Seven Picks for the quarter

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1 From the LKP Advisory Desk... The BSE SENSEX after missing earnings growth for two consecutive years is now poised to see growth return during the second half of the current fiscal thanks to a good monsoon coming after two consecutive years of drought. The SENSEX trading at 20x current years expected earnings does not really capture the opportunities present in several listed companies in India. While subdued energy prices has helped India improve its macro picture the Indian Economy is surely a bright spot amidst anemic global growth. In this third edition of LKP 7 PICKS we present 7 such investment ideas across sectors. Stocks Sector CMP (Rs.) Target (Rs.) Returns (%) Rationale Action Construction Cranes % Play on economic recovery Balrampur Chini Sugar % Best Bet on sugar sector revival EPC Industries MIS % Irrigation Proxy Jain Irrigation MIS % Stay with the Best NOCIL Chemicals % Emerging Leader Sintex Diversified % Building Scale Tata Coffee Coffee % Turnaround Year LKP Advisory September 24, 2016

2 ACTION CONSTRUCTION EQUIPMENT (ACE) CMP: 44 Action Construction Equipment - ACE with a 60% market share in the duopolistic mobile & tower crane industry is a proxy to play the economic revival theme in India. The recent merger with ACETCR brings in high margin tower rental business into its fold while the normal monsoon this time around bodes well for its farm equipment business. Given its balance sheet strength ACE trading at 2x book value offers value. A triangular price pattern breakout is seen formed on ACE since the last 18 months. Stock has taken support around the 200 DMA and is currently trading very close to the same as well. On the shorter time frame as well the stock has formed a similar triangular pattern (dotted lines), indicating sort of fractal nature pattern. Buy with a target of 49 LKP Advisory 2

3 BALRAMPUR CHINI MILLS CMP: 113 Balrampur Chini Mills Ltd - BCML is one of India"s leading integrated and well managed sugar company with a strong balance sheet. It has a sugarcane crushing capacity of 76500TCD, 320klpd distillery and a co-gen of 150mw of saleable power. BCML in our view is set to report bumper profits this fiscal given buoyant sugar prices as it holds 39lac bags of sugar inventory valued at Rs27 per kg. The stock has broken out of a deep consolidation which has lasted for years. Post this breakout the stock rallied and have now gone though the first retracement towards this trendline We believe that with this crucial support in the chart structure on daily price levels, stock can be bought with a target of 124 LKP Advisory 3

4 EPC INDUSTRIES CMP: 158 EPC Industries is a Mahindra Group company and in our view is a key beneficiary of the Pradhan Mantri Krishi Sinchayee Yojana - PMKSY given the normal monsoon coming after two consecutive years of drought. A clean balance sheet backed by a focused M&M parentage makes the BSE listed EPC our pick to play the Micro Irrigation story in India. The stock has been on a strong uptrend, and recently as well the stock has witnessed a short term correction. Looking at the longer term structure, the uptrend is intact for the stock Also, the short term breakout above its consolidation suggests that the stock could resume its uptrend very soon. Buy with a target of 185 LKP Advisory 4

5 JAIN IRRIGATION SYSTEMS CMP: 96 Jain Irrigation System Ltd - JISL is the largest producer of Micro Irrigation Systems in India and second largest globally. JISL is also one of India;s largest producers of PVC pipes & fittings. JISL is a clear beneficiary of the normal monsoon this year and with a recapitalised balance sheet is our preferred bet to play the MIS theme in India. Monthly charts indicate a pattern breakout of its downward sloping trendline of resistances On the daily chart as well the stock has broken out of a rectangle multi month channel pattern Interesting to note is the marginal acceleration in RSI in the third attempt of this breakout has led to a key rally of sorts indicating that the stock has broken out of this consolidation Buy with a target of 110 LKP Advisory 5

6 NOCIL CMP: 67 The AMG company is the market leader in Rubber Chemicals with a capacity of 55k MT at its facilities in Navi Mumbai & Dahej. Having de-leveraged its balance sheet NOCIL today is in a position to fund its capex at Dahej without diluting equity. Closing down of several international rubber chemical facilities and an improved product mix coupled with operating efficiencies are leading to significant margin expansion at NOCIL. Monthly charts indicate a pattern breakout of double bottom. On the daily chart stock has broken out of a rising channel trendline pattern Now here the RSI has been in a triangular consolidation with price trending higher, any breakout of the RSI pattern on the upside soon can lead to swift momentum on stock. Buy with a target of 75 LKP Advisory 6

7 SINTEX INDUSTRIES CMP: 86 The 8000cr Sintex is a super brand in plastic processing with its prefabs growing at 25%. While its conventional products like water storage is gaining ground the Swachh Bharat Abhiyan is acting as a key growth driver for the company. Its custom moulding business is around 3500crs with presence across three continents. Its textile business is around 1000crs with its facility strategically located close to the Pipavav Port. On the monthly charts, stock has broken the downtrend trending resistance line. It has formed a downward sloping triangle / wedge pattern, which can have bullish connotations. On the daily chart, the stock has recently broken above the 200 DMA, also confirming a breakout above the rectangular consolidation. Buy with a target of 98. LKP Advisory 7

8 TATA COFFEE CMP: 127 The listed subsidiary of TGBL is one of the largest & finest producer of Instant Coffee globally which is a $32bn market. Its 8400MT facility comprising of spray dried, agglomerated and freeze dried coffee is slated to post an improved performance this fiscal driven by the success in new product launches and inventory gains. The 1800cr Tata Coffee (including the 1000cr subsidiary- Eight O clock Coffee) derives half of its revenues from the instant coffee segment and leverages on the tremendous brand equity and parentage of the Tata Group. Stock has been completing its key retracement levels on longer term charts. A Fibonacci extension drawn from its 2009 lows indicate that stock has crossed its 23.6% retracement levels. The next target arrives at 38.2% extension point, which is placed at a level of 143. Buy with a target of 143. LKP Advisory 8

9 LKP Seven picks performance LKP Seven picks Q1-FY17 Name Reco Date Price Target Price as on Capital 30-Jun Invested P/L (%) P/L Comments Ashok Leyland Buy 1-Apr ,000-10% (10,000) closed Balrampur Chini Buy 1-Apr ,000 15% 14,679 Target Hit Dalmia Sugar Buy 1-Apr ,000 15% 14,679 Target Hit KCP Ltd Buy 1-Apr ,000 12% 11,905 Target Hit KCP Sugars Buy 1-Apr ,000 17% 16,667 Target Hit KEC Intl Buy 1-Apr ,000 11% 11,290 Target Hit Manappuram Buy 1-Apr ,000 14% 14,286 Target Hit TOTAL 700,000 11% 73,505 NIFTY 1-Apr-16 7,713 8, ,000 7% 52,162 OUTPERFORMANCE 700,000 3% 21,343 LKP Seven picks Q2-FY17 Name Reco Date Price Target Price as on Capital 23-Sep Invested P/L (%) P/L Comments Banco Products Buy 24-Jun ,000 12% 11,940 Target Hit Greaves Cotton Buy 24-Jun ,000 13% 13,077 Target Hit Jamna Auto Buy 24-Jun ,000 10% 10,366 Target Hit State Bank Of India Buy 24-Jun ,000 12% 11,538 Target Hit Tamil Nadu Newsprint Buy 24-Jun ,000 10% 9,886 Target Hit Triveni Engineering Buy 24-Jun ,000 14% 14,286 Target Hit VIP Industries Buy 24-Jun ,000 12% 12,381 Target Hit TOTAL 700,000 12% 83,474 NIFTY 24-Jun-16 8,089 8, ,000 9% 64,296 OUTPERFORMANCE 700,000 3% 19,178 LKP - Q1-FY17 - Total Returns (in %) LKP - Q2-FY17 - Total Returns (in %) 12% 10% 7% 11% 12% 10% 9% 12% 8% 8% 6% 6% 4% 4% 2% 2% 0% Nifty Performance LKP for the quarter 0% Nifty Performance LKP for the quarter LKP Advisory 9

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