Stock Pick From Fertilizers And Construction Sectors

Rashtriya Chemicals & Fertilizers (RCF) manufactures urea, complex fertilisers, bio-fertilizers, micronutrients, water soluble fertilisers, soil conditioners and a range of industrial chemicals. The low gas prices will reduce subsidies and enable faster flow of money from the government. The low cost of production is due to less potash and di-ammonium phosphate (DAP) prices. RCF has issued a commercial paper of Rs.180 crore to State Bank of India with maturity date of March 30, 2017. The company is going to declare its Q3FY17 results on February 10. On the valuation front, RCF’s share price is trading at PE of 17.19x against industry PE of 16.35x. The company has given dividend yield of 1.91 per cent in FY16. On the visibility of growth, we recommend investors to buy the stock with a target of Rs.66 and a stop loss of Rs.50.

NCC is in the construction activities in the infrastructure sector. Its business divisions include buildings and housing, roads, electrical, water and environment, irrigation, railways, power, metals, mining and international. The shareholding pattern of the company indicates that mutual funds have increased their stakes by 458 basis points to 22.2 per cent in Q3FY17 on a quarterly basis. NCC is hoping to cross Rs.10,000 core in consolidated revenues during the current financial year, as the company expects to do better in the second half. The company has received fresh orders of more than Rs.8900 crore in the first seven months of the current year, as against a targeted order inflow of Rs.12,000 crore for the whole year. It has a balance of orders of about Rs.22,164 crore at the end of H1FY17. On strong order book, we recommend investors to buy the stock with a target price of 100, with a stop loss at Rs.70.