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

Companies in the affordable housing, automobiles, healthcare and FMCG space are seen as key beneficiaries

Ram Prasad Sahu & Ujjval Jauhari 

Budget 2018
Photo: Shutterstock

The focus of the Union was largely on rural, and social sectors. Allocation to these sectors has been increased by up to 35 per cent. The biggest thrust is on the segment, which is expected to boost farm incomes, improve 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 and housing thrust would be companies in the construction as well as cement, paints and electrical space. 

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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 incomes, 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

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Budgetary support to the 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 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


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The plan to create 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

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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 such as highways, roads, irrigation, metro and high speed trains are positive triggers 
 
Efforts to uplift by improving farm incomes, increased allocations under MREGA, etc will help in boosting cement demand from 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


 

First Published: Mon, February 05 2018. 06:01 IST
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