Broking firm Geojit analyzes 4000 stocks; and chooses around 50 and out of that gives you the best stock to invest every month. This month the broking firm has picked EID Parry.
"What is unique about this company is that it's moving away from commodity business to being a branded player. It wants to be an FMCG player as it wants to move away from the cyclical business to a more resilient business. This is why we believe that this company is due for re-rating.
So the stock we are recommending this time is EID Parry. The company is one of the largest integrated sugar players. It is a part of the Murugappa group, one of India's leading business conglomerates, which adds favour to investing in this company. But the biggest safety net is that it has a 58 percent stake in Coromandel International, whose market value is Rs 13000 crore, against which its market is less than Rs 6000 crore. In other words, the company's primary business is virtually going free," the broking firm has stated.
EID Parry has been reducing debt and doing cost optimisation to expand the margins. It is also relocating its plant to improve efficiency. Hence we believe that EID Parry will create wealth for its investors.
Here is the summary of Geojit's reasoning for EID Parry:
One of the finest integrated sugar company from the Murugappa group
The company has embarked on a journey to focus more on branded business, transforming itself from commodity player to FMCG player
Its sugar brand Parry's Pure has been rated as a super brand
It has another brand called Amrit for organic brown sugar and jaggery
We believe that company's increased focus on branded business will result in re-rating of the company in the market on the same lines that Tata Consumer got re-rated
While EID Parry's market cap is Rs, 6000 crore, the value of its 58 percent holding in Coromandel International at present is Rs 13340 crore. In other words, its sugar and nutraceutical business is virtually going free
The above factor also reduces downside risk to its share price
The government policies for the sugar industry are helping the industry to improve its financials
The company has spare land that can be monetized in the coming quarters
The company has substantially reduced debt in the first six months of the current financial year from Rs 902 crore as of 31st March to Rs 265 crore as on 30 September
The company has undertaken cost-cutting measures to expand its margin and also relocating plant to improve operations
For the first six months of the current year, the company's stand-alone profit before tax and exceptional items increased to Rs 115 crore compared to a loss for the same period last year
Both FPIs and MF have increased stake in the company for September 2020 over June 2020 quarter. Institutional holding stands at 9.3 percent.
EID Parry enjoys a healthy ROCE of 41.11 percent
One of the highest-rated mojo stocks with a score of 87 with good quality, excellent recent financial performance, and technical indicators are suggesting an upward trend
The shares of EID Parry closed at Rs 338 on the NSE.