Share Market Tips For June 2019

weekly share market news and updates

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Share Market Tips For June 2019: 4th Week

Parag Milk Foods Ltd (NSE: PARAGMILK) (Share Price: Rs.257 ): Potential Buy

Valuation:Fairly-Valued stock with TTM PE of 17x.

Reasons to Consider: Net Sales rose by a robust 30% YoY to Rs 660 crore. Revenue from VAPs (Value Added Products) rose 25% driven by a slew of new product launches and 75% growth in SMP (Skimmed Milk Powder) sales as company reduced inventory during the quarter. The recent acquisition of Danone's plant in Sonepat, Haryana contributed Rs 12 crore to top line in this quarter. The contribution of Health& Nutrition Products (part of VAPs) increased to 3.5% of revenue as compared to 2.5% in FY'18. In April'19 Company has taken price hike of 1%. EBITDAM (excluding other income) dropped by a substantial 419 bps YoY as Marketing & Logistics spend towards improving reach and range witnessed marked increase. There has been a marked improvement on the working capital front, with NWC days down to 68 in FY19 from 72 in FY18. It has developed a portfolio of dairy products under its kitty which includes four flagship brands Gowardhan, Go, Topp Up & Pride of Cows.

Key Drivers: There has been a substantial expansion of the company's distribution network with retail reach increasing to 3.8 lac outlets currently compared to 2.5 lac outlets at FY'18 end. In FY'19, company has incurred a capital expenditure to the tune of Rs 80 crore and has guided for Rs 60-65 crore each for FY'20 and FY21. Debt on BS has reduced by Rs 50 crore to 215 crore over the last 12 months. It has launched the premium liquid milk under 'Pride of Cow' brand in Delhi, NCR region which was till now available in only 3 cities ( Mumbai, Pune & Surat ). Going forward, aggressive expansion of distribution network & inorganic growth is expected to aid revenue growth (acquisition of Danone India's dairy plant at Sonepat, Haryana in FY'18). The overall return profile will also likely improve as capex requirement will largely pertain to maintenance over the next two years.

Financial: Total revenue Rs 660 cr in Q4FY19 vs Rs 509 cr in Q4FY18 up 30%. PAT at Rs. 28.5 cr in Q4FY19 vs Rs 22 cr in Q4FY18 up 29%. Ebitda stands at Rs.46 cr in Q4FY19 down 13% vs Rs. 52.5 cr in Q4FY18.

Apollo Tyres Ltd (NSE: APOLLOTYRE) (Share Price: Rs.202): Potential Buy

Valuation: Fairly-Valued stock with TTM PE of 17x.

Reasons to consider: Apollo Tyres (ATL) posted a weak set of numbers for Q4FY19. Consolidated revenues came in at Rs 4,274 crore, up 6.0% YoY (Asia Pacific Middle East and Africa i.e. APMEA up 7.9% YoY, Europe flat YoY). Domestically ATL realises 60% sales from replacement market, with sizeable 30% exposure to the OEM market and the remainder 10% from exports. However, strong volume growth registered by OEMs in the past few years would percolate into a ready aftermarket base over the medium term going forward. We feel the replacement market would continue providing steady volume support in the ancillary space including at ATL. Further, H2FY20E may also see some revival in the OEM segment ahead of the new emission standards rollout from April 2020. In this quarter it has written off fully IL&FS deposit exposure which has again dented its profitability.

Key Drivers: ATL is witnessing strong demand in truck replacement segment which accounts for 70% of demand in Indian operations. Replacement growth is more than offsetting the slowdown in OEM demand. ATL has guided for double-digit growth in the standalone business for FY2020. The European operations are also set to report healthy double-digit growth in the next 1-2 years as ATL enters new geographies with the rampup in its Hungary plants capacity. The OEM segment would be an additional growth driver with ATL targeting 20% of revenues from OEMs in the next 2-3 years. For Q4FY19 steady raw material prices which realised 4% QoQ improvement in raw material cost largely on the back of softer natural rubber prices, which declined from Rs 126/kg to Rs 120/kg and Brent crude prices currently hovering at US$ 60-65/barrel will help in margins improvement and profitability. It would take 5% price hike in Europe truck/bus radial segment in June as a product positioning exercise. It has also maintained healthy Debt:Equity of 0.3x

Financial: Total revenue Rs 4274 cr in Q4FY19 vs Rs 4031 cr in Q4FY18 up 6%. PAT at Rs. 84 cr in Q4FY19 vs Rs 250 cr in Q4FY18 down 66%. Ebitda stands at Rs 425 cr in Q4FY19 down 17% vs Rs. 515 cr in Q4FY18.

Share Market Tips For June 2019: 3rd Week

Share Market Tips For June 2019: 2nd Week

Share Market Tips For June 2019: 1stWeek

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