Recommendations from Pharmaceuticals & Auto-Tractors Sector

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.  

GRANULES INDIA LIMITED 

CMP - Rs 165.20
BSE CODE - 532482 
Volume - 2,11,696
Face Value - Rs 1 
Target  - Rs 181 
Stoploss - Rs 154 (CLS)

Granules India Limited is a pharmaceutical company with presence across the pharmaceutical manufacturing value chain, including active pharmaceutical ingredients (APIs), pharmaceutical formulation intermediaries (PFIs) and finished dosages (FDs). Its business operations include three areas, namely, core business, emerging business, and contract research and manufacturing services (CRAMS). On the consolidated quarterly front, net sales grew by 11.42 per cent in Q3FY20 to Rs 703.96 crore as compared to Rs 631.78 crore in the same period for the previous fiscal year. The company reported an operating profit of Rs 166.66 crore in Q3FY20, up by 39.84 per cent from Rs 119.18 crore in Q3FY19. Net profit after tax increased by 9.96 per cent to Rs 64.03 crore in Q3FY20 from Rs 58.23 crore in Q3FY19. On account of the launch of new products and improving product profiles, company earnings are expected to remain healthy despite the current market situation. Thus, we recommend a BUY.

ESCORTS LIMITED

CMP - Rs 835.40
BSE CODE- 500495 
Volume - 2,15,694 
Face Value - Rs 10 
Target - Rs 905 
Stoploss - Rs 775 (CLS)

Escorts Limited is an engineering company which offers agricultural tractors and construction equipment. Its segments are agri machinery, auto ancillary products, railway equipment, construction equipments and others. On the consolidated quarterly front, net sales fell by 15.97 per cent in Q4FY20 to Rs 1,385.65 crore from Rs 1,649.08 crore in Q4FY19. The operating profit still saw an improvement of 3.82 per cent to Rs 212.37 crore in Q4FY20 from Rs 204.55 crore in Q4FY19. Net profit in Q4FY20 was Rs 129.22 crore, up by 9.66 per cent from Rs 117.84 crore in Q4FY19. Given the rural-centric tractor demand that is relatively less impacted by Covid-19, the domestic tractor industry is expected to outperform the rest of the automobile industry. Moreover, a strong Rabi season and Rs 1.7 lakh crore interim stimulus package for farmers are positive signals for the company. Thus, we recommend a BUY on this scrip. 

(Closing price as of May 19, 2020)