Why Rahul Sharma is betting on Nelcast, Kesoram and BEPL

After the massive runup in the broader market, this particular consolidation is good. Let it consolidate for some more time to get better strength to go up after the large cap rally is over, says Rahul Sharma, Co-founder, Equity99 Advisors.

What do you make of the result season so far? This time, some companies are seeing EPS upgrades, some downgrades and some are absolutely neutral?
In the first quarter, textile and metals performed really well and have posted results accordingly. Selectively, in the coming days, pharma will turn to new IT as valuations are overstretched and that will lead to some kind of consolidation but overall I am very bullish on the market.

How would you look at the underperformance of the broader markets in the last 10 days?
We have already seen such a massive runup in the broader market. I feel this particular consolidation is good, especially for the broader market. Let it consolidate for some more time to get better strength to go up after the large cap rally is over.

Is this the time to get into defensive names like FMCG and technology? The latter of course had rallied after the results. How would you look at the defensive pack?
On the defensive side, especially for pharma, we have seen some rally. I feel some potential is left but overall the overstretched stocks from the valuation side will face consolidation. The undervalued segments still have good potential to grow in the upward direction. The coming days will be good for the defensive side of the market.

One of your picks is Nelcast. What is the call there?
Nelcast is the largest jobbing foundry in India for the manufacturing of ductile and grey iron castings. It has an equity base of just Rs 17.40 crore that is supported by the reserve of around Rs 412 crore, which is almost 23 times higher than the equity.

For Q4 of FY2021, Nelcast posted a PAT of around Rs 6.64 crore, around 75.70% higher sales at Rs 220 crore and EPS of around Rs 0.76. Its operating profit also grew 44% and on August 12, the company is going to post the Q1 numbers which I am expecting to be good. On technical ground also, it is looking very bullish. The target levels for Nelcast will be Rs 125 and the stop loss will be placed at Rs 83.

What is your call on Kesoram Industries? The target price is Rs 130 and stop loss is Rs 80. Can you tell us more about that?
Kesoram Industries is a multiproduct and a multi-location company. Automobile tyres and cement are its core businesses. The Q4 for the company went very well and the same is expected to continue in coming days.

Technically, there is a horizontal line breakout which has come after six years. It has kind of a multiple breakout as we get close to Rs 96 levels. I am expecting a sharp rally and the target price is at Rs 130, keeping stop loss at Rs 83 for Kesoram.

Your last pick is BEPL. The stop loss is Rs 180 and target is Rs 260. Can you elaborate?
Yes. Bhansali Engineering Polymers Ltd. (BEPL) has a good client base of leading companies dealing in automobiles, home appliances, electronic healthcare and kitchenware. The company is almost debt free and is expected to give good quarterly results in coming days. It has also delivered good profit growth of around 83.18% CAGR of over the last five years and a ROE track record of around 39.77% in three years.

The first quarter has been really good for the company and I am expecting the same in the coming days. They have had a really great Q1 where operating margin on YoY basis as well as net profit grew substantially well. Technically also, there is a rounding bottom formation on weekly charts and in the short term charts, there is a flat pattern breakout. Rs 180 will be the stop loss and target levels will be Rs 260 within a timeframe of six months.