Coal India, APL Apollo Tubes, CCL Products And More - Top Stock Picks For August By Axis Securities

Axis Securities Report

• Coal India Ltd. - Coal India has a robust financial risk profile with healthy net cash and cash equivalents of Rs 25,870 crore (as of March 2022). Trade receivables have come down to Rs 11,368 crore in FY22 from Rs 19,623 crore in FY21 leading to positive free cash flow in FY22 (post working capital changes). The company has a capex plan of Rs 17,000 cr for FY23, primarily on evacuation infrastructure. Despite the proposed capex and high dividend payout, liquidity will remain robust over the medium term, backed by a robust capital structure and healthy cash accrual.

• APL Apollo Tubes Ltd. - The capex from internal cash accruals targeting capacity addition (Raipur plant with added portfolio), addition at other low margin plants and cost savings augurs well for APL Apollo in our view to maintain its return on capital employed to the north of 30% (FY22 at 34.5% versus 26.5% in FY21) across the steel cycle. Further, to protect its margins in the steel downcycle, the company has maintained capex discipline and lean working capital with efficient inventory management leading to robust free cash flows.

• CCL Products India Ltd. - We remain positive on CCL Products given-

1. expertise in customised blends;

2. cost-efficient business model;

3. largest manufacturer and exporter of instant coffee;

4. doubling of Vietnam capacity from the current 13,500 million tonne leading to volume growth visibility for the next two years;

5. capacity additions in -added products (FDC and small packs), and

6. foray into high margin branded retail business (Continental Coffee).

We expect CCL Products’ sales/Ebitda/profit after tax to grow at 17%/18%/21% CAGR over FY21-24E.

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