Top 10 Beneficiaries of Budget 2020Author: Rohan Takalkar Posted on 05 Feb 2020 16:58:29
The Union budget of FY20-21 got announced on 1st of Feb 2020 and soon the reactions started pouring in on how fair or unfair the budget. Well as said in the previous blog this year’s budget was a tight rope walk for the government. The fiscal deficit target crossing and lower direct tax revenues hurting the kitty of the government, it was prudent the reforms and policies aren’t going to be like a big bang this time. However, in order to stimulate the consumption back into economy, the government announced various measures which were truly a need of the hour. They touched on the key issues like farmer distress, depositor apathy on failure of banks, NBFC credit crunch crisis in a subtle way and announces measure to overcome this crisis. Theses policy measure are beneficial to key sectors and in that sectors few key players are about to benefit more. So, here is our effort to spot few of those beneficiaries.
Government’s emphasis on doubling farmers income and rural development has augured well for many Agri and allied industries. The key beneficiary we see of this move would be Escorts Ltd. Is one of the India’s leading engineering conglomerates having operations into three major segments i.e. Agri- Machinery, Construction & Material Handling equipment and Railway Equipment. The company hold 11.3% market share in domestic tractor volumes and has outpaced industry averages over past few years. The past year being dull particularly for automobile industry has also impacted sales of the company. However, above normal monsoon across India has resulted into rise in ground water table levels, which augurs well for Rabi harvest. With good Rabi season, demand is again expected to kick back soon. Company’s fundamentals remain intact and will be benefitting from the strong impetus provided by the union budget 2020.
2) Supreme Industries
Another major beneficiary of the Agri and allied allocated budget is Supreme Industries which is a manufacturer of plastic products with operations. Governments Jal Jivanmission under which the irrigation improvement is taking place is further enhanced and the reach of this policy is expected to reach to more 20 million farmers, which in turn augurs well for the company. Its major revenue comes from plastic pipe business which is close to 55% and holds a commendable 9.48% market share in the PVC pipe industry. This looks as another beneficiary of this union budget 2020 under Agri and allied industry budget outlay.
3) Dixon Technologies
Electronic equipment is now part of daily life of every consumer in the economy and country’s inefficiency to produce electronic equipment has led to higher import of such goods from china and it holds significant chunk of import bill. In order to encourage domestic manufacturing of electronic equipment like mobile phones, semi-conductors, medical devices, etc government has announced to introduce a new scheme for make in India electronic products. Dixon technologies which holds a strong clientele such as Xaomi, Samsung, Voltas, Croma, Flipkart, Havells, Jio, etc looks like a major beneficiary of the move. The company recently got order for manufacturing of set top boxes for Jio and also commenced production of home appliances for Voltas Beko. Such strong clientele and equally strong fundamentals prove to best investment opportunity for the investors.
4) Sterlite Technologies
Sterlite technologies is major manufacturer of fibre optic cables and has its operations across the globe is the next beneficiary of the Union budget 2020. Government has allocated Rs.6000 crore under Bharatnet programme which works for connectivity of rural area under which government plans to connect 2.5 lakh gram panchayats with broadband connectivity. Till date 412460 km of fibre optic cable has been laid and 147659-gram panchayats have been connected with the broadband network. Sterlite technologies holds commendable market share in the optical fibre space and also has strong orderbook in the hand. Recent results of the company were not in tune of its past performance as global optical fibre demand slipped down significantly in past few quarters. However, with upcoming themes like rapid digitisation, Bharatnet, 5G network will augur well for the demand of the OFC’s for the company.
5) Ultratech Cement
Infrastructure spending in the budget has always remain a key focus for the market. The government too have expended adequate amount of funds for infrastructure development due to which we can see rapid urbanisation happening around us. Similarly, this year too government has committed significant amount of money for infrastructure development for which Ultratech cement looks as a natural beneficiary. Company’s robust expansion plan of commissioning 3.4 mtpa in eastern market and 2.3 mtpa clinker plant are expected to be commissioned by 2021. Existing capacity and robust expansion plan assure that company can serve the potential demand created by the infrastructure initiatives coming up in the economy.
6) KEC International
Railway electrification is a major task in front of Indian railways and government has decided to electrification of rail tracks close to 27000 kms in this year’s budget. In this purview we see KEC international as a major beneficiary of this project. KEC international is established leader in EPC segment and has delivered projects in around 100 nations. The company is delivering projects in power transmission and distribution, Railways, Civil, Solar and cables. The company’s 60% of the revenue is generated from domestic projects and remaining comes from overseas. The government’s emphasis on railways upgradation and modernization provides several opportunities for the company and thus provides huge growth potential in coming days.
7) Relaxo Footwears
The government has time and again encouraged domestic manufacturers with various types of subsidies or tariffs on imported goods to create demand for domestically manufactured goods. In such view, government announced hike in customs duty import hike on footwears to 35% from 25% earlier and 20% on parts of footwear from 15% earlier. Relaxo, is expected to benefit from the move as the gap between imported footwear and domestic footwear will be widened more. This is help Relaxo to gain market share in key urban areas. The company’s fundamental provides necessary cushioning for the potential growth.
8) KNR Constructions
The infrastructure spending remained high for this year too with transport infrastructure allocated with Rs.1.76 lakh crore itself signifies the magnitude of infrastructure coming up in future. KNR constructions remains on the sweet spot to deliver the upcoming potential in infrastructure. The company’s strong orderbook and better execution capability and healthy balance sheets assures more bidding from the company for new high highway projects. With such ahigh infrastructure budget new highway projects are expected to be announced soon. Furthermore, company’s 64% of the revenue comes from Road EPC and BOT projects makes it a natural beneficiary of the upcoming projects in infrastructure.
9) Mahanagar Gas
National gas grid project is another major project of the union government which envisages to increase share of natural gas to 15 % from 6.2 % by 2020 in the country. The government has decided to expand this grid project to 27000 km from 16000 km currently connecting natural gas sources to hubs in the urban areas. Mahanagar gas is one of the leading gas distribution company in India with distributorship of compressed natural gas and piped natural gas in key urban areas of Maharashtra. MGL is poised to benefit with strong expansion plans in place to the tune of Rs.500 crore in FY21. The company also expects it the vehicle flow to increase to 70000 vehicles in FY21 for which the national gas grid looks to be essential.
10) Jubilant Foodwork
Jubilant foodworks is one of those FMCG players which looks to benefited from change in personal income tax policy. The excess money at the dispose of the customers hands will pave way for aggregate demand for consumer products. Jubilant food works looks as better investment idea as rapid urbanisation has led to strong demand for the product line the company offers. The higher store openings in the quarter and strong same store growth prompts for robust revenue growth of the company. Government’s impetus to increase the aggregate demand in the economy will improve the consumption sentiment in the country and thus provide a necessary economic growth.
As stated in our previous blog key highlights of union budget 2020,we had mentioned a budget centric approach to invest in market. Above is the effort taken in the same direction to put a light on that same approach. These were the top 10 possible beneficiaries of the government policies announced in the union budget 2020. Apart from theses there are many other opportunities to invest in which you can find with the help of your advisor or else you can simply contact us.
Disclosure: Above mentioned stocks are not recommendations and are given for solely as information purpose.