5 companies that will benefit from the “Swach Bharat Abhiyan” implementation

Investment

oi-Sunil

By Sunil Fernandes

Updated: Thursday, October 9, 2014, 12:46 [IST]

Prime Minister Narendra Modi last week launched the country's biggest cleanliness drive in the form of the "Swach Bharat Abhiyaan". The PM led a cleanliness pledge at India Gate, with an estimated 30 lakh government employees across the country joining the Prime Minister.

Bold initiatives have been planned under the scheme and there is a huge investment outlay to ensure that every corner of the country remains clean. The estimated cost is a staggering Rs 2 lakh crores in the next 5 years.

It's almost certain that there would be few companies that would benefit from this investment outlay. Here are the 5 companies that could benefit.

1) HSIL

HSIL or Hindustan Sanitaryware and Industries is a top player in the Sanitaryware business. The company is likely to be among the beneficiaries as the government plans a huge outlay on toilets. The stock is currently trading at Rs 351, and is now almost 5 times over and above its 52-week low of Rs 77. We wish to reiterate that the stock is not cheap and the benefits of sharp growth in the future may already be priced into the stock. It will benefit for sure, but, you have to pay a huge price to multiple and a higher price to book value at the current price. May not be an attractive buy at the moment.

2) Nilkamal Plastics

If you have been using plastic chairs, tables or dustbins, you could not have missed using a product of Nilkamal. The company is likely to benefit from a huge uptick in consumption of dustbins, water tanks etc. The stock is currently trading at Rs 374 on the National Stock Exchange. With the book value at Rs 314, one would say it's valuations are not expensive at the current levels. The p/e ratio is also at a reasonable 14 times making the stock a compelling buy.

3) Cera Sanitaryware

This stock is not particularly cheap at Rs 1647. Though the stock is likely to benefit from the increased use of Sanitaryware in the "Swach Bharat Abhiyan" the price to earnings multiple is at over 30 times. The benefits from the Abhiyan may already be reflected in the price.

4) Kajaria Ceramics

Kajaria Ceramics is India's number 1 tile manufacturing company and caters to ceramic, wall, vitrified, polished, glazed and paving tiles, adhesive etc. the addition of toilets is likely to see the company benefits immensely in the coming years. The stock is currently trading at Rs 350 on the National Stock Exchange.

5) Somany Ceramics

Somany Ceramics is also a leading player in tiles. The stock is trading at Rs 290. The valuations are not very attractive considering the price to earnings and price to book value multiples.

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