Coal India – price hike will increase profitability & top line:
There is some upside to Coal India post the news of hike in prices by about 5% to 8% and the pocket of strength that Coal India has been in during the last few days – when there was in fact a market carnage – encourages us to think that this may be the one where the government feels quite confident that going forward, if things pan out very well for the market, this would be a good divestment candidate.
All things are in favour of Coal India as a virtual monopolistic or oligopolistic sort of situation pans out. Also, I do not think valuations are as high if you compare it to other commodity stocks. Hence, Coal India is better placed among others.
With regard to the coal production not moving up, the government has done some thinking. With improved focus of the government on energy as well as on coal linkages for the power sector as well as other sectors, this is about to change. That is why the market is now trying to give Coal India a better value than earlier.
PTC Financial Services – risky at these prices:
We came up with a research report at around Rs 14-15 for PTC Financial and we still like this stock. However, one should be aware of a little bit of risk involved at these prices. If somebody is a trader for three to six months, then there can be better entry points, but the company has performed very well in the past few months. In fact, some of the NBFCs have also done very well. Thus, PTC Financial Services stays on our radar.
NBFC Stocks – better than bank stocks on valuations:
It is a good time to buy into any wholesale NBFC. In an environment where interest rates and bond yields are coming down, all wholesale NBFC companies would benefit. We have been advocating this thought to all our clients. M&M Financial, Rural Electrification Corporation and Power Finance Corporation etc are still available at very reasonable valuations. Hence, these are probably better buys than some of the banks which have already run up.
IPCA Labs – valuations are ridiculously low. Problems will be solved in 6 – 9 months:
We currently like a lot of midcap pharma companies. Some of them have underperformed in the market for their own reasons however. A case in point is Ipca Laboratories, which was in the news for all the wrong reasons sometime back. We feel that in another six to nine months, a lot of problems would be solved and at the valuation at which Ipca is available, we feel this is again one of the most ridiculous entry points for Ipca.
Mid-cap Pharma stocks have upside:
We like Ipca Laboratories, Natco Pharma and Granules India as well.
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