8 stocks that slipped 15-20% from 52-week highs still hold promise

NEW DELHI: One of every five BSE500 constituents have hit their 52-week highs in August so far, but a few of them have taken a beating ever since, falling 15-20 per cent.

They included Nalco, Mahindra Logistics, Nilkamal, Mahindra Logistics, Rain Industries, Allcargo Logistics, Nilkamal, Balaji Amines, La Opala and RG Gujarat Fluorochemicals.

Analysts said many of these stocks fell due to a miss on Q1 earnings. They are still positive on a few of them.

Shares of Nalco plunged 20 per cent to Rs 78.30 at Tuesday's close from a 52-week high of Rs 97.45 hit on August 6 after its Q1 results came in below Street expectations due to higher-than-expected costs and miss on volumes and realisation. The stock though recovered some ground on Wednesday, rising 4 per cent to Rs 81.65, as analysts showed faith in the stock.

"We expect higher aluminum prices to absorb the cost shock and lead to improved margin in subsequent quarters. With integrated mining operations, Nalco is the best play on higher LME prices," Motilal Oswal said.

Mahindra Logistics fell 18 per cent to Rs 675.35 on Tuesday from its 52-week high of Rs 818 hit on August 2. The scrip fell a further 1.5 per cent in Wednesday's trade. Another logistics firm Allcargo Logistics fell 16.3 per cent to Rs 182.2 from August 3's high of Rs 217.75.

BOB Capital Markets has a 'buy' call on Mahindra Logistics. Key stock price drivers include strong recovery in M&M sale volumes, new customer additions in third-party logistics business and earnings recovery.

Allcargo, which is looking for delisting, has reinitiated the process after Sebi notified new delisting rules. The company has fixed Rs 148.01 as floor price for share buyback.

"Looking at the institutional holding structure, getting to the 90 per cent mark doesn’t appear to be difficult. However, the exit price has to be accepted by the promoter for the delisting offer to be successful. The stock is trading 29 per cent above the floor price. Hence we will not suggest any trade at this juncture as the risk to reward is not favourable," IIFL Securities said in an August 9 note.

Five stocks Nilkamal, Balaji Amines, La Opala RG, Rain Industries and Gujarat Fluorochemicals are down 15-18 per cent from 52-week highs hit this month.

Among them, Balaji Amines has fallen not because of earnings, but rich valuations.

Edelweiss said it remains positive on the company due to continuous capex ramp-up, strong demand outlook for its products, and announced capex plans that will extend the company’s growth trajectory in a duopoly market.

"However, the rich valuation may impact near-term upside," it said. HDFC Securities has an 'add' rating on this stock.

Specialty chemical stocks Gujarat Fluorochemicals and Rain Industries have seen profit booking after rallying 177 per cent and 62 per cent, respectively, so far this year.

In the case of Nilkamal, the company reported a profit of Rs 1.94 crore in the June quarter, down from Rs 27.48 crore in the March quarter. Sales fell to Rs 449.79 crore from Rs 605.95 crore sequentially.

"Q1FY22 has been once again a challenging quarter. The recovery over the past three quarters got undone with the second wave of Covid-19 which again led to restrictions and full or partial lockdowns, which resulted in a loss of the B2C & retail businesses. This has led to a 26 per cent degrowth in the business. The resultant loss of sales led to a decrease in profits by 90 per cent," the company said.

The company said it has been able to pass on 85 per cent of the rise in raw material cost so far, but with a lag. A total of 112 BSE500 stocks hit their one-year highs in August so far.