Recommendations From Pharmaceuticals And Commercial Vehicles Sector

GRANULES INDIA 
CMP - Rs140
BSE CODE 532482
Volume 180575
Face Value Rs1

The company is a manufacturer of Paracetamol and is engaged in pharma manufacturing chain from API to finished dosages. It is mulling capacity expansion for its major drugs Paracetamol, Metformin and Guaifenesin, for which it is incurring capex of Rs300 crore. Apart from this, the company has recently entered into CRAMS business through a JV with Omnichem and has ventured into making of Rx drugs and has filed ANDAs. On the financial front, it posted a PAT growth of nearly 17 per cent in Q4FY17 despite tepid revenue growth of just 0.7 per cent. On an annual basis, it posted a robust PAT growth of nearly 39 per cent despite of revenue de-growth in FY17. Taking into consideration of a forward FY18 P/E of nearly 17 and 30 per cent PAT CAGR over FY17-19, we recommend a Buy, for a target of Rs161 and with a stop loss of Rs125.

ASHOK LEYLAND
CMP - Rs99.30
BSE CODE 500477
Volume 2642193
Face Value Rs1

A flagship of the Hinduja Group, the company is one of the top commercial vehicle manufacturers and holds market share of nearly 27 per cent in trucks in India. Recently, the company has reported 11 per cent MoM growth in its June sales where LCVs and M&HCVs posted 29 per cent and 6 per cent growth, respectively. To comply with the recent BS IV norms, it has come up with iEGR technology and is expected to boost fuel efficiency and give cost advantage. The company is simultaneously expecting growth in its CV business by increasing its product line. On the defence front, it is expected to focus on tactical, armed and tracked vehicles. Financially speaking, the company posted robust revenue and PAT growth of 46.5 per cent and 194 per cent respectively in Q4FY17. On an annual basis, it has posted tepid 5.7 per cent revenue growth while posting strong PAT growth of 213 per cent. With favourable monsoons, product diversification and cost reduction plans, we recommend Buy in the stock for a target of Rs112 and a stop loss of Rs94.