Sharekhan is positive on the Building Materials Sector and has identified six stocks to buy for up to 32% gains from their present levels. Three of the six stocks are small caps and three are midcaps. Five of these six stocks have provided multi-bagger gains. Century Plyboards (India) Ltd (CPIL), Greenlam Industries Limited, Greenpanel Industries Limited, APL Apollo Tubes Limited, Kajaria Ceramics Limited, and Supreme Industries Limited are the companies behind these six stocks.
Building Materials Sector
The sector of Building Materials Raw material pressures are felt across the board, according to Sharekhan: The building materials industry recorded a 15.8% year-on-year sales increase (Hi-tech & Supreme exceeded expectations), driven by a strong demand environment and pricing growth. Moreover, except for Hi-Tech, all companies lag in terms of OPM (down 472 bps y-o-y).
Inventory losses were caused by a continuous drop in resin prices during Q2FY2023. Wood panel and tile manufacturers suffered as essential raw material prices rose, as did power and fuel expenses. Further, Overall, net earnings fell 25.7% year on year. Overall, while revenues remained consistent, lower-than-expected OPMs resulted in a net profitability loss.
Also, Hi-tech and Greenlam reported higher-than-expected net earnings, whereas APL Apollo, Pidilite, and Greenpanel reported somewhat lower-than-expected net earnings. Further, the brokerage commented on the valuation, saying, We expect building materials sectors to profit from strong demand, but increased raw material prices offer a hurdle in the short term.
Century Plywoods (India) Ltd. (CPIL)
Century Plyboards has a market capitalization of Rs 12,001.78 crore. The company primarily manufactures and sells Decorative Plywood Laminates, Veneers, Medium Density Fibre, and linked products. Sharekhan advises investors to buy the stock, with a target price of Rs 700 per share.
Moreover, we have reduced our net earnings expectations for FY2023, due to weak margins in MDF and particle board, according to the brokerage. Further, we maintain our projections for FY2024 in general terms. If purchased at the present market price, the stock is expected to return up to 31% of its target price. The stock is currently trading at Rs 543.15 per share, 0.14% higher than its previous close. It opened at Rs 538.30 per share today. Also, the stock has dropped 7.51% in a year but has returned 210.66% in three years. The stock has returned 72.51% during the last five years.
Greenlam Industries Limited
Greenlam Industries is a small-cap stock worth Rs 4,223.14 crore. The company manufactures laminates, decorative veneers, and other related items. Sharekhan has assigned the stock a buy call with a target price of Rs 420 per share. The firm claims that the specified target price has a potential upside of up to 25%.
Moreover, the firm said of the stock, we have fine-tuned our net earnings expectations for FY2023-FY2024, factoring modestly lower volumes and OPM in laminates. The stock opened today at Rs 336.80 and is now trading at Rs 332.25 per share. Its 52-week high is Rs 1,997.40 and its low is Rs 279.80. It gave 1.38% in one week and 2.62% in one month. Finally, it returned 12.57% in one year, 69.97% in three years, and 57.16% in five years.
Greenpanel Industries Ltd
Greenpanel Industries Ltd is a small-cap firm that makes plywood, medium-density fiberboards (MDF), and other items. It is worth Rs 4,740.78 crore in the market. Greenpanel Industries’ stock has been recommended for a buy call by the brokerage, with a target price of Rs 505 a share. Also, the brokerage commented on the company, saying, We have marginally reduced our forecasts for FY2023-FY2024 to account for worse Plywood margins.
The stock is now trading at Rs 383.60 per share, down 0.79% from its previous finish. It started trading at Rs 388.90 per share. Its 52-week high is Rs 625.70, and its 52-week low is Rs 330.40. Further, It is a multi-bagger stock with 740.04% gains in 5 years, but only 3.69% positive returns in 3 years. It has dropped 15.13% in one year. However, it increased by 8.39% in the previous week and by 3.97% in the previous month.
APL Apollo Tubes Limited
APL Apollo is a significant maker of branded steel products in India. With a market capitalization of Rs 28,603.31 crore, it is a mid-cap corporation. Sharekhan advises buying the company at a target price of Rs 1275 per share for up to 12% returns. We have reduced our FY23 profit forecasts to account for lower margin assumptions, which will be largely offset by the elimination of minority interest if Apollo Tricoat merges with APL Apollo Tubes, according to the brokerage.
Further, our earnings projection for FY24-25 remains virtually unchanged. Also, the stock of APL Apollo Tubes is currently trading at Rs 1,146.35 a share on the NSE, up 2.31% from its previous close. Further, its 52-week high is Rs 1,177 and its low is Rs 770.90. It returned 5.48% in one month and 11.25% in three months. It returned 24.06% over a year. Further, it delivered 630.39% multi-bagger returns in three years and 478.16% multi-bagger returns in five years.
Kajaria Ceramics Limited
Kajaria Ceramics is an Indian mid-cap firm that manufactures and trades ceramic and vitrified tiles. It is worth Rs 18,845.97 crore on the stock exchange. Kajaria Ceramics stock is recommended for purchase by the brokerage, with a target price of Rs 1300 per share. According to Sharekhan, we have marginally revised our predictions downward for FY2023- FY2025E, factoring in decreased OPM.
Moreover, if the stock is bought today at the present market price, the brokerage claims a possible upside of up to 11%. On the NSE, the stock is currently trading at Rs 1180.25 per share, a 2.51% increase over its previous closing. Also, the stock has returned 13% in a week and 8.46% in a month. In one year, it increased by 5.04%. Finally, it provided 120.28% multi-bagger returns in three years. It returned 64.38% in 5 years.
Supreme Industries Ltd
Supreme Industries Ltd. It has a market valuation of Rs 31,244.80 crore and is classified as a mid-cap company. Plastic Piping System, Cross Laminated Films & Products, Protective Packaging Products, Industrial Moulded Components, Storage & Material Handling Products, Moulded Furniture, Performance Packaging Films, and Composite LPG Cylinders are some of the product categories in which the company operates.
Moreover, Supreme Industries’ stock has been recommended for purchase by Sharekhan, with a price target of Rs 2,520 per share. We have reduced our expectations for FY2023-FY2024 to reflect weaker OPM, according to the brokerage. If we acquire share at its current market price, it is likely to gain up to 2.5% with the provided target price.
The stock’s current market price is Rs 2,458.55 per share, up 0.96% from its previous close. Its 52-week high was Rs 2,480, and its 52-week low was Rs 1,666.25. Further, it has provided 7.95% in one week, 8.66% in one month, and 25.01% in three months. It returned 6.21% after one year. It had a multi-bagger return of 115.71% in three years and 112.8% in five years.
Disclaimer: The equities are part of Sharekhan brokerage report. Topbulletin, the Author, and the respective Brokerage House are not accountable for any damages resulting from decisions based on the article. Before making any investment decision, customers should consult with recognized specialists, according to us.
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