Recommendations From Restaurants And Utilities:Non-Elec. 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.

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JUBILANT FOODWORKS
CMP - Rs1425 
BSE CODE 533155 Volume 72002 Face Value Rs10

This company holds franchise of Dominos and Dunkin Donuts with 67% market share in pizza segment in India. The company is seen focusing more on online business for home delivery and reducing store launches to recover rental losses. Moreover, it is looking forward to investing Rs100 crore on rejuvenating and upgrading products and packaging. The profits would also be utilised to offset the loss-making Donuts business. The company is also considering higher penetration in Sri Lanka and has changed product line accordingly. Financially, Q1FY18 has been exuberant with nearly 11% and 255% revenue and PAT growth, respectively, as compared to the previous quarter. Annually, the company has posted marginal 2.7% and 7.2% revenue and PAT growth, respectively, in FY17. We recommend a BUY in this zero-debt company for a target price of   Rs1680 and with a stop loss of Rs1340. 

GAIL INDIA

CMP - Rs409 
BSE CODE 532155 Volume 1874037 Face Value Rs10

This Maharatna company is engaged in natural gas processing and distribution. Recently, Government of India’s attempt to renegotiate on the import pricing policy of LNG with Australia is expected to benefit gas utilities. Thereby GAIL, which  also buys imported gases, would benefit  from reduction in the prices. Standing at 78MMSCMD, GAIL has shifted its preference more towards long term contracts in LNG. The LT contracts increased to 20  from18MMSCMD while ST contracts declined to 8 from 15. Financially, despite subdued revenue growth, the stock's EBITDA and profit margins have shown substantial growth amid decline in raw material, employee benefit and impairment of asset expenses. Moreover, the company has been reducing its debt YoY since FY15, keeping D/E at 0.1x. The only risk persists is offtake obligation of 5.2 million tonnes of US LNG in 2018. However, it would sign one deal soon to hire LNG tanker for three years with a French oil company to haul the same gas. We recommend a BUY in the scrip for a target price of Rs435 and with a stop loss of Rs370.