With the lockdown extension till May 3, 2020, the key demand driver is likely to deteriorate further in the coming days. Indians consider Navratri and Akshay Tritya as an auspicious time to buy and invest in the housing sector, but this pandemic has put a halt on all the development and construction activities across the country.
Coronavirus pandemic put an added pressure on the ailing real estate sector, which has already been facing demand challenges for quite a long time. With the lockdown extension till May 3, 2020, the key demand driver is likely to deteriorate further in the coming days. Indians consider Navratri and Akshay Tritya as an auspicious time to buy and invest in the housing sector, but this pandemic has put a halt on all the development and construction activities across the country. With a pause in economic activities, the industrial sector has also taken a back seat. “We expect ceramics companies to face a relatively bigger challenge on the demand front (significant dependence on new real estate construction) but weak brent prices should help protect profitability to some extent. Wood panel companies such as ply could see demand challenges too but could recover faster,” JM Financial said in its latest research report. Even amid the coronavirus slump, the research and brokerage firm sees up to 43% upside in the share prices of certain ceramic and ply companies stocks. Given below are three such stocks with a ‘buy’ recommendation.
1. Kajaria Ceramics: Tile companies depend on the construction or real estate sector for demand generation and hence might see a delayed recovery. “We expect Kajaria to post a decline in tile volumes in 1HFY21 and expect a gradual recovery in demand in 2HFY21,” JM Financial said in a report. The brokerage and research firm has upgraded its rating to buy from hold with a target price of Rs 470. At Monday’s closing, the stock traded at Rs 352.15 apiece on BSE, translating an upside of 25 per cent.
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2. Century Plyboards: Century Plyboards is the only wood panel company in India and is the third-largest laminate producer in the country. “We like Century Ply on account of its market leadership positions in most product categories, a wide range of product portfolio, brand equity, distribution strength, superior management quality, low debt levels and healthy return ratios. After the recent sharp fall in stock price (-35% in the past 2 months), we believe the valuations are attractive at 13.1x FY22E EPS,” the report said. The brokerage sees an 18 per cent upside in stock price with a target price of Rs 130. The brokerage firm has revised its rating to buy from hold. Century Plyboard stock price settled at Rs 107 apiece on BSE in the previous session.
3. Prince Pipes and Fittings: Prince is the 6th largest plastic pipes and fittings player in India with a large product range. “The ongoing slowdown due to COVID-19 will give impetus to the consolidation in the pipes industry, which will help large players such as Prince to gain market share from smaller/unorganised players,” the report said. The brokerage and research company maintained buy rating to the stock with a target price of Rs 190, an upside of 43 per cent. At Monday’s closing, the stock ended at Rs 107.90 apiece on BSE. “We like Prince Pipes for its pan-India presence, diversified product portfolio across applications, strong distribution network (similar to market leader), brand equity, healthy return ratios and net cash position post the initial public offering,” it further added.
(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)