Good growth visibility for companies making watches, shoes, pizzas, movies, etc, but valuations look stretched.
At a time when both bulls and bears are struggling to make money, Dalal Street is betting big on companies which make shoes, watches, pizzas, kitchen appliances and movies.
Shares of companies such as Bata India, Titan, Jubilant FoodWorks and TTK Prestige all hit life-time highs in June. UTV Software shares touched a two-year high the same month.
Sample this. Shares of footwear maker Bata India gained 58 per cent in the past three months compared, while there was a two per cent decline in the Bombay Stock Exchange’s benchmark, the Sensex, during the period.
Thursday, the stock touched an all-time high of Rs 619.20 on the BSE.
Shares of Jubilant FoodWorks, which sells Domino’s Pizza in India, have gained about 75 per cent in three months.
The stock touched an all-time high of Rs 959.90 on Thursday and closed at Rs 949.30. Since their listing in February 2010, these shares have gained 555 per cent from the issue price of Rs 145.
Others like footwear maker Bata India, jewellery & watch retailer Titan Industries, kitchen appliances maker TTK Prestige and media & entertainment firm UTV Software have all delivered great returns to investors.
“It indicates that the purchasing power in a populous country such as India is increasing. Most of these companies are expanding in tier-II and tier-III cities, from where growth is going to come,” said Anita Gandhi, director at Arihant Capital Markets.
The numbers tell the story. For the financial year ended March 31, Jubilant reported sales growth of 60 per cent and TTK Prestige of 50 per cent. Titan and UTV Software had sales growth of 39 per cent each. In profit growth, Jubilant saw a jump of 117.6 per cent for 2010-11, while UTV Software registered a rise of 154 per cent.
| LOOK WHO’S IN FAVOUR | |||||||
| Returns (%) | FY-2010-11 (YoY growth in %) | Forward PE FY12 |
All-time high | ||||
| 1-year | 3-mth | Net sales | Net profit | Price | Date | ||
| TTK Prestige | 230.52 | 31.58 | 50.33 | 59.71 | 28.65 | 3,000.00 | 29-Jun-11 |
| Jubilant FoodWorks | 212.38 | 75.22 | 59.95 | 117.59 | 53.18 | 959.9 | 30-Jun-11 |
| Bata India | 124.35 | 58.06 | 16.79 | 41.23 | 23.65 | 619.2 | 30-Jun-11 |
| UTV Software | 102.6 | 42.73 | 39.98 | 154.04 | 15.09 | 1,132.00 | 13-Dec-07 |
| Titan Ind | 81.79 | 11.89 | 39.68 | 72.35 | 33.26 | 238.25 | 14-Jun-11 |
| Source: Capitaline, Bloomberg Data compiled by BS Research Bureau | |||||||
“Investors are buying shares of companies where they see consumption is growing. They are looking for business models which have higher sustainability,” said Deven Choksey, managing director at Mumbai-based KR Choksey Shares & Securities.
“However, personally, I don’t want to chase stocks which are expensive. I will prefer to wait on the sidelines till valuations become comfortable.”
