Recommendation from Retailing and Tyres 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.
VEDANT FASHIONS LTD
CMP - Rs1,093.00
BSE CODE 543463
Volume 8,375
Face Value Rs1
Target Rs1,180-1,240
Stoploss Rs1,006 (CLS)
Vedant Fashions is a pioneer in ethnic wear and a leader in India’s fashion sector. It is the parent enterprise to the labels Manyavar, Mohey and Mebaz. The company was incorporated on May 24, 2002. Its quarterly consolidated financials reveal that operating profit for Q4FY22 was Rs155.11 crore as compared to Rs94.60 crore for Q4FY21, an increase of 63.97 per cent. Net sales for Q4FY22 were at Rs296.25 crore, recording an increase of 54.66 per cent as compared to net sales of Rs191.55 crore in the same quarter last year. The net profit has also improved and was Rs88.70 crore since the same period at Rs47.60 crore in Q4FY21. This indicates a growth of 86.33 per cent. The company enjoys a first-mover advantage, scale efficiencies and no discounts on the Manyavar brand, thus allowing Vedant Fashions to enjoy a significantly higher gross margin along with high-teens growth potential and asset-light model as both manufacturing and distribution are outsourced, which justifies the company’s comparison of its premium valuations versus its peers. Hence, we recommend BUY.
BALKRISHNA INDUSTRIES LTD
CMP - Rs2,298.70
BSE CODE 502355
Volume 18,935
Face Value Rs2
Target Rs2,400-2,440
Stoploss Rs2,200(CLS)
Balkrishna Industries (BKT) started its off-highway tyre business in 1987. For many years, the company has successfully focused on specialist segments such as agricultural, construction and industrial as well as earthmoving, port and mining, ATV and gardening applications. The company’s quarterly consolidated financials reveal that the operating profit for Q4FY22 was Rs612.45 crore as compared to Rs611.76 crore for Q4FY21, a marginal increase of 0.11 per cent. Net sales for Q4FY22 were at Rs2,374.21 crore, recording an increase of 35.4 per cent. This was as compared to net sales of Rs1,753.45 crore in the same quarter last year. The net profit has slightly reduced and stands at Rs374.84 crore since the same period which was at Rs379.95 crore in Q4FY21, down by 1.34 per cent. With global off-the road (OTR) demand maintaining a solid position in Q1 despite inflationary pressures and major agricultural commodity prices such as maize and soya staying stable, the company does not risk targeting a volume increase of 10-12 per cent in FY23. Hence, we recommend BUY.
(Closing price as of July 12, 2022)