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Last Updated : Sep 09, 2018 09:03 AM IST | Source: Moneycontrol.com

Nifty to consolidate amid IIP, WPI data; top 3 stocks to bet on

Sumit Bilgaiyan of Equity99 expects the Nifty to consolidate between last week’s high-low levels

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Sumit Bilgaiyan

Equity99

On a weekly basis, profit booking was seen in the market last week after six consecutive weeks. Along with the Nifty, the Bank Nifty, Midcap and Smallcap indices have also seen strong selling pressure during the first half of the week.

Depreciation of the rupee versus the dollar, higher crude prices and worries over a trade war between the United States and China were the main reason for the weekly fall. At the end of last week, the Nifty closed 91.4 points lower against its previous week's close.

This week has only four trading days. We expect the Nifty to consolidate between last week’s high-low levels, with quality stocks rallying. There are many important events this week. Consumer Price Inflation (August) and Index of Industrial Productivity (July) will be declared on September 12. Wholesale Price Inflation (July) will be declared on September 14.

On September 12, Apple will unveil its new iPhones. From an earnings point of view, a bunch of companies are going to announce their results like Reliance Home Finance, Reliance Capital, Power Finance Corporation, Tourism Finance Corporation of India and Rural Electrification Corporation.

Our past recommendations like Dr Reddy’s Laboratories, Ajanta Pharma, L&T Technology Services, Larsen & Toubro Infotech, Suven Life Sciences, Sun Pharmaceutical Industries, ITC, GMR Infrastructure, Mahindra & Mahindra and Adani Green Energy have given fantastic returns in the very short term.

Alkem Laboratories:

Alkem Laboratories produce high-quality branded generics, generic drugs, active pharmaceutical ingredients and neutraceuticals, which market in India and over 50 countries internationally. It has an extensive manufacturing footprint with a total of 16 manufacturing facilities including 14 in India and 2 the United States.

Company is having comprehensive portfolio of over 700 brands covering all the major therapeutic segments. It has reported excellent results for 1QFY19. Its sales and EBITDA grew by 27.19 percent YoY and 86.08 percent YoY, respectively, while PAT increased by 90.26 percent to 136.15 crore. EBITDA margins in Q1FY19 were at 14 percent vs 9 percent in Q4FY18 and 9 percent in Q1FY18.

Last month Company has successfully cleared the USFDA inspection at Baddi plant. At the CMP, the stock trades at a P/E of 38x.

Technically stock is ready for big breakout. Its daily and weekly charts look highly promising. We are recommending a buy for medium term.

Bharat Forge:

Bharat Forge (BFL), the Indian multinational is a technology driven global leader in metal forming having transcontinental presence across ten manufacturing locations, serving several sectors including automotive, power, oil and gas, construction & mining, rail, marine and aerospace.

BFL has posted a quite healthy growth in Q1FY19. Its profit zoomed 33.92 percent to Rs 234.46 crore against Rs 175.08 crore. EBITDA increased 24 percent to Rs 428.8 crore against Rs 345.7 crore while sales increased by 23.2 percent to Rs 1479.66 crore against Rs 1200.08 crore. Its EBITDA margin improves to 29 percent from 28.8 percent.

Company is setting up Aluminum Forging facility at BF PMT in Tennessee, USA at a cost of USD 55 million. This facility in addition to Al forgings in Europe will help company to enhance its presence in the light weighting technology used in passenger vehicles.

Stock is trading at a PE ratio of 39x. The stock looks good on the daily and weekly chart so we are recommending a buy for medium term.

Super Crop Safe:

Super Crop Safe (SUCROSA) is R&D driven agro chemical with focus on niche products. The company has successfully developed and commercialized high margin bio products through its R&D. Such products are Super Gold, triNETRA and Artica which are getting quite strong response from the market.

Company is aiming to launch 3-4 high margin -high demand products from its R&D every year, which will further strengthen its margin. We believe this approach would add vigor to the company's performance in coming 1-3 years.

At CMP, the stock is trading at PE of just 18.15x on its EPS (TTM) of Rs 1.33 per share. The stock is available at a discount compared to industry PE of 40.18x. Company’s EBITDA grew 37.84 percent CAGR in last four years while PAT increased 77.29 percent CAGR in last four years.

For Q1FY19, its PAT soared 41.25 percent to Rs 1.13 crore. Its EBITDA margin for Q1FY19 stands at 11.45 percent as against 7.66 percent in Q1FY18. We believe this stock can become multi-bagger in a long run, so we are recommending a buy for long term investment prospective.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Sep 9, 2018 08:34 am
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