3 hot stock picks from Anand Rathi Share and Stock Brokers

 Dalmia continues to surpass industry volume growth and with its premium products and market-leading position, it should post a strong performance.

With 25m tpa (south 12.1m, east & north-east 12.9m), Dalmia enjoys a 9.2 percent market share.

Its high cement-to-clinker ratio, optimized fuel-mix and logistic costs, the proposed 9MW waste-heat-recovery plant in Odisha and corporate restructuring would help raise its EBITDA/ton to Rs.1,327 in FY20 (vs. Rs.1,202 in FY17)

The better operating performance, rising capacity utilization and no major capex would help improve the RoE and RoCE from 4.5 percent and 5 percent in FY16 respectively to 16.8 percent and 13.6 percent in FY20

Our revised target of Rs 3,460 (earlier Rs.3,202) is based on 13x Sept’19e EV/EBITDA, reflecting an EV/ton of $197.

Deepak Nitrite

CMP   Rs 205                                            Target   264

 DNL is one of the leading global players for several niche chemical products used in - Colorants, Petrochemicals, Agrochemicals, Rubber, Pharmaceuticals, Paper, Textile

DNL has recently increased its focus on adding high value products. (Greenfield expansion plan at Dahej, Gujarat for manufacturing phenol (2, 00,000 ton/year) and acetone (1, 20,000 T/year).

With the completion of its Phenol project, the top line for the company is expected to almost get doubled by FY-19E.

Also, due to India’s heavy dependence on the imports due to lack of domestic production capacity and imposition of around 7.5 percent cumulative anti dumping duties, the macro scenarios for the domestic market looks promising for the company.

At CMP, the stock is trading 27x time FY18E and 11.3x FY19E earnings. We recommend BUY on Deepak Nitrite Limited with a target price of Rs.264 per share.

Supreme Industries

CMP   Rs 1,155                                          Target   1,450

 Supreme Industries (SI) is India's leading polymers and resins processing company offering wide range of plastic products.

During the quarter, raw material prices remained muted due to lower crude oil prices. Several initiatives taken by the government to boost infrastructure spending and focused drive to support affordable housing augur well for the company's business growth prospects.

Company states that this quarter was weak because of GST. Expecting 12 percent top line growth for the year.

The company intends to increase its contribution from value added products to around 35 percent or more of its total revenues through focusing on technological innovations and designs.

We expect Supreme Industries Ltd to grow its revenues at a CAGR of around 14 percent in the next few years on the back of both increase in volumes and value terms.

The company plans to achieve 7 lakh ton per year installed capacity by FY-21.

At CMP the stock is trading around 28.9x times FY18E earnings and 23x times FY19 E earnings.

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