Recommendations From Food Processing & Cement Sectors
The scrips in this column have been recommended with a 15-day 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.
NESTLE INDIA LIMITED
CMP - Rs 17,178
BSE CODE : 500790
Volume : 5,081
Face Value : Rs 10
Target : Rs 18,500
Stoploss : Rs 16,000 (CLS)
Nestle India Limited is a FMCG company engaged in the food business. Its business includes products related to milk and nutrition, beverages, prepared dishes and cooking aids, and chocolate and confectionery. Nestle India’s popular brands include Nestle Baby & Me, Nescafe, Nescafe Classic, Maggi, Maggi Oat Noodles, Nestle Kit Kat, Nestle Bar One, Nestle Alpino, Nestle Munch, etc. For Q4FY20, the net sales reported by the company amounted to Rs 3,305.78 crore which have grown by 10.84 per cent compared to the revenue of Rs 2,982.39 crore for Q4FY19. The PBDT increased by 0.41 per cent to Rs 795.20 crore in Q4FY20 as against Rs 791.99 crore for Q4FY19. Compared to the net profit of Rs 525.43 crore in Q4FY20, it is 13.55 per cent more as compared to Rs 462.74 crore for Q4FY19. The company wasn’t much affected by the virus pandemic disruptions due to initial stockpiling of packaged goods. Nestle India intends to undertake cost-saving initiatives to boost operating margins. New product launches are expected to drive growth in the future. Hence, we recommend a BUY.
ACC LIMITED
CMP - Rs 1,332
BSE CODE : 500410
Volume : 1,31,335
Face Value : Rs 10
Target : Rs 1,430
Stoploss : Rs 1,245 (CLS)
ACC Limited is engaged in the manufacturing of cement and ready mixed concrete. Its products include Portland cement, premium cement and bulk cement. On a consolidated quarterly front, the company reported net sales of Rs 3,433.02 crore in Q3CY20, down by 10.82 per cent from Rs 3,849.63 crore in Q1CY19. Operating profit came in at Rs 642.40 crore in Q1CY20, declining by 6.67 per cent from Rs 688.30 crore in Q1CY19. Net profit was reported at Rs 320.79 crore in Q1CY20 and Rs 342.80 crore in Q1CY19, falling by 6.42 per cent. Although the lockdown has adversely affected demand, the company has net cash of Rs 4,400 crore which provides it with a cushion from any extended period of weak topline. Gradual improvement in demand along with the resumption of operations and falling energy prices should bode well for the company going forward. Thus we recommend a BUY.
(Closing price as of June 30, 2020)