Why Rahul Sharma is gung-ho on JSL Hisar, PFC and Phillips Carbon Black

The undervalued segment of the market which have come down and are available at good attractive valuations, is my focus now, says Rahul Sharma, Market Strategist & Research Head, Equity99 Advisors.

First of all, a quick view on the index, which seemed to be acting cautious because only consumer stocks are gaining. Also what is your view on the broader market? Do you think HNIs are back and retail is back because broader markets have recovered after a correction?
A market consolidation is very likely. . This is mostly because we have seen such a good rally in the recent past and this consolidation or minor correction will be very healthy for the markets and provide much greater strength to go on upside. Right now, I feel 17,250 is the first support level for the Nifty to sustain and then on the lower side 17,100 and then definitely 17,000 will be a psychological level.

On the upside, 17,425 will be a hurdle, crossing which we will again reach 17,500 level. Right now, we can see stock specific moves in the market. I feel the undervalued segments of the market which have come down and are available at good attractive valuations, are my focus. I am just digging in each and every sector and wherever I can find good attractive valuations, I am picking up those stocks.

JSL Hisar is one of your stock picks. It has been buzzing the last couple of days. Tell us about your rationale and target?
JSL Hisar is a leading manufacturer of stainless steel, flat products like ferritic martensitic and duplex grades. The company has a super ROCE of around 24.5% and ROE of around 25.4%. Despite such good fundamentals, the PE is just 6.13X. The company has reduced its debt by around 32% in FY21 and at present, it is near to 0.5X. Its PAT has grown at around CAGR of 79% CAGR over the last five years and the company has been constantly generating positive operating cash flows.

Both FIIs and DIIs are increasing their stakes in June quarter. So I am really bullish on JSL Hisar. I am keeping target price at Rs 340 and stop loss will be at Rs 275.

Even power stocks are doing phenomenally well. PFC is your pick. Why do you like PFC and what is the target there?
Power Finance Corporation is engaged in the business of extending financial assistance to the power sector and is systemically important to non-deposit taking NBFCs. The company has a superb ROE of around 21.3%. It is a regular dividend paying company and a very safe bet with a superb yield of around 7.79%. The company has a market cap of around Rs 34,902 crore against an enterprise value of around Rs 68,63,000 crore.

It is available at a very attractive valuation of PE ratio of just 2.7X. FIIs are increasing their stake in the June quarter. We have seen that and the company has a free float of around 7.28%. PFC is a very safe bet at this current point of time and that’s why I am taking up this with a stop loss of Rs 125 and a target price of Rs 160 in Power Finance Corporation.

Phillips Carbon Black is your last pick. It gained almost 2% today, Rs 246 actually. Why do you like this one and what is the target over there?
It is a part of the RP-Sanjiv Goenka Group which was set up by KP Goenka back in 1960s in collaboration with Phillips Petroleum Company in the USA. PCBL is the largest carbon manufacturer in India and seventh largest global player with a significant customer base in around 40 plus countries. Its key clients include major companies like MRF, Apollo, JK Tyres, TVS, Ceat, Nexen Tire, Goodyear etc.

The company has an excellent ROCE of around 7.7% and ROE of 17.17%. Despite being a market leader, it trades at just a PE ratio of 10X against industry PE ratio of 25X. It has given superb Q1 results and investors like Ashish Kacholia holds around 1.45% stake in this company. In the coming days,Phillips Carbon will outshine. So I am picking up this stock with a stop loss of Rs 227 and a target price of Rs 285.

Any thoughts on ONGC?
Definitely, I feel the gas price hike is beneficial for the company. I feel it is a very good point of time to invest in ONGC because there is a good technical breakout. . There is a hurdle above Rs 126. I think Rs 135-140 levels can be achieved in ONGC.