Recommendations from Auto Parts & Equipment & Cigarettes,Tobacco Products 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.

TUBE INVESTMENTS OF INDIA 

CMP - Rs 505.70
BSE CODE 540762
Volume 3,954
Face Value Rs 1
Target Rs 550
Stoploss Rs 480(CLS) 

Tube Investments of India (TII) is a mobility-focused manufacturing company. It manufactures products for automotive and industrial applications and operates through three segments, namely, engineering, bicycles and metal-formed products. Looking at the consolidated quarterly trends, for Q2FY20, the company posted net sales of Rs 1,191.11 crore which is a decrease of 15.74 per cent compared to net sales of Rs 1,413.58 crore in Q2FY19. The decrease in net sales was a result of the slowdown in the domestic automobile industry to which nearly 50 per cent of TII’s revenue is linked. The company’s PBDT increased by 16.19 per cent to Rs 161.48 crore in Q2FY20 from Rs 138.98 crore in Q2FY19. Subsequently, the net profit for Q2FY20 grew by 36.54 per cent to Rs 92.82 crore from Rs 67.98 crore gained in Q2FY19. TII has a healthy business risk profile with diversified revenue streams all along sustaining its market leadership positions in key business segments and also as one of the leading companies belonging to the Murugappa Group. Hence, we recommend a BUY.

GODFREY PHILLIPS INDIA 

CMP - Rs 1413.70
BSE CODE 500163
Volume 24,888
Face Value Rs 2
Target Rs 1,540
Stoploss Rs 1,310 (CLS) 

Godfrey Phillips India is engaged in the manufacturing of cigarettes and chewing products and also in the trading of tobacco products and tea. It offers cigarettes under brands such as Hawk-Eye, Red and White, Marlboro, Cavender’s and Four Square. On a consolidated quarterly front, the company’s net sales posted growth of 12.89 per cent to Rs 744.32 crore in Q2FY20 from Rs 659.35 crore in Q2FY19. It reported an operating profit of Rs 130.16 crore in Q2FY20, up by 17.70 per cent from Rs 110.59 crore in Q2FY19. The net profit grew by 56.97 per cent to Rs 113.54 crore in Q2FY20 from Rs 72.33 crore in the same quarter for the previous fiscal year. Growth in the company’s core business of cigarettes is expected owing to new product launches and better realisation. Thus, we recommend a BUY.