Hot Chips - Stock Recommendations For Your Portfolio

DSIJ selects 2 aggressive stocks picks in every issue, with a 7-15 day horizon based upon the bullish trend during that period. For this issue, we are recommending a company from a diversified sector and a company from personal care indsutry.

Orient Paper & Indsutries
BSE Code: 502420 Volume: 76752 CMP: Rs 69

The demerger of its cement business into a new wholly-owned subsidiary, Orient Cement (OCL), remains a key trigger for Orient Paper & Industries. The approval process for the demerger is on track, with the scheme of arrangement having been approved by the Orissa High Court on July 27, 2012. Expected to become effective by October 2012, the demerger will create a pure play cement company that triggers the much-awaited value unlocking process. It will ensure that cash flows from the cement business can be dedicatedly used to fund the growth of the business rather than to support the losses of the paper division.

The commissioning of a 25 MW captive power plant in August 2012 and the remaining 35 MW (of the total 55 MW) by September 2012 is expected to result in substantial reduction in the division’s cost in H2FY13. One can look at the stock from a medium to long-term trading perspective.

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Marico
BSE Code: 531642 Volume: 32650 CMP: Rs 189

Marico’s Q1FY13 performance was better than the street’s expectations. This can be attributed to its higher-than-expected OPM, which stood at 14.8 per cent. The gross profit margin (GPM) witnessed a strong improvement of 659 bps on a YoY basis to 49.5 per cent, largely on account of a sharp correction in the prices of copra, which accounts for 40 per cent of the raw material cost.

The domestic consumer business maintained its strong growth momentum, with 16 per cent volume growth during the quarter. An 18 per cent YoY growth in the sales volume of Parachute rigid packs was the highlight of the quarter. On the other hand, around three per cent YoY organic growth in the international business and single-digit samestore sales growth in the domestic Kaya business were the low points. Overall, the long-term domestic growth story for Marico is intact. One can look at the stock from a medium to long-term trading perspective.

*Highest price after our recommendations
(Closing price of August 7, 2012)

The scrips in this column have been recommended with a short-term investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.