Recommendation From Coffee &Auto Parts & Equipment Sector

DSIJ selects two aggressive stock picks in every issue, with a 15 day horizon based upon the bullish trend during that period. For this issue, we are recommending companies from Recommendation  

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TATA COFFEE 

CMP - Rs.160
BSE CODE 532301
Volume 157052
Face Value Rs.5

The flagship company of Tata Global Beverages, which holds 57.48% stake in the company, has posted marginal 3.5% revenue growth, but it has fared well in operating profits, posting 40% growth driven by operating efficiencies. Thereby, the consolidated PAT grew by a robust 83% in FY17, driven by improvement in instant coffee and plantation operations. Meanwhile, Eight O'Clock Coffee too posted strong performance, driven by lower coffee commodity costs. Even on provisional basis, 27% decline in tea production in Assam, which accounts for 50% of country's tea production, would keep tea prices rising due to supply shortage, thereby benefiting companies like Tata Coffee. Therefore, considering newer product variants, lower operating costs and rising demand, we recommend a BUY in the scrip with a target of Rs.186 and with a stop loss of Rs.147. 

EXIDE INDUSTRIES 

CMP - Rs.202
BSE CODE 500086
Volume 43619
Face Value Rs.1 

A flagship of Chloride Eastern, it is the country's largest manufacturer of lead acid storage batteries and power storage solutions provider. The company has posted nearly 11% growth in both revenue and PAT in FY17, while nearly 13% revenue growth in Q2FY18 was driven by robust volume growth in automotive and motorcycle batteries, amid replacement demand for two and four-wheeler batteries and justifiable growth in UPS and telecom batteries. Going forward, the GST roll-out is expected to benefit the company, as currently the unorganised market forms nearly 40% of the aftermarket segment. Moreover, the company's market is expected to increase from 7,800 crores to 17,000 crores over FY17-20. Further, the company holds stakein insurance business and the re-rating of insurance stocks would pave way for further growth of the company. Considering these factors, we recommend a Buy in the scrip for a target of Rs.228 and with a stop loss of Rs.190.