Tobacco companies are vulnerable to increasing taxes and changing govt. policies. However large profit margins makes them an attractive business model.
Godfrey Philips is one among largest Cigarette Manufacturers in India.
I am splitting this analysis in long term and short term.
Long Term Analysis-
For your reference I have attached monthly chart of Godfrey Philips. As seen on chart the stock was trading in narrow bands for multiple years. These bands have come in 3 phases.
Phase 1- From April 2005 till June 2009.
During this phase chart was trading in a broad range of 120-340. Stock broke out of this congestion in June 2009.
Phase 2- After breaking out of congestion in 2009 it registered a high of 442. However it went into trading band again with price range of 345-442. It remained in this range till May 2011.
Phase 3- In June 2011 stock broke out of second congestion band to enter into the 3rd phase of range bound trade. This range was in broad price band of 420-800.
After these consecutive phases of congestions the stock broke with good volumes in Oct 2015 to double the price in just 3 months.
Large gains can be followed by profit bookings. Same thing happened with Godfrey Philips. Stock came down heavily from Jan 2016 till the current month.
Now the chart is trading near a strong support of 800. This is the price from where the chart has broken out of 3rd congestion phase.
That makes it a very attractive level to enter into. Buying at current level of 887 and adding more quantity till stop-loss of 800 can looks an attractive proposition. Long term target can be around 1400.
Short Term Analysis-
On daily chart there seem to be good momentum with volume on 17 May. We know that the stock is trading near monthly support. If 17 May momentum is to continue chart should reach to its next resistance level of around 1100. That can give us the gains of 20% in next 15-20 trading sessions.
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