Hot Chips - Stock Recommendations For Your Portfolio

DSIJ selects 2 aggressive stocks picks in every issue, with a 7-15 day horizon based upon the bullish trend during that period. For this issue, we are recommending companies from the Textiles and Engineering sectors.

RAYMOND
BSE CODE: 500330 | Volume: 84398 | CMP: Rs 369

In existence for more than five decades now, Raymond is going all out to expand its retail presence. Currently, the company has 853 stores, up from 584 in FY09, and is targeting 100 stores per year going forward. They follow an asset-light model in which they focus on the franchise strategy for the retail side as well as the outsourcing of routine manufacturing processes. This process involves the outright purchase of stocks by franchise owners, thus limiting the company’s working capital. There is a very strong buzz in the market that Raymond has been able to sell off some part of its land bank in suburban Mumbai for a very handsome amount. If this buzz is true, the company will be able to reduce its debts and save on its interest outgo to a large extent. One can look at the scrip from a medium-term perspective.

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CUMMINS INDIA
BSE CODE: 500480 | Volume: 24797 | CMP: Rs 465

Cummins India is basically engaged in the manufacture of diesel engines and value packages for the power, industrial and automotive markets. In the recent past, the company has taken a conscious decision to raise the prices of its products, which will be an advantage in a scenario of rising raw material costs. It is believed that the company will be able to maintain its EBITDA margins at around 16 per cent, and this will enable a healthy ROE. The company is debt-free, which is an added advantage. We favour this stock as in spite of being part of the capital goods sector, which has faced headwinds, this company has been able to maintain its growth rate backed by exports. Its domestic power-gen business has also supported it well. The company has a capex plan of Rs 250 crore in this fiscal for setting up a new facility at Phaltan. One can look at the scrip from a medium-term perspective.