Buy VST Industries around Rs 1855-1810: ICICIdirect.com

ICICIdirect.com is bullish on VST Industries and has recommended buy rating on the stock with a target of Rs 2150 in its November 21, 2012 research report.

“The share price of VST Industries remains in a secular bull trend, consistently forming higher peaks and troughs on the long term price charts. While the stock continues to remain in an upward trajectory, it has a tendency to consolidate sideways after every major up move before resuming the northward journey. This indicates a healthy trend as the share price works off its overbought conditions before the start of each up-leg and, thereby, provides enough entry opportunities for medium term traders. The last up move from the December 2011 low of Rs  994 saw the stock hitting an all-time high of 2269 levels towards late April 2012. Thereafter, the stock went into a sideways consolidation mode for nearly seven months and in the process retraced the preceding up move by precisely about 50%.”

“The medium term moving averages on the daily and weekly charts (50 day EMA – 1775 and 21 week EMA – 1754) remain in a rising mode. The stock has been taking good support at the said averages during the whole consolidation phase, which again indicates a positive bias. The recent price action saw the stock re-test its long term rising trend line in place since February 2011. Subsequently, the stock has registered a breakout past the seven month consolidation range. Following the range breakout, we expect the stock to resume its northward journey and head to challenge its all-time high of 2269 over the medium term Among oscillators, the MACD on the weekly chart has generated a positive crossover above its nine period average and indicates strength in the price breakout.”

“VST Industries is one of the foremost cigarette manufacturers in India with a presence in low priced brands like Charms, Charminar and Moments. We believe, with VST’s dominance in the low priced cigarettes market, it is well poised to benefit from increasing per capita income and shift in demand from other cheaper tobacco products to cigarettes. Following the slowdown in volumes in H1FY13, we have assumed a slight dip of - 3.5% in FY13E volume growth and expect volumes in FY14E to increase by 2.5%. VST should command higher multiples considering strong balance sheet, higher return ratios and increasing dividend payout,” says ICICIdirect.com research report.

FIIs holding more than 30% in Indian cos

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