Budget 2021 Stock Picks: Anand Rathi picks Coromandel International and Hindustan Aeronautics (HAL)

Investors are now focussed on the upcoming Budget session, key stocks from specific sectors are likely going to benefit because of announcements in the Budget session. Anand Rathi has picked 2 such stocks today and explained the fundamentals reasons why they like those companies. First pick is Coromandel International from Agri Sector while the second pick is Hindustan Aeronautics (HAL) from the defense space.

1st Pick: Coromandel International (Agri Sector)

Anand Rathi recommends buying Coromandel International with a target of Rs 1012. The Company is leading marketer of Organic fertilizer in India and has recently added bio pesticide solutions to its portfolio. Crop Protection products are marketed in India as well as in international geographies, offering a wide range of technical and formulation products. The Specialty Nutrients business of Coromandel International focuses on water soluble fertilizer, Sulphur & micronutrients. The Company has 16 manufacturing facilities, producing a wide range of Nutrient and Crop Protection products, which are marketed through an extensive network of dealers, institutional customers and its own retail centers.

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The Government recently passed three agriculture reform bills to liberalize the agriculture market. These reforms will lead to much improved price discovery, better storage infrastructure and improved ability for the farmers to sell their produce to corporates instead of going through the mundi systems. The crop protection business grew by 35% versus last year for the first half and 26% for the quarter; Coromandel International further strengthened its new product launches and strategic tie-up with the global players & co-marketing initiatives. Anand Rathi says Coromandel International continues to invest in R&D, product development and regulatory filing and has a very rich product pipeline and tends to introduce new molecules in the coming quarters.

The company reported operating cash flow of Rs 2083 cr in first half of FY21. It plans to expand its Kakinada and Vizag plants from internal accruals and will incur a Capex of upto Rs 500 cr.

2nd pick: Hindustan Aeronautics (Defence Sector)

Hindustan Aeronautics is engaged in the business of Manufacture of Aircraft and Helicopters and Repair, Maintenance of Aircraft and Helicopters. HAL is one of the premier defence PSU in India along with Defence Research & Development Organization (DRDO) and has over the years showcased research, design and development capabilities with the successful development of military aircraft and helicopters such as the Ajeet, Marut, HPT-32, Kiran and Advanced Light Helicopter.  

Anand Rathi notes that HAL’s capabilities in manufacturing and servicing of defense aircrafts and helicopters makes it a direct comparable to established International defense players. It thus faces no competition domestically and only from international players.

HAL has the following positives in its favor - wide portfolio comprising of indigenous and licensed products, long credible history of proven design and development capabilities, expansion and diversification into new growth areas of engines, UAVs, civil aircrafts and exports and strong balance sheet. Thus based on the business capabilities, industry growth prospects and valuations, Anand Rathi initiates coverage on Hindustan Aeronautics Limited with a BUY rating and a target price of Rs 1152 per share.