Bata : Cup & Handle Break Out.

Bata remained under pressure after touching 750 level and posted low around 440 mark. It gained momentum from there and kissed 600 level and again entered correction phase. However the bears could not hold the counter at lower levels and again it started its upward journey and managed surpass 600 levels during last session. It witnessed gap up opening and traded with positive bias through out the session and the break of 600 level was well supported by decent volumes. It seems that the counter has gave a Cup & Handle break out on a daily chart and is expected to trade with positive bias in sessions ahead.

Gati : Will move at full Speed?

India's logistic sector perhaps is the most hot sector nowadays. The logistic companies are traded at P/E of almost 70x. The sector is buzzing for multiple reasons and most discussed is the GST. The sector is poised for accelerated growth for several broad reasons.

 Growth of the logistic sector is directly co-related with the economic activities. The past trend suggests that logistic industry grows at 1.5 to 2x of the GDP growth.

 Poor infrastructure (Railways, roads etc.) created the bottlenecks and stifled the growth of industry. But the government reforms and infrastructure ramp-up (e.g. metros) will address the issue.

Expected E-commerce market growth over the next few years is 25-30% CAGR. The main factors are internet penetration and urbanization.

India logistic spend is 13% of the GDP as compared to 7-8% of the developed countries.



And finally the implementation of the GST will be the game changer for the several organized logistic players.

Among many players we are discussing GATI which is one of the top five logistic service providers in India. The company has sound fundamentals and is currently trading at P/E of 43.3. The emphasis however in our analysis of the Company is more Technical than Fundamental. Along with other players GATI is also one of the buzzing stocks among the market participants. It has been witnessing quite higher volumes during recent past. It took a nosedive from 335 levels and posted a low around 95. It started steady recovery backed by huge volumes and now knocking its resistance level of 184. It formed a doji candle during previous session and started today's session with gap up opening which remained unfilled through out the session suggesting strong bull power. Strong close above 184 may add fuel and the counter may touch 215-225 levels in no time. Reasonable SL for this volatile counter is below 157 which is its recent swing low.

Tamilnadu Newsprint & Paper : Flag Pattern

Flag Chart Pattern: A short term continuation pattern.

The counter commenced its uptrend from around 185 levels and kissed 271 and witnessed healthy correction. It witnessed gap up opening from 255 levels and posted fresh high of 291.9. Since then it has been consolidating in a broader range of 260 to 290. Today the counter managed to break the said range and gave a powerful close above 290 mark. The counter has developed a typical Flag Pattern on a daily chart. Today's move was supported by heavy volumes and there is Bullish cross over of MACD above zero line. Other indicators too looking quite bullish we expect the counter to commence its fresh trend from here.

Theoretically the length of the Flag Pole is applied to the break-out level to determine the advance. So in our case the length of the Flag Pole is 50 points (i.e. 290-240) which can be applied to break-out level which is Rs.290. So the Target comes around 340. Reasonable stop loss is Rs.275 on a closing basis.

Nocil : Comprehensive View

Nocil has been in the Rubber Chemical business for over the last 4 decades. It is the largest rubber chemical manufacturer in India. The company offers wide range of rubber chemicals and major customers of the company are tyre companies like Apollo Tyres, Ceat Ltd, MRF Ltd etc. NOCIL has set up new manufacturing facility at Dahej in Gujarat, with a much improved process technology to strengthen its position in the field of Rubber Chemicals. The said facility has started its commercial operations in FY 2012-13. The performance of Rubber Chemical Industry is largely dependent on the the performance of tyre and automobile Industry. 

The growth prospects for Rubber Chemicals are likely to be centered in the Asia Region. There are huge investments done by the tyre companies around Asia-Pacific Region. Over the last 3-4 years, the global rubber chemical industry has seen many large manufacturers restructuring their businesses and has strategically exited their rubber chemical operations. Many small players had to shut down their operations. This is due to high competition from China and Korean players as they customers. The gradual realignment of supply and demand due to restructuring / exits from rubber chemicals business have ensured that there is a greater awareness amongst customers of the need for stable and quality supplier like NOCIL. Also, major MNCs are trying to de-risk their supply chain by diversifying raw material procurement away from China. As risk associated with Chinese exports increase, MNCs are increasing preferring India amongst the developing countries for raw material supply. 

The company witnessed major turnaround in its financials in the year 2015 where it posted sales growth of more than 20% and Operating profit jumped by more than 90%. Though Sales declined in 2016 by 50 basis points Net Profit jumped by almost 37%. With crude oil prices expected to remain under pressure in near future the company is expected to maintain its high operating profit margin. 

We recommend 'Accumulate' rating on the counter on the basis of following Investment Rationale.

1. The company belongs to Arvind Mafatlal Group which has rich experience in Chemical Industry. 

2. The company has a long track record, established Brands and enjoys largest market share in the Rubber Chemical.

3. Operating Profit margin improved substantially and is expected to sustain at higher levels.

4. The company has reduced its debt significantly which in turn will improve the net profit margin.

5. The new plant at Dahej has reached 80% capacity utilization and is quite cost-effective.

6. Favorable government policies and strong government support for R&D.

7.Eastward shifting of Global Chemical Industry.

Valuations:   We expect the company to grow its sales at CAGR of 14% over FY17 & FY18. We expect PAT of Rs.86.9 cr and Rs.95 cr for the FY17 & FY18 respectively applying CAGR of 10.54%. At current market price of 60.25 the stock is trading at FY17 PE of 11.15x & FY18 PE of 10.21x. Recommend Accumulate on the stock with price TGT of 88.5 (15x of FY18 EPS)

Technical Outlook

The counter has managed to give a very powerful close above 60 levels with decent surge in volumes. On a daily chart it has been trading above its short term as well as long term moving averages. Across time frames i.e. Monthly, Weekly & Daily there is Bullish MACD crossover above Zero line which is a very positive signal. Other technical Indicators too looking quite bullish it is expected to show strength in near term. Technically as long as 52 level is not breached on a closing basis the view remains bullish. 

SBIN

The counter has been trading in the range of 249 to 250 for the last few sessions. However during last session it formed a very strong bullish candle on a daily chart. Besides it has been consistently respecting its 20 & 50 DMA on a closing basis. With other technical indicators turning quite bullish we expect the counter to continue its northward journey in near future. 257 is the next major hurdle as per daily & weekly analysis. Any close above 257 and we may see non-stop rally up to 270-275 levels. Reasonable SL is below 240.

Disclaimer: We have already initiated positional long on the counter from 241 levels to our paid subscribers.

Heromotoco

The counter today pared all Intraday gains  and again found a stiff resistance around 2680 levels. Today's move was backed the decent volumes. Though the counter is consistently respecting its 200 DMA, looking at today's reversal it seems that bears took the full control of the day and it might be vulnerable in coming sessions. Besides other technical indicators too are looking weak reinforcing the bearish view. Short position can be initiated at current levels with SL of 2635 for probable down fall up to 2510-2502 levels.

Havells India

The counter witnessed a very sharp bounce back from its strong support area around 238 marks. It quickly captured its short term moving averages on a daily chart and is consistently respecting them on a closing basis. It seems that it has developed a classical Falling Wedge Chart Pattern on a daily chart. With other technical indicators looking quite bullish we expect the counter to challenge its 200 DMA in a near term. Traders can bet on the counter 263.35 SL 252 (CLS) TGT 275-278.