Recommendation from Diversified and Abrasives Sector

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.

GENERAL INSURANCE CORPORATION OF INDIA

CMP - ₹161.55
BSE CODE 540755
Volume 52,755
Face Value ₹5
Target ₹173 - 180
Stoploss ₹139 (CLS)

General Insurance Corporation of India is engaged in the business of reinsurance and is the largest reinsurance company maintaining a 60 per cent share in the Indian reinsurance market. The company provides reinsurance across many business areas. Recently, the company released Q2FY23 results wherein the gross premium witnessed de-growth of a marginal 3.27 per cent to ₹8,100.62 crore against the previous quarter last year. Investment income levels stood at ₹3,206 crore, up 20 per cent from last year’s quarter. The net profit zoomed 84 per cent to ₹1,859.93 crore from the corresponding quarter last year. The net worth of the company including fair value change account increased to ₹59,203 crore at the end of Q2FY23 as against ₹55,088 crore at end of Q2FY22. Overall, the underwriting performance was impacted on the back of a challenging external environment and the company continues to take necessary steps to bring down the incurred claim ratio and improve overall profitability. Hence, we recommend BUY.

CARBORUNDUM UNIVERSAL LTD

CMP - ₹880.35
BSE CODE 513375
Volume 10,322
Face Value ₹1
Target ₹955 - 985
Stoploss ₹850(CLS)

Carborundum Universal Ltd., a part of the Chennai-based Murugappa Group, produces abrasives, ceramics, refractories and electro-minerals. It is an integrated ‘mines to market’ company with mining, power generation, fusion, manufacturing, marketing and distribution as part of its core business operations. Taking into account the company’s financial performance, on a consolidated basis it reported a growth of 33.52 per cent from ₹844.63 crore registered in Q2FY22, recording total revenue of ₹1,127.77 crore in Q2FY23. Comparing the net profit for the second quarter of FY23 to the same quarter last year, it declined 13.27 per cent from ₹96.98 crore to ₹84.11 crore. The company’s shares have risen significantly in the recent month and have room to soar even further given the 52-week high of ₹1,033.95. Promoters owned a sizeable 41.90 per cent share in the company. The company’s profitability is evidenced by the good ROE and ROCE ratios. Given Murugappa Group’s strong parental support and the company’s promising outlook, we recommend BUY.

(Closing price as of Dec., 13, 2022)