Budget 2018 impact: Rural, consumer, infrastructure sectors big gainers

The focus of the Union Budget was largely on rural, infrastructure and social sectors. Allocation to these sectors has been increased by up to 35 per cent. The biggest thrust is on the rural segment, which is expected to boost farm incomes, improve rural infrastructure and therefore consumption. Companies in the affordable housing, automobiles, healthcare and FMCG space are seen as key beneficiaries. The National Health Protection Scheme (NHPS) will benefit healthcare, diagnostics and insurance players. The third area of higher spending is infrastructure, where allocation is up by 14 per cent. Beneficiaries of the infrastructure and housing thrust would be companies in the construction as well as cement, paints and consumer electrical space. 

Allocation of Rs 1.24 trillion, an increase of 10.1 per cent, is positive for order inflows 

Higher allocation will speed up award and construction of roads projects 
 

EPC or engineering, procurement and construction projects are likely to get favourable treatment and Ashoka, which is already witnessing better execution of its projects, will gain further
 

A well-funded balance sheet and healthy order book lends confidence to EPC revenues, which have grown at 19 per cent annual over FY17-19
 

A leader in switchgears, cables, lighting and other durables, Havells will benefit from an uptick in rural incomes, rural electrification as well as urban demand 
 

Higher focus on housing for all can propel growth for most segments of Havells
 

Smart city allocations and emphasis on execution can further improve demand 
 

With disruptions, inventory adjustments from GST implementation behind, growth rates can pick up 
 

Havells’ air-conditioning business will also gain from higher income levels

Budgetary support to the rural economy should benefit Hero, which gets half of its volumes from the hinterland

Hero is well placed given its distribution franchise, brand recall and products in the entry/executive segment 
 

Launch of new bikes such as the Xtreme 200R will help Hero enhance margins and tap into the premiumisation trend  
 

Hero is also looking at gaining share in the scooter segment with new products
 

Higher volumes and operating leverage should help overcome the cost pressures
 

No hike in cigarette duties is a big positive 
 

Increased outlay for farm and rural sector will boost consumption demand benefitting its FMCG portfolio
  

Incentivising domestic value addition and Make in India in food processing (doubling allocation) bodes well for ITC 
 

Stock seen re-rating due to improving prospects of non-cigarette businesses 
 

The prices of other listed FMCG, hotels and paper stocks have risen 35-140 per cent, say analysts, while it is not the case for ITC’s businesses

Net sales and net profit are for trailing 12 months ended Dec’ 2017 (# - period ended Sep’2017); Price, market cap, PE (price-earnings), dividend yield as on Feb 2, 2018; Source: Capitaline;  Compiled by BS Research Bureau

The plan to create infrastructure to support a billion passengers per annum will help aviation companies like SpiceJet 

Airports Authority of India will receive additional funds for upgradation of airports, which will be positive for non-metro airports
 

Higher allocation to regional connectivity scheme is positive for the company, which has the largest regional networks  

Demand growth will get a boost as new airports and helipads add to the company’s volumes and will help keep load factors high
 

Increase in minimum support price for crops to 1.5 times of costs will raise farmer incomes and incentivise production benefiting agro-input firms
 

Rallis, with presence in crop protection and seed segments and higher domestic focus, will gain from this move
 

Rising affordability and demand for both hybrid seeds and crop protection will be positive for Rallis’s volumes and help deal with cost pressures 
 

A diversified portfolio, vast distribution network and robust balance sheet will help Rallis gain market share in India

A affordable housing fund in NHB, funded from priority sector shortfall of banks will lead to increased refinancing corpus benefiting players as Repco

Allocation to both the affordable housing scheme (PMAY) and the credit linked subsidy scheme should aid loan growth 
 

A sharp correction from highs offers scope for upside; stock trades at 2.4 times its FY19 estimated book value
 

While loan growth should see an uptick, investors should keep an eye out for asset quality concerns, both in the individual and loan against property segments
 

Continued thrust on affordable housing will act as a demand catalyst 
 

Increased outlays on infrastructure such as highways, roads, irrigation, metro and high speed trains are positive triggers 
 

Efforts to uplift rural economy by improving farm incomes, increased allocations under MREGA, etc will help in boosting cement demand from rural India too
 

UltraTech, India’s largest cement maker with pan-India presence and expanded capacities, should gain the most even as other larger players will also benefit