A HOLISTIC VIEW

The confluence of global events in last couple of months has increased the volatility in the equity market globally and the Indian market has not remained immune to that. The Greece crisis, Chinese stock meltdown, the expectations of US Fed rate hike happening in September and Iran deal has dominated every business channel and newspaper.  These global events along with the domestic triggers such as ongoing results season, progress of monsoon, RBI’s bi-monthly monetary meeting early next month and start of the monsoon session of parliament will shape up the direction of equity market in short term.

Year till date (July 17, 2015) the frontline equity indices in India have moved up by 3.5 per cent, however, it masks the volatility in between. After touching an all time of 29681 on closing basis on January 29 and 30024 on intraday basis on March 4, Sensex corrected by little more than 11 per cent in next couple of months as the Greece drama plot thickened and early signs of crack in the Chinese stock market were clearly visible. Since then the market has gained almost 8 per cent after dust has settled down around the Greece crisis and the Communist Party in China tried to stabilise the equity market there. In the following paragraphs we will try to understand how these events and other events will play out in the coming months, what will be their impact on the Indian equity market returns, and how should you build up your portfolio?

Greece Blinks: Long Term Reforms Remain Elusive

After six months of procrastination to any meaningful negotiation, a miss on the payment to International Monetary Fund, more than two weeks of capital control and finally 17 hours of marathon meeting, Greece managed to reach a deal with its creditors that will help it to pave the way for further negotiation for the third bailout of Greece since 2010. We believe and maintain our earlier stance that without a political unity, it is very hard to enforce monetary unity. The recent agreement, like its predecessors, is just kicking the can down the road and buying some more time. The agreement fails to address the heart of the problem.

According to a report by Reuters, the IMF (International Monetary Fund) informed the leaders just after the meeting that Greece’s debt is not sustainable, as they need much more dramatic extension or upfront haircuts. That problem has not been addressed. Moreover, the implementation of key reforms on pension and VAT, which was rejected by the Greek voters earlier, will always be difficult if not impossible. Therefore, the problem may have been warded off for time being but this problem may resurface again few years or months down the line as we have been seeing in the last five years.

Regardless, we feel that even the worst outcome of the crisis, i.e. ‘Grexit’, is not going to impact severely the Indian equity market. It will at the most have a temporary impact as we saw this time when the Sensex fell by more than 500 points in early trade on July 6; however, it recovered from its low and closed a mere 166 points lower at the end. Other than the knee-jerk reaction, the Greece crisis will not have a lasting impact the way many observers are linking it with the fall of Lehman Brothers at the height of US financial crisis.  It is because the Greece economy constitutes less than 2 per cent of the nominal GDP of Eurozone and India’s direct exposure to Greece in terms of trade is less than a 1 billion USD.

Therefore, we need not worry much about the Greece problem till the time it does not initiate a dominos effect leading to default by other countries and banks, chances of which are very remote.  Nonetheless, we believe we are now better prepared to face any such eventuality. The other global event that was looming large over the Indian market was the steep fall in the Chinese market.

Chinese Stock Market: A Roller-Coaster Ride

The Chinese equity indices saw a dramatic rise and even more striking fall in the last one year. For example, the Shanghai Composite Index had risen by 131 per cent since September 2014 before touching its recent peak on June 12, after which it crashed 30 per cent in a little more than three trading weeks. This volatility has the potential of impacting other country equity indices too. But neither the wild ride up nor down seems related to the underlying performance of the listed companies.

At their peak, according to a report by Bloomberg, Chinese shares were trading almost twice as expensive as they were when the Shanghai Composite peaked in October 2007 and more than three times pricier than any of the world’s top 10 markets. The median stock on Chinese exchanges traded at about 58 times projected earnings for the next 12 months, compared with 18 for the US and 16.5 for Japan. So it was no brainer that Chinese stocks were in the bubble zone and tight liquidity brought by seasonal cash hoarding and a long list of IPOs, as well as regulators' scrutiny on margin financing pricked the bubble.

Although the fall in the Chinese stock market has the potential of contagion impact to other emerging equity markets or Asian markets including India in terms of outflow of foreign money, we do not see it happening now. On the contrary some of the outflow from the Chinese equity market may find place in the Indian equity market as we are better placed in terms of future growth. The expected series of economic reforms, cooling inflation and falling interest rates will work in our favour.

The decline in the Chinese economic growth, one of the factors attributed to fall in equity market, is actually a blessing in disguise for India. Prices of various commodities are directly related to the economic activity in China. Hence, lesser demand from China had already put pressure on commodity prices including gold, which is trading at its five year low.

In addition to above in one of the historic deal struck between Iran and US-led P5 + 1 nations, which will lift international sanctions from Iran, will reduce the international crude oil prices. This will also help India to resume its crude oil purchases from Iran that will lower its import bill as currently India was importing from other sources like Nigeria and Venezuela that were at considerable geographical distance. The combined impact of slowdown in Chinese economy and Iran deal has led to fall in commodity prices. This will help the Indian government to manage its finances in a better way and will also help the corporate sector to boost their margins while at the same time inflation will be contained.

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US Fed Reserve Rate Hike

The only international factor that we should watch carefully is the timing of the US Fed rate hike. Now, as the Greece crisis has more or less been addressed and a perpendicular fall in the Chinese market has been arrested, concerns of disruption in the financial market have faded as of now. These factors along with the substantial improvement in the US labour market and strong economic activity in the first quarter of 2015 might give comfort to US Federal Reserve to start raising interest rates, first time in a decade, before the end of 2015.

This will definitely have its repercussions. We already got a taste of it during the “taper tantrum” episode in May and June of 2013, where a mere mention of scaling back of quantitative easing and not raising the interest rate by US Fed created extreme volatility in both equity as well as bond markets. We saw a sharp fall in the equity prices and jump in 10 year government bonds, which crossed 9 per cent.

This time, however, India is better placed to face any such volatility as the government’s finances in terms of twin deficits, GDP growth rate and inflation are at much more comfortable level, which reduces India’s vulnerabilities from external factors more than in many other emerging economies. This also got vindicated in a report by global ratings agency Fitch that said ‘the so-called "fragile five" emerging economies including India and Brazil are showing "fewer signs of vulnerability" to US Federal Reserve's rate hike. The large emerging markets (EMs) -- Brazil, India, Indonesia, Turkey and South Africa -- are exhibiting fewer signs of vulnerability to a drop in capital inflows than some of their smaller counterparts.

Regardless, we believe the rate hike will definitely entail outflow of foreign money. The foreign portfolio investors (FPIs) have remained the dominant force in the Indian equity market and largely determined the market direction. The Indian mutual fund played a role of second fiddle to FPIs; however, in the months of May and June 2015 we saw role reversals. Despite FPIs pulling out Rs 5768 crore and Rs 3344 crore in the months of May and June from the Indian equity market, Sensex gained marginally in the month of May and by 2.3 per cent in the month of June.

What led to such gain was investment by Indian mutual funds of more than Rs 10000 crore and Rs 4000 crore in the months of May and June respectively. Going forward, we believe they will continue to play a larger role in terms of providing stability to the market. Mutual funds, in this Bull Run, are attracting inflows in a scale that is unmatchable in their entire history. Net inflows in equity MFs (including equity-linked savings schemes) stood at Rs 1,03,962 crore in the last 15 months ending June, which is higher than inflows received over a 12-year time-frame stretching between January 2002 and April 2014.

Regardless, the appreciation of the U.S. dollar will put pressure on balance-sheets of banks, firms, and households that borrow in dollars but have assets or earnings in other currencies. India’s corporate sector, which has borrowed heavily in foreign currency, may experience some volatility when US Fed decides to hike rates. Corporate sector debt has risen very rapidly, nearly doubling in the last five years to about USD 120 billion. According to a report by India Ratings & Research, among 500 top listed borrowers (ex-banking and financial services), 234 corporates had a negative sensitivity to rupee depreciation in FY14. If the rupee depreciates by 1 per cent (against the US dollar), it would shave off their absolute EBITDA by 0.19 per cent (median).

However, this is lower than the 0.28 per cent (median) observed across 237 corporates in FY13. The agency estimates that in FY15 the situation may not have shown a meaningful improvement over FY14.  In terms of sectors, net exporting sectors IT and pharmaceutical will benefit. Rupee depreciation by 1 per cent is expected to improve the absolute EBITDA (median) of IT corporates by 1.8 per cent and that of pharmaceutical corporates by 1.63 per cent. The textile sector also showed a positive sensitivity of 0.7 per cent in FY14.  Sectors that will be negatively impacted are fertiliser and consumer durables. A 1 per cent depreciation of rupee would reduce the absolute EBITDA of corporates in the fertiliser sector (highly import dependent) by 2 per cent and would shave off 0.37 per cent (median) of operating profit for the consumer durable sector. Besides the above factors, there are some domestic factors that will play an important role in giving direction to the Indian equity market.

Monsoon and Monetary Policy

The Indian Meteorological Department (IMD) had earlier given a cautious forecast for the monsoon this season. Nonetheless, the progress of south-west monsoon has been adequate in the first month (June) where we saw rainfall 16 per cent more than the long period average.  However, likelihood of a deficiency in monsoon still cannot be ruled out as El Nino conditions continue to prevail. In fact, the IMD expects July and August to receive 8 per cent and 10 per cent deficient rainfall this year.  June typically receives around 19 per cent of south-west rainfall while the months of July and August receive a much higher share of rainfall at around 33 per cent and 29 per cent respectively.

Sowing, however, has been upbeat post the initial spell of rains with cumulative sowing at around 56.3 million hectares (MH) in June 1- July 17, 2015 vs. 34.75 MH in the corresponding period last year.  This covers more than 50 per cent of the total area under kharif crops last year.  Moreover, the link between south-west monsoon performance and food inflation is getting weak due to gradual importance of the rabi season, progress of irrigation facilities over the years, and policy response towards food supply.

Incidentally, while 2014 saw a south-west monsoon deficiency of 12 per cent, food inflation at both wholesale and retail levels declined considerably – largely on account of factors like controlled increase in MSPs, prudent liquidation of buffer stocks, and strict action on illegal hoarding. Hence, if monsoon deficiency were to play out as expected, prompt policy response from the government would once again become an imperative for curbing food price pressures. In a sign of preparedness, the government has already announced moderate increase in MSPs, started importing high price pressure items like pulses, and is likely to tap the Price Stabilization Fund (for onions/potatoes) announced in the Union Budget.

All this eases inflationary concerns, going forward. Can the RBI reduce rates if poor rains push up food inflation as we saw for the month of June where CPI food inflation for June rose substantially to 5.48 per cent versus 4.8 per cent in May? If history can give any indication, one can expect a dovish stance by the RBI Governor in next RBI meeting.  During the earlier BJP led government RBI Governor Bimal Jalan had cut rates during the 2003 drought. Moreover, Gov Rajan himself has acknowledged this recently: "For example, 2002-03, there was very weak rain, but you had very limited inflation, partly because of government action. So I think we need to wait and see how all those factors play out, that would be the biggest factor that is on our mind right now..." . Therefore, we cannot completely rule out a rate cut in the forthcoming RBI meeting.

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Parliament Session: Awaiting the Outcome

The monsoon session of Parliament has begun and there are ten bills pending in Rajya Shabha, two and most important bills (The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Re-settlement (Second) Bill, 2. The Goods and Services Tax Bill) are held up in a committee.   Non passage of these bills may impact market sentiments. Holding of these bills is also impacting the overall investment sentiments in India. According to Jaspreet Singh Arora, Senior Vice President, Systematix Shares & Stocks India, ‘Pending important bills are definitely impacting the investment climate. It is going to be difficult to get it through in the coming monsoon session unless government resorts to joint session of both houses. But given Bihar elections in October 2015, it’s unlikely the government will take that measure. Besides this what is also impacting investments is high interest rates and presence of high NPAs in the system both of which need to addressed before which next round of capex from private sector can kick in’.

Despite all the controversies surrounding the government we are of the opinion that there are 75-80 per cent probability that at least GST bill will see the light of the day in this session (to know more on this read edit.) This will give a major boost to the Indian equity market.

Outlook and Valuation

The spectacular rise in the Indian equity market since Narendra Modi was nominated as the PM candidate from BJP has made the Indian equity market relatively expensive, at first glance. The MSCI India index traded on a price/earnings ratio of 23.48 at the end of June 2015, and a price/book ratio of 3.28. The figure for the MSCI Emerging Markets index was 14.19 and 1.55, respectively. This may seem to give weight to the idea that optimism about the Modi government has pushed up valuations. However, India has generally been a relatively expensive market compared to the rest of the emerging universe. This reflects the higher quality of the India corporate sector as a whole and their return ratios.

We believe that the Indian equity market presents an exciting investment opportunity now. For those who have missed the bus earlier, every correction should be used to build your portfolio. In the following pages we are presenting eight such stocks that are beaten down in recent correction but offers good investment opportunity in long run.

CERA SANITARYWARE | BSE CODE: 532443 | Face Value: Rs 5 | CMP: Rs 2024.00

Cera Sanitaryware (CSL) is a sanitaryware production company. As an expansion strategy, CSL is always looking for joint venture (JV) partners for manufacture of sanitary ware products and tiles in preparation for future demand as also for margin boost. Further, the company has already proposed to invest Rs 125 to 150 crore over the next two years in JVs and upgrading its units.

On financial front, net sales from operations of CSL boosted by 19.67 per cent and stood at Rs 194.2 crore in Q1FY16 compared to same period of last fiscal. CSL's EBITDA stood at Rs 28.24 crore with growth of 16.94 per cent on yearly basis. However, The EBITDA margin contracted by 34 basis points to 14.54 per cent in Q1FY16 compared to Q1FY15. The financial cost increased by 26.62 per cent and the tax expenses too increased by 16.5 per cent on yearly basis. The net profit of the company stood at Rs 15.67 crore compared to Rs 13.63 crore, rose by 14.97 per cent on yearly basis. 

Considering macroeconomic overview, more than 110 million rural households are without toilets across India in 2012. The government was able to assist 11 million households in building toilets during FY15. The government’s ambitious initiatives such as Swatch Bharat Abhiyan, Smart Cities, AMRUT cities and many more will definitely create demand of CSL’s product in coming days. Further, the CSL is virtually debt free company with Debt to equity ratio of 0.16 as of FY15. With good ROE of 23.51 per cent and ROCE of 31.40 per cent in FY15, we recommend this company to buy.

EXIDE INDUSTRIES | BSE CODE: 500086 | Face Value: Rs 1 | CMP: Rs 153.00

Exide Industries (EIL) is a manufacturer of lead acid storage batteries for automotive and industrial applications. The company's business segments include Storage Batteries & allied products, Solar Lantern & Home Lights, and Life Insurance business. It also manufactures submarine batteries. EIL's products include electric storage batteries used for starting piston engines, other lead-acid accumulators and home uninterruptible power supply (UPS) systems.

Anticipating future demand EIL has already lined up major investments of about Rs 800 crore in capacity expansion and technology upgradation in the current financial year. Further, on raw material front, Exide consumes lead about 75.41 per cent of total raw materials. International lead prices declined by 18.18 per cent to USD 1800 per tonne during one year period. This slide in its raw material will definitely help to company to expand profit margins.

On financial front, EIL posted Rs 9568 crore in FY15 with a growth of 14.85 per cent on yearly basis. The company's EBITDA rose by 9.46 per cent to Rs 970 crore in FY15 compared to previous financial year. EIL's net profit also increased by 12.83 per cent to Rs 614.55 crore in FY15 compared to previous fiscal year. However, its EBITDA margin and net margin contracted by 50 and 12 basis points to 10.14 and 6.42 per cent in FY15. 

Interestingly, EIL has negligible debt to equity ratio of 0.02 as of FY15. On valuation front, EIL stock is available at PE multiple of 23.78x, which quite cheaper compard to PE multiples of Amara Raja Batteries at 35.75x and Eveready Industries at 54.23x. hence we recommend to buy this stock.

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GATEWAY DISTRIPARKS | BSE CODE: 532622 | Face Value: Rs 10 | CMP: Rs 335.00

Gateway Distriparks is in a business of Warehousing, Container Freight Stations, providing handling and clearance of sea borne Exim Trade in containerized form. The company operates container freight stations (CFS) at Navi Mumbai, Chennai, Visakhapatnam and Inland Container Depot at Garhi Harsaru. Gateway Distriparks plans to utilise its land banks to further extend capacities, expand its presence in new locations.

On financial front, the consolidated total revenue from operations of Gateway Distriparks rose by 9.73 per cent to Rs 1111 crore in FY15 against Rs 1013 crore in FY14. The operating profit rose by 23.5 per cent to Rs 341 crore from Rs 276 crore on yearly basis. The operating profit margin expanded by 344 basis points to 30.69 per cent in FY15 on yearly basis. The net profit of the company increased by 38.24 per cent and stood at Rs 188 crore from Rs 136 crore year on year basis.The net profit margin expanded by 349 basis points to 16.92 per cent in FY15 on yearly basis.

Gateway Distriparks Railway products segment revenue rose by 21.9 per cent amounting to Rs 691 crore and Container Freight Station Operations segment revenue rose by 15.98 per cent Rs 340 crore during FY15. The Chain Division segment revenue decreased by 46.8 per cent to Rs 82 crore in FY15 on yearly basis.

Gateway Distriparks has 40.4 per cent stake in Snowman Logistics and is its largest shareholder. Snowman is too posting good financial results year on year. Going ahead, as there is significant growth in the logistic segment after implementation of Goods and Service Tax across India. Hence we recommend this stock to buy.

ITC | BSE CODE: 500875 | Face Value: Rs 1 | CMP: Rs 315.00

ITC is a conglomerate with business segments viz.: fast moving consumer goods (FMCG), hotels, paperboards and specialty papers, packaging, agri-business, and information technology. FMCG business consists of cigarettes, cigars, smoking mixtures, and branded packaged foods, personal care products, education and stationery products, lifestyle retailing, incense sticks (agarbattis) and safety matches. 

ITC is a dominant player in the Cigarettes segment with a revenue market share of over 75 per cent . Higher disposable income in rural areas could result in consumers switching from lower end products like bidis and local made cigarettes to micro filter cigarettes. ITC plans to stimulate the distribution strategy for its FMCG business by increasing its direct reach to 1 lakh villages in India. These 1 lakh villages account for 80 per cent of rural consumption. The company's segments other than FMCG account for just 18.07 per cent of its revenue in FY15. 

On financial front, consolidated total income of ITC increased by 9.96 per cent to Rs 38835 crore in FY15 on yearly basis. The company's EBITDA boosted by 8.81 per cent to Rs 14202 crore in FY15 compared to previous fiscal year. However, Net profit of the company increased by 8.68 per cent from Rs 8891 crore in FY14 to Rs 9663 crore in FY15. But its net profit margin contracted by 30 basis points to 24.88 per cent in FY15 on yearly basis. The company has virtually debt free status with debt to equity ratio of 0.01 at the end of FY15. ITC scrip is available at PE multiple of 26.03x times its trailing twelve month EPS of Rs 12.05. Though, continuous regulatory pressure and aggressive competition in other FMCG products weighed on ITC during last half year. We believe that the ITC share is available at quit a good attractive valuation. 

JUST DIAL | BSE CODE: 535648 | Face Value: Rs 10 | CMP: Rs 1107.00

Justdial provides fast, free, reliable and comprehensive information to users and connect buyers to sellers. The company started offering local search services in 1996 under the Justdial brand and is now the leading local search engine in India. Justdial has also initiated its ‘Search Plus’ Services for the users. These services are aimed at making several day-to-day tasks conveniently actionable and accessible to the users. Justdial is transitioning from being purely a provider of local search and related information to being an enabler of such transactions. Justdial intends to provide an online platform to thousands of SME’s to get them discovered and transacted. Justdial has a database of approximately 15 million listings as of March 31, 2015. The company entered in booming e-commerce market through transaction model. Justdial had approximately 331200 campaigns as of FY15.

On financial front, Jusdial's total income from operations rose by 27.86 per cent and stood at Rs 590 crore in FY15 compared to Rs 460 crore in FY14. Company's depreciation expenses decreased by 73.34 per cent in 2015 compared to last year. The operating profit rose by 13.33 per cent to Rs 142 crore. The other income rose by 22.38 per cent on yearly basis which impacted rise in net profit of the company. The net profit of Jusdial in FY15 increased by 15.11 per cent to Rs 139 crore against Rs 121 crore in FY14. The company's EPS stood at Rs 19.7. The Justdial scrip is available at PE multiple of 55.4 times.

Company has a good brand recall in voice searches and has built a strong SME database. Justdial has added online food ordering feature, with more new revenue streams in the offering. In current financial year the site will have a clutch of such features, including doctor appointment, cab booking and movie ticketing. Hence we recommend to buy this stock.

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Prestige Estate Projects | BSE CODE: 533274 | Face Value: Rs 10 | CMP: Rs 223.00

Prestige Estate Projects (PSPL) is a real estate company and its business segments include Residential, Commercial, Retail, Hospitality and Services. The company operates in Bangalore, Goa, Hyderabad, Mangalore, Cochin and Chennai. The company now has over 184 completed projects spanning a total developed area of over 60.74 million sqft. It also has another 57 ongoing projects comprising around 59.24 million square feet & 43 upcoming projects totaling 44.11 million square feet, which include Apartment Enclaves, Shopping Malls and Corporate Structures, spread across all asset classes. In a recent development, PSPL is in final talks to acquire remaining 62 per cent stake in Bengaluru's Exora Business Park at an estimated cost of Rs 1300 to 1500 crore.

PSPL showed stellar financial performance during FY15. The company posted revenue of Rs 3420 crore which was higher by 32.15 per cent on yearly basis. Its EBITDA rose by 37.97 per cent to Rs 994 crore in FY15 compared to previous fiscal year. PSPL's EBITDA margin expanded by 80 basis points to 29.06 per cent in FY15 on yearly basis. Net profit of the company increased by 5.76 per cent to Rs 332.37 crore in FY15 compared to previous financial year. However, its net margin contracted by 261 basis points to 9.72 per cent in FY15 on yearly basis. PSPL had debt to equity ratio of 1.06 as of FY15, quite better compared to its industry peers. 

The company has a product mix of ongoing projects as 83 per cent residential, 10 per cent commercial, 5 per cent retail and 2 per cent hospitality. The shares of this diversified real estate company is available at PE multiple of 25.58x times of its TTM EPS of Rs 8.86. Hence we recommend a buy on this stock.

Shriram City Union Finance | BSE CODE: 532498 | Face Value: Rs 10 | CMP: Rs 1657.00

Shriram City Union Finance (SCUFL) is Shriram Group flagship company and is in the business of providing long term home loans. SCUFL has a comprehensive range of offerings comprising finance for Two Wheelers and Three Wheelers, Four Wheeler to both new and pre-owned passenger. The company also provides finance to commercial vehicles, Personal Loans, Small Business Loans, and Loan against Gold. It has over 1000 business outlets across India and enjoys a high credit rating.

On financial front, SCUFL's revenue increased by 10.99 per cent to Rs 3562 crore in FY15 compared to previous financial year. Over the past five years net sales of the company increased consistently. Its EBITDA increased by 5.14 per cent to Rs 2215 crore in FY15 on yearly basis. The company posted net profit of Rs 571 crore with increment of 7.38 per cent in FY15 on yearly basis. But its net profit margin contracted by 54 basis points to 16.04 per cent in FY15 compared to previous financial year. The company's net interest margin expanded by 150 basis points to 13.6 per cent in FY15 on yearly basis. 

SCUFL's asset quality marginally declined as its Gross non performing asset (NPA) expanded by 45 basis points to 3.12 per cent amounting to Rs 491 crore in FY15 on yearly basis. Net NPA stood at 0.68 per cent to Rs 107 crore in FY15 while its net NPA remained at 0.60 per cent to Rs 76 crore in FY14. SCUFL stock is available at trailing PE multiple of 19.21x times trailing EPS of Rs 86.7. Hence we recommend buy this stock.

Symphony | BSE CODE: 517385 | Face Value: Rs 2 | CMP: Rs 1876.00

Symphony is headquartered at Ahmedabad, operates in two segments: home appliances and corporate funds. Symphony provides domestic, commercial and industrial air coolers. With its continuou focus on R&D and innovations to innovate its products, enhancement in design, technology and post sales services, the company is able to command a market share of more than 50 per cent in the organized product category. Over the years, Symphony has established a robust distribution network comprising about 750 dealers, 16,500 retail dealers in 4,500 towns. 

On financial front, Symphony's total income boosted by 31.8 per cent to Rs 412.23 crore in 9MFY15 on yearly basis (June ending). The company sold 615295 units of Air Coolers with growth of 24.5 per cent during 9MFY15 on yearly basis. Interestingly, the company was able to grow in its realization to Rs 6270 per unit during 9MFY15 compared to Rs 6029 in 9MFY14. The company's EBITDA rose by 48.8 per cent to Rs 134.81 crore in 9MFY15 compared to same period in previous financial year. Its EBITDA margin expanded by 373 basis points to 32.7 per cent in 9M FY15 on yearly basis. Symphony's net profit too showed a growth of 42.36 per cent on yearly basis and a net profit margin expansion of 169 basis points to 22.84 per cent during 9MFY15 compared to same period in previous fiscal year.

Symphony is zero debt company with good ROE of 38.33 per cent and ROCE of 37.28 per cent in FY14. Symphony's shareholding pattern indicates that FII holdings expanded by 164 basis points to 3.82 per cent and DII holdings expanded by 209 to 5.61 per cent during last twelve months. On valuation front, the stock is available at PE multiple of 50.68x times its trailing EPS of Rs 36.28. We recommend buy this stock.