On Tuesday, Indian equity indices rose modestly. Asian stocks followed Wall Street higher as the passing of a US infrastructure plan lifted mood, while oil prices rose on the prospect of increased energy demand in an expanding global economy. Axis Securities, a brokerage firm, has recommended buying CCL Products and NOCIL for their great potential upside.
With a total manufacturing capacity of 35k tonnes, CCL Products (CCLP) is India's largest maker and exporter of instant coffee.
The firm has set a target price of Rs. 430, while the stock last traded on the NSE on November 6, 2021, at a price of Rs. 381 per share. Though a 6- to 9-month investment horizon is preferable for such ideas, our recommendations may bring some profit potential even for short-term investors.
US business a key growth driver over the long term
CCLP has done well in the US markets, and management expects to become the primary supplier for one of its biggest clients, which would be a significant lift for the company moving forward.
Target and Valuation
"Management of CCLP has revised its volume guidance upwards of more than 15% for FY22 from earlier 10-15% guidance on the back of commercialization of new capacity at Vietnam. It also expects a steady improvement in EBITDA/kg. Overall for FY22 topline is likely to be driven by a combination of volume and price/mix led growth. Despite sharp rise in RM prices and other Operating Costs, CCLP maintained its EBITDA Margin at 24%+ levels on the back of improved mix and better price realization. We recommend BUY with TP of Rs. 430/share," the brokerage has said.
The firm has set a target price of Rs. 300, while the stock last traded on the NSE on November 8, 2021, at a price of Rs. 268 per share.
Strong industry growth prospects going ahead
The Indian tyre industry's medium to long-term prospects have improved following the impact of COVID-19, with stable demand growth. Replacement demand and the OEM segment are projected to rebound quickly. Demand from export markets is also expected to be strong. NOCIL has claimed some market share increases in the local market as demand has improved significantly.
Target and Valuation
"We revise our FY22/23/FY24 estimates downwards to factor in the near-term pressure on business and profitability. Maintain BUY with a revised TP of Rs 300/share (previously Rs 315/share) valuing it at 20x FY24E EPS," the brokerage has said.
The above stocks are picked from the brokerage report of Axis Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article