Current stock market volatility led has led a correction in many scripts. Current prices offer a great opportunity to accumulate these fundamentally sound stocks, where the business growth story remains continues.

Despite business dynamics not seeing much of an impact from problems, Godrej Agrovet has dropped over 19 % while Indian Hotels has risen 5.8%  in the past six months. Both stocks have underperformed the Nifty, which has risen over 8 % in this period.

Who is Godrej Agrovet?

Godrej Agrovet (GAVL) is a diversified farm-to-fork company with interests in animal feed, oil palm plantations, agri-inputs (crop protection), poultry, dairy and frozen foods segments.

The company launched its initial public offering in October last year and the stocks are decent performing since then. It has generated consistent returns and achieved high growth through both organic and inorganic routes over the years.

Why GAVL?

1. Animal feed subsidiary: Company’s successful stop de-growth in animal feed (majorly broiler& capital feed) segment which constitutes nearly 50% of the business.

2. New launches in crop protection: With growing exports and improved domestic performance owing to deliver decent growth in crop protection segment

3. Policy support in Palm oil: It is the stronger performer for the company. Higher import duty on oil is helping improve domestic prices of palm oil

4. Value-added products in the diary: A better margins in upcoming quarters happens company now launched products in the value-added product portfolio

5. Healthy balance sheet: Company’s balance sheet remains healthy with low debt, appropriate cash and room for inorganic expansion

6. Attractive Valuation: Stock is now trading at FY19e(EV/EBITDA)of 20 times and P/E ratio of 30 times which looks attractive.

Indian Hotels Company:

It is the hospitality arm of Tata Group and the owner of luxury Taj Group of Hotels.

Why IHCL?

1. Completed reconstructing, clean balance sheet: -It has positioned for growth with a leaner balance sheet at a debt-equity ratio of 0.47 times.

2. Demand Supply scenario favourable: After a period of surplus supply, offering pricing power to companies.

3. Growing rates and occupancies: A parallel increase in occupancies is enabling revenue per available room(Rev PAR) growth for IHCL, which will help grow revenues rapidly in H2FY19.

4. Moving to an asset-light model: IHCL has moved its focus towards domestic business, where it remains a strong market leader.

5. Economy segment growing fast: IHCL is expanding through the Ginger brand. It will help to market capture.

6. Attractive valuation: IHCL is now trading at an FY19Eev per room of 1.05 times and EV/EBITDA of 19.5 times, which is an attractive entry point.

7. Outlook: With the growth story for both GAVL and IHCL intact, we find current price level attractive and would recommend progressive accumulation.

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