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Sensex: Top performers of FY09

Apr 1, 2009

Financial year 2009 (FY09) has come to an end. It was a crazy rollercoaster ride considering various situations and events that one got to witness. Right from blue chips to small caps, stocks across sectors have been battered on account of various reasons ranging from poor quarterly results, high debt levels, macro and micro economic issues, global uncertainties, poor future outlook and a major corporate scandal, amongst others. During FY09 i.e. from the April 1 2008 to March 31 2009, there has not been a single stock on the BSE that has garnered positive returns. However considering that the BSE-Sensex has fallen by 38% during this period, there have been a few stocks that have outperformed the index. In this article we have profiled the top five performers and tried to rationalise their outperformance.

Source: Equitymaster

Hindustan Unilever Limited (-0.1%)
FMCG sector stocks have been the preferred choice over the past one year. The reasons for the same are many. The prime one being their strong fundamentals coupled with their 'recession proof' businesses. HUL, being a FMCG behemoth, has been the top performer amongst the blue chips stocks. The stock has outperformed others due to its stable financial performance as well. Its CY09 financial performance was commendable. While revenues grew by 20% YoY, its profits grew by 9% YoY. This was mainly on account of stable margins, pricing power, slew of new products and strong growth in revenues. However, the stock has witnessed some slack in the past few weeks mainly on account of its high valuation.

Maruti Suzuki (-4.9%)
The performance of Maruti's stock in FY09 as compared to its peer group has been terrific. While the stocks of M&M and Tata Motors have fallen by 41% and 70% respectively, the stock of Maruti has dropped by a mere 5%. However it may be noted that it has risen by nearly 80% since January 2009. Until the end of November 2008, Maruti had shed nearly half its market value largely on back of unwillingness of banks to lend coupled with high interest rates. This led to a slump in demand for vehicles. However, the scenario has significantly changed since then. The measures taken by the RBI and the government (to boost consumption) have helped in increasing the demand for vehicles. Maruti may have been the largest beneficiary as it recorded its highest ever sales in the month of February 2009.

Infosys (-6.8%)
Next in line is Infosys recording a point to point loss of only 6.8%. The company's stock has performed well on account of its strong financial performance in the 9mFY09 period. During the period, the company's revenues grew by 32% YoY, while its profits increased by 28% YoY. This is a much superior performance when compared to its peers, TCS and Wipro, whose profits grew by 4% YoY and 20% YoY respectively. In addition, the company has a highly competent management that is capable of envisioning future trends in the industry. The management's solid depth of experience gives the company a sustainable competitive advantage over its peers, especially in uncertain times such as the present. Furthermore it is making conscious and constant efforts to move up the software value chain. Infosys offers all its services through its highly integrated and widely acclaimed global delivery model. Notwithstanding the current slowdown and uncertainty over short term business prospects, Infosys continues to lead the Indian technology offshoring story, as seen from the strong growth and superior performance metrics that the company has recorded over the past few years.

NTPC (-7.8%)
Recording a point to point loss of only 7.8%, India's power sector czar, NTPC comes next on the list. The stock has gained strong momentum in the past few months mainly on account of lower commodity prices, which would eventually help it improve margins by lowering fuel costs. In addition, the company put up a strong performance in the 3QFY09. On the back of steady capacity addition, NTPC has managed to grow its revenues at a steady pace (revenues higher by 16% YoY in 9mFY09). However, its operating profits have been impacted by higher fuel costs. Nonetheless, NTPC's operating and bottomline performance has been improving over the past three quarters on account of lower commodity prices. Going forward, the effects of the better margins and balance sheet strength are expected to be reflected in the results.

Sun Pharma (-7.3%)
Last on the list is Sun Pharma, recording a point to point loss of 7.3%. As compared to its peers, Ranbaxy and Dr. Reddy's, whose stocks dropped by 63% and 18% respectively, the stock of Sun Pharma has performed much better. While Ranbaxy ran into trouble with the US FDA due to deficiencies in its manufacturing facility and Dr.Reddy's had to contend with difficult conditions in the German market, Sun Pharma's growth was much steadier. The latter was able to garner exclusivity periods for a few drugs which greatly enhanced its overall performance in FY09. In 9mFY09, the company's revenues grew by 50% YoY, while profits jumped by 86% YoY. In the process, its operating margins also expanded to 47.5%, an expansion of a whopping 10%. It may be noted that Sun Pharma enjoys the best margins and return ratios as compared to its domestic peers. However, the only concern for the company is the uncertainty surrounding its Taro acquisition. This matter is currently pending in the courts.


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