This Chemical Stock Surges 67.69% In 1 Month, HDFC Securities Sees More Upside

Excel Industries Ltd, a small-cap company with a market capitalization of Rs 2,058.70, is involved in the chemical business. The stock has grown by 76.53 percent in one year and by 77.59 percent year to date (YTD). The stock has risen 51.14 percent in the last six months and 67.69 percent in the last month. The stock has climbed by 32.11 percent in the previous five days. HDFC Securities, a local brokerage company, has issued a buy call on the stock by seeing more upside. The brokerage has placed a target price of Rs 1,650 to Rs 1,795 with a stop loss (SL) of Rs 1,195 and a time horizon of three to six months because it believes Excel Industries Ltd's overall chart pattern signals a significant upside.

Investment rationale

The brokerage has noted "After the formation of huge upside gap on 14th Feb around Rs 984- Rs 1110 levels, the stock price continued its northward journey for the next few sessions before showing a dip. The said upside gap remains unfilled till now, as per daily and weekly timeframe chart. The downward correction of mid to later part of Feb month has resulted in a buy on dips opportunity and the stock price moved up again in later part of Feb and early part of March month."

HDFC Securities has said "We observe a decisive upside breakout of the crucial overhead resistance of up sloping trend line at Rs 1320 levels (resistance as per the concept of change in polarity) in last week and the stock price closed higher. This is positive indication and one may expect further upside in coming sessions. The volume has expanded sharply during upside breakout of important hurdle. This action indicates an aggressive participation of bulls. The weekly 14 period RSI has moved above 75 levels, which reflect an existence of strong upside momentum in the stock price. The overall chart pattern of Excel Industries Ltd indicates long trading opportunity."

The brokerage’s take on Excel Industries Ltd (EIL)

HDFC Securities has claimed "The company has delivered healthy revenue/PAT growth of 10.8%/22.2% CAGR over FY16-21 on the back of its diversified enduser industry applications; strong positioning in the domain of phosphorus, its derivatives & related chemistry and its resilient R&D focus. Low debt level and sizeable investment position could fund capex plans. Excel industries has its focus on product lines including pharma intermediates, polymer inputs and specialty chemicals which are low volume, but high value products. Product additions and extensions and positive developments in pharma and environment-biotech segment would make a strong case for re-rating of the stock in the long term."

As per the brokerage "Although their business fundamentals and financial profile remains robust, comments about the sustainability of the recent strong financial performance would require more details about existing capacities, its capacity utilization, capex plans, key customers, end-under industry mix; much of these is not available in the public forum. The stock is currently trading at 14.15x TTM EPS. We believe that given its strong track record with its product additions, its R&D focus and management's focus on improving operational efficiency; there is a scope for re-rating of this stock in the shorter time horizon."

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. 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.