Recommendation From Personal Products & Commodity Chemicals 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. 

COLGATE PALMOLIVE 

CMP - Rs 1132.35
BSE CODE 500830
Volume 16,836
Face Value Rs 1
Target Rs 1235
Stoploss Rs 1040 

The FMCG giant is engaged in manufacturing and marketing of personal care products majorly known for its toothpastes. Oral care products account for more than 95% of company’s total sales turnover and its volume market share for toothpaste and toothbrush were 53.4% and 44.8%, respectively in FY18. Colgate has attempted to curb competition and recover decline in market share with the launch of Swarna Vedshakti and Cibaca Vedshakti under the Ayurvedic segment. The management expects oral care segment volume growth of nearly 6% in FY19. The company has posted 6.4% and nearly 40% revenue and PAT growth in Q1FY19 as against Q1FY18. On the annual basis, the company has reported 5.2% and 16.6% revenue and PAT growth, respectively, amid favourable base and cost control initiatives and despite competition in both toothpaste (Dabur & Patanjali) and toothbrush (P&G’s Oral-B). Going forward, the company is expected to spend heavily on advertising of its product launches. With strong ROE and ROCE at 49% and 71%, we recommend a BUY in the stock. 

NAVIN FLUORO 

CMP - Rs 639.90
BSE CODE 532504
Volume 2,306
Face Value Rs 2
Target Rs 694
Stoploss Rs 588 

The largest integrated specialty fluorochemical maker is engaged in manufacturing of refrigerants catering to refrigeration and air-conditioning, speciality fluorochemicals catering to pharma, agrochemical and polymer industries, inorganic fluorides inclusive of hydrofluoric acids and contract research & manufacturing services (CRAMS) to global innovator pharma companies. The four segments generated 31.7%, 33.7%, 20.2% and 14.4% of revenue, respectively, in Q1FY19. It has built the country’s first plant with high pressure fluorination capabilities with CGMP compliance for CRAMS. Recently, R-32, a new refrigerant is attracting high interest as it efficiently conveys heat, reduces consumption of electricity to nearly 10% as against R-22, holds global warming potential (1/3rd lower) and has low environmental impact. The company is a key player in the global R32 market. On the financial front, the company’s FY18 topline and bottomline grew 25.6% and 34.6%, respectively. The company is virtually debt-free. Its P/E stands at an attractive 18.95x as against industry P/E of 23x. We recommend a BUY