Recommendations From Domestic Appliances & Ceramics Sector

Recommendations From Domestic Appliances & Ceramics 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.

BAJAJ ELECTRICALS

CMP - Rs 437.80
BSE CODE : 500031
Volume : 70,069
Face Value : Rs 2
Target : Rs 475
Stoploss : Rs 405 (CLS)

Bajaj Electricals is engaged in engineering and projects, power distribution, illumination and consumer durables businesses. On a consolidated quarterly front, the company reported net sales of Rs 1,293.27 crore in Q4FY20, down by 26.55 per cent from Rs 1,760.83 crore in the same quarter for the previous fiscal year. Operating profit declined by 40.47 per cent from Rs 91.12 crore in Q4FY19 to Rs 54.24 crore in Q4FY20. The company reported a net loss of Rs 0.12 crore in Q4FY20 against a net profit of Rs 24.98 crore in Q4FY19. There has been an improvement in balance sheet position with leverage ratio reducing from 1.6x in FY19 to 0.6x in FY20. This reduction in debt will lead to a significant decline in interest outgo going forward. Companies with a strong balance sheet position like Bajaj Electricals are likely to recover faster post lockdown. Thus, we recommend a BUY on this scrip.

KAJARIA CERAMICS 

CMP - Rs 423.80
BSE CODE : 500233
Volume : 25,241
Face Value : Rs 1
Target : Rs 455
Stoploss : Rs 395 (CLS)

Kajaria Ceramics Limited is a tile company engaged in the manufacturing and trading of ceramics, polished and glazed vitrified tiles and offers products, including ceramic wall and floor tiles, polished vitrified tiles, glazed vitrified tiles, and sanitary ware and faucets. On the consolidated financial front, the net sales for Q4FY20 declined by 20.03 per cent to Rs 652.04 crore from Rs 815.31 crore reported for Q4FY19. PBDT for Q4FY20 contracted by 23.57 per cent to be Rs 95.36 crore compared to Rs 124.77 crore for Q4FY19. The company gained a net profit of Rs 48.82 crore for Q4FY20, decreasing by 26.98 per cent when compared to the net profit of Rs 66.86 crore gained in Q4FY19. Despite a challenging year, Kajaria Ceramics is expected to benefit from its leadership position in the industry and strong execution capabilities. Additionally, the company also has a healthy cash balance aiding its long-term growth prospects. Hence, we recommend a BUY.

(Closing price as of July 28, 2020)

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