The US Federal Reserve hasmaintained the interest rates at 0% citing uncertainty in the global economy, higher inflation and exports, etc. Now, the pressure is on our RBI Governor to reduce interest rates in the next monetary policy meeting on 29 September. Our view is that the RBI will reduce rates by 50 basis points to stimulate the economy and thus, cheer industry men and the stock markets including the debt markets. Investors should keep adding their favourite stocks and invest in good equity or balance fund schemes through the systematic investment route to generate wealth over the next 3-5 years.
Crude oil prices are down 60% from their peak and this is expected to boost margin profile of companies in the paint industry, particularly Kansai Nerolac Paints Ltd (KNPL). Pertinent to note is that when crude oil prices were at $80 a barrel five years ago, the company had an Ebida margin of around 15%. While last year at higher oil prices, the margins was only 10%. Thus, it is no surprise that the company will be catching the same level of margin of 15% in the next 1-2 years. The company is a preferred pick among mutual fund houses and foreign investors and with good performance going ahead, the KNPL stock currently quoting at Rs 235 can achieve a price target of Rs 285 in the next nine months time horizon.
Voith Group of Germany is a large industrial conglomerate with a presence in over 50 countries manufacturing products for the pulp, paper and board industry. Their subsidiary in India is Voith Paper Fabrics (VPFV) which was acquired from Porritts & Spencer's UK. The primary business of VPFV in India is supplying the paper industry a highly advanced sophisticated product called paper machine clothing (PMC) made of synthetic. The company has cash and bank balance of Rs 90 crore which comes to nearly Rs 200 per equity share and this cash can be used by the company for buy back of its shares, an acquisition or a hefty dividend. On a tiny equity capital of Rs 4.39 crore (out of which the foreign promoters hold 74%) the company may post a PAT of Rs 18 crore for FY 2016. Hence, on Rs 10 face value, the earning per share works out to a whopping Rs 40. The VPFV stock trading on BSE at Rs 625 can be accumulated by long term portfolio investors for handsome gains.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.