Having a time horizon of more than two quarters, domestic brokerage and research firm HDFC Securities has shared its top two stock recommendations From FMCG and Lubricants Sectors – Bajaj Consumer Care Ltd. and Castrol India Ltd.
Top picks of HDFC Securities –
Bajaj Consumers: Bajaj Consumer’s winning combination of being debt free, being cash rich (~ ₹600 crores) and negative working capital indicates that the company is well financed with a strong business model, the brokerage said. Considering the high reliance on a single category, it feels that the company trades at an extremely unfair discount to its FMCG peers.
At current valuations, BCCL is also a good acquisition candidate for large FMCG players/PE players. “We think the stock’s base case is fair value ₹290 and the bull case is reasonably priced ₹317 in the next two quarters. Investors can buy into the stock ₹252-256 Add More On Bands And Dips ₹222-226 band,” HDFC Securities note said.
Castrol India: The brokerage highlighted that in the light of possible attack by EVs, the company is looking at various revenue streams for the future. The deal with 3M is a reflection of the company’s diversification into new avenues. The deal, signed in May 2019, will bring a range of market-leading vehicle care products to the automotive after-market.
The company is confident about its business prospects in India over the long term and has recently decided to continue investing in India due to slow growth. “We think investors can buy into the stock ₹135-138 Add on Bands and Dips ₹119.5-122.5 band. The fair value of the base case stock is ₹151 and the fair value of the bull case stock is ₹169 in the next 2 quarters.
in the CMP ₹136.45 stock trades at 15.8x CY22E EPS.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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