India Budget FY 19: Agri Stocks May Reap Better on Rural Focus | CORPORATE ETHOS

India Budget FY 19: Agri Stocks May Reap Better on Rural Focus

By: | January 25, 2018
Budget

Jan 25: With hopes of agriculture and rural focused programs in the Union Budget 2018-19 to be presented to Parliament on February 1, the prospects of agro-chemical stocks, fertilizers, tractors and related industry is set to improve in the next two quarters, according to analysts.

Agro-chemical industry is expected to perform better in Q3 and beyond due to good rainfall ahead of rabi season and improvement in crop acreage. Ratings agency ICRA expects agro chemical companies to report 11-12% YoY growth in revenues in Q3 much higher than 1.1% in Q1 and 7.4% in Q2 respectively.

Here are some top picks in this sector:
#UPL Ltd (BSE: 512070, NSE: UPL) Category: Large Cap

UPL Ltd (formerly United Phosphorous Ltd) is a leader in crop protection technology. The shares rose near 500% in the past five years beating Nifty returns and other benchmarks. Net profit has risen 143% QoQ to Rs 579 cr while on an annualised basis it rose 25.32% while sales rose 5.19% to Rs 4194 cr YoY.
On technical charts, RSI of 52.17 indicates neutral to bullish trend, MACD has witnessed a bullish crossover and ADX of 13.75 indicates range bound trading.

#Escorts Ltd (BSE:500495 ,NSE: ESCORTS) Category: Mid Cap

Established in 1944, Escorts Ltd is a leader in agro machinery and construction equipment has seen steady growth in tractor sales in the past two months. In November it sold 5119 units, 6.51% growth on YoY basis. In December it sold 3606 tractors representing a YoY growth of 13.1%.

In Q2, the net profit rose 147.90% YoY at Rs 77.56 cr while sales rose 22.27% to Rs 1211.68 cr.

On technical charts, RSI of 67.80 indicates bullishness while MACD has witnessed a bullish crossover indicating buy and ADX of 30.26 indicates uptrend. Currently trading at a PE of 46.17, the scrip is moderately valued by the market. In the past week, prices have risen sharply from 761 levels to 842 levels this week.

#Shiva Global Agro Industries Ltd (BSE: 530433) Category: Small Cap

Shiva Global Agro Industries is an emerging leader in fertilisers, de-oiled cakes and hybrid seeds.  It was established in 1993 and provides holistic solution to farmers. In 2016-17, net profit rose 41.4% to Rs 7.29 cr while sales fell to Rs 452.81 cr from Rs 464.09cr the previous year. In September quarter, net profit rose 201.50% to Rs 1.81 cr.

It is trading at a PE of 44.6 indicating moderate valuation by market while RSI of 54.45 indicates bullishness, MACD has witnessed a  bearish crossover indicating sell and ADX of 29 indicates range bound trading.