Bank of Baroda and ABB India were removed from the largecap portfolio. Devyani International has been withdrawn from the midcap portfolio.
Bank of Baroda, ABB India, and Devyani International have been removed from Kotak Institutional Equities’ largecap and midcap portfolios, while Canara Bank and Adani Ports & SEZ have been added.
The brokerage business said it withdrew Bank of Baroda, which had a weight of 160 basis points, from its largecap portfolio due to its exceptional performance over the last six and twelve months, when it climbed 27 percent and 73 percent, respectively.
Canara Bank has replaced Bank of Baroda with a weight of 150 basis points. Canara Bank was once part of its midcap portfolio. One basis point equals one tenth of a percentage point.
“The portfolio has a good exposure to PSU banks through SBI and Canara Bank.” SBI trades at 1.1X FY2024E BV after deducting the value of its partners and subsidiaries.
Canara Bank is now trading at 0.9X FY2024E BV.
Given similar return profiles and values, there is not much to choose amongst the main PSU banks (except SBI) at the moment,” Kotak stated in its analysis.
The brokerage company also withdrew ABB India, which had a 200-bps weight in its largecap portfolio, since it believed the stock had exceptionally rich values. It added Adani Port SEZ with a weight of 150 bps.
“We remain impressed with ABB’s fundamentals and remain optimistic about the investment cycle.”
ABB’s valuations assume long-term robust revenue growth and margins.
According to Kotak, Adani Port’s stock is trading at 12.3X FY2024E EBITDA and 10.2X FY2025E EBITDA. The stock is trading substantially below its fundamental worth (its 12-month Fair worth of Rs 810) and has down 10% since January 24, 2023, the day before the publication of a short-seller report on Adani Group.
“We remove Devyani International from the mid-cap model portfolio, given the stock’s 21% gain in the last month, which has pushed the stock price well above our 12-month Fair Value of Rs 160,” the company said of the KFC and Pizza Hut franchise.