Recommendations from Pharmaceuticals & Cement Sectors

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. 

CIPLA LTD.

CMP - ₹1091.40
BSE CODE 500087
Volume 57,362
Face Value ₹2
Target ₹1140-1160
Stoploss ₹1048 (CLS) 

Cipla is the third-largest pharmaceutical player in India and a leader in therapies such as respiratory and urology. It also ranks 2nd in the overall chronic business and is the second-largest Indian exporter in emerging markets. The company has witnessed slight degrowth of 2.35 per cent in net sales and operating income from ₹5,504.35 crore in Q1FY22 to ₹5,375.19 crore in Q1FY23. The operating profit contracted from ₹1,410.82 crore in Q1FY22 to ₹1,246.78 crore in Q1FY23. The quarter saw a net profit of ₹706.56 crore as compared to ₹711.8 crore in Q1FY22, recording flat growth. The company is currently operating with a healthy return on assets (ROA), return on capital employed (ROCE) and debt coverage ratio. Also, the shares of Cipla are trading at a PE ratio lower than the industry average. Considering a strong outlook for its US business backed by predicted growth in respiratory products and high-value launches in the US markets and expected outperformance of growth in the domestic markets, we recommend BUY. 

Rhi Magnesita India Ltd.

CMP - ₹652.85
BSE CODE 534076
Volume 7,360
Face Value ₹1
Target ₹710-740
Stoploss ₹634 (CLS) 

RHI Magnesita is a global leader in refractories and has the largest number of locations around the world with the most innovative, reliable products and services. The company reported impressive consolidated quarterly numbers for June 2022 with net sales at ₹602 crore, up by 40 per cent from ₹429 crore as of June 2021. The quarterly net profit zoomed 64 per cent to ₹82 crore from ₹49 crore in the same quarter of the last fiscal. The EBITDA improved 53.91 per cent to ₹119.85 crore for the June 2022 quarter from ₹77.87 crore for the June 2021 quarter. Compared to its peers, the company is trading at a lower PE ratio. The ownership structure of the company indicates that institutional owners hold a large share in the company which is one of the factors indicating the degree of credibility of the company in the investment candidacy. Also, considering the company’s focus on the continuation of strategic transformation, sustainability leadership in refractory industry and innovation and technology leadership, we recommend BUY.

(Closing price as of Sept. 20, 2022)