Sell Rallis India: East India Securities

Rallis, on standalone basis, posted growth of 17.8% in Net Sales for the quarter, as domestic business picked up on back of strong monsoon and spillover of export order from previous quarter. Domestic business was struggling on account of two back to back droughts and high channel inventory. Other business (majorly seed) posted strong growth of 66% for the quarter. Rallis’s Q2FY17 numbers were in-line with our expectation.

 Even thought Rallis has one of the best distribution network, company seems to be unable to capitalize on it. Given stellar performance by peers, Rallis’s lowering innovation index and declining growth in domestic business indicate urgent need for business restructuring & focus. 

Overall, we estimate Rallis to register a CAGR of 9% in Net Sales and Profit over FY2016-18E, respectively. On the valuation front, the stock is trading at 29x & 26x FY2017 & FY2018 Estimated Earnings. We recommend Sell on stock with a Target Price of Rs 223.

Buy Navin Flourine: Dynamic Levels

In 2QFY17, Havells India Ltd. (Havells) posted net revenue growth of 9% YoY to INR 14.5 bn, mainly boosted by notable growth of 22% YoY in company’s electrical consumer durable (ECD) segment. On the other hand, revenue growth in Switchgears (5% YoY) and Cables & Wires (flat YoY) was muted on account of sluggish housing and industrial demand. 

Lighting & fixtures demonstrated 9% YoY revenue growth, led by 22% growth in lighting (ex-CFL). Havells’ core EBITDA stood at INR 2.1 bn (14.5% EBITDA margin) compared to INR 1.9 bn (14.1% margin) in 2QFY16. Contribution margin improved across all segments. 

PAT stood at INR 1.4 bn, up 21% YoY. Going forward, attractive macro triggers such as expected growth in housing demand, higher discretionary spending related to payouts of Seventh Pay Commission and healthy monsoons auger well with company’s growth prospects. Over FY16-19E, we expect Havells’ revenue to grow at 13% CAGR with 120 bps margin improvement, entailing 19-20% CAGR earnings growth.

Robust return ratios (RoE >20%; RoCE >30%) and debt-free balance sheet enhance fundamental strength. Improved profitability with optimum working capital could result in notable FCFF of INR 4.7 bn by FY19E. Maintain BUY rating with TP of INR 478 (36x Sept-18E EPS).

Buy granules india: Nirmal Bang

Granules India posted subdued sales growth of 3% yoy to Rs 363.6 cr for the quarter, due to capacity constraints in Paracetamol and Metformin however EBITDA margins improved by 100 bps on account of favorable product mix leaning towards formulations (37% of sales vs 29% in Q2FY16). 

The company posted EBITDA margins of 20.4% vs 19.4% in Q2FY16 and vs 19.6% in Q1FY17. The company is undergoing capex program (earmarked Rs 314 cr for FY17 and similar number for FY18) for increasing the capacities in addition to greenfield facility at Virginia. Increased capacities are likely to be operational by FY17 end or early FY18. 

Management has maintained revenue growth guidance of 10-15% for FY17. In last 5 years the company has shown robust growth and grew at CAGR of 24.7% with PAT CAGR of 41.5%. For the next two years we expect the company’s sales to grow by 14% and PAT by 28%, due to higher profitability in Omnichem and higher contribution by formulations business. 

We believe current year is an year of consolidation wherein it is making all possible efforts to prepare a base for future growth momentum. We have assigned a multiple of 18x FY18E earnings and based on that we recommend BUY on the stock for price target of Rs 156.

Hold Hcl Infotech & M&M: Prakash Gaba

Prakash Gaba of prakashgaba.com told CNBC-TV18, "Nifty had seen a low at 8400 zones. If we get rallies, those would be shorting opportunities, unless 8550 is taken on the upside you must assume that any upmove that we may have would be shorting opportunities and the downside is open." 

"I like two stocks - HCL Technologies   looks certainly good and can climb to levels closer to around Rs 820 zones. I would have a stop loss below Rs 775 and trade long. Mahindra & Mahindra (M&M) is also looking good with targets of Rs 1,420-1,450 zones and stop loss below Rs 1,350. It may take some time for that, but that's the target," he added.

Buy stocks of Ashok Leyland: Ashwani Gujral

Ashwani Gujral of ashwanigujral.com told CNBC-TV18, "Nifty and the Bank Nifty continue to remain in a longer term correction. 

Whatever way the event pans out, the big buying opportunity will come as the market moves higher, for the moment I don’t think there is great positional trade on the Nifty or the Bank Nifty, wait for the event outcome and then try to get long." 

"There is great risk reward now on Ashok Leyland   where a medium target of Rs 120 is now visible. Infosys   is getting closer to Rs 950-970 and getting ready for a pullback rally. In fact the entire IT sector out there could see pullback rally with Infosys right up to Rs 1,080-1,100. Also, Axis Bank   which had a sharp correction in any sort of pullback could also have a medium target closer to Rs 600," he said.

Buy UltraTech Cement on dips: Anu Jain

Anuj Jain, Director – Equities at IIFL Private Wealth Management told CNBC-TV18, " UltraTech Cement  , given the way it closed on Friday, it gave up most of the steam, it is good to pick up closer to Rs 3000 or Rs 2990. It is poised towards Rs 3300. So, it is a buy on dips. On Friday it gave up, so there is a possibility of a couple of percentages down before it moves up." " India Cements on the other hand has kept the steam on Friday. 

There is some minor resistance closer to Rs 105 and it can actually move upto Rs 112-113. So, there is momentum still in it. The smaller ones will also start, so, JK Lakshmi Cement has stated to show some accumulation," she added.

Buy Gateway Distriparks on dips: Anu Jain

Anuj Jain, Director – Equities at IIFL Private Wealth Management told CNBC-TV18, "There are certain stocks which kind of stood out on the basis of which they were accumulated.  Gateway Distriparks  , despite the way it has moved up, even at the current level of Rs 365, any dips or up to Rs 355 one can look at picking up this stock. For a medium term, the target is as high as about Rs 400-420. In the mid term if one is playing for about 15-20 days, around Rs 375-385 is what one should get which is still about 7-8 percent move which is still left into the counter." "We have seen a big move coming along with banking into infra. 

So, there was a lot of short covering and a move up there. So, there are signals both in Sadbhav Engineering , Blue Star  and in Voltas  but I would like to give Blue Star as a call. In the medium term again like Gateway Distriparks the targets are very high of about Rs 425. So, for somebody who is looking at as an investment call also, we are advising this," she said. "For a safe person who does not want to play any of these, there is probably Glenmark Pharma . Looking for a target of Rs 750 and stoploss of about Rs 705."