Month: September 2021

1. Vishnu Chemicals:

The brokerage bets on the stock of chemicals company for gains of up to 17.55% seeing a target of Rs. 818 from the last trading price of Rs. 695.9 per share.

About the company: Vishnu Chemicals Ltd (VCL) is India’s largest manufacturer of Chromium and Barium compounds. The company has a strong moat of being a low cost manufacturer and a leader in a niche industry, its products has varied applications across 20 sectors like Leather, Pharmaceuticals, Glass, Paints & Coatings, Tiles, Wood preservatives etc. The company’s clientele span 57 countries. The company also acquired Barium carbonate facility of Solvay Barium GMBH in India and entered the barium segment.

Rationale for bullishness on the stock

“Going forward, we are positive on the growth prospects of the company on the back of 1) Constant expansion of its product application across industries 2) Backward integration by setting up Soda Ash unit which is expected to be commissioned by Q4FY22 at a capex of Rs. 120Cr for Chromium chemicals which will be margin accretive 3) Incremental capacity expansion in Barium segment provides good visibility of future growth and 4) Post completion of investment phase in FY22, we expect VCL to generate strong cash flows which will aid in deleveraging its balance sheet and thereby improve its return ratios”, says the brokerage report.

“The brokerage expects the company’s revenue, EBITDA and PAT to likely record a growth of 16/36% and 51% CAGR over FY21-23E along with consistent FCF generation and improvement in working capital. Higher PAT growth will be driven by strong operating performance across both Chromium and Barium segments where we expect segment-wise EBITDA margins to expand by 600/400 bps respectively over FY21-23E. At a consolidated level, we expect overall margins to expand by 430 bps to 15.9% in FY23E v/s 11.6% in FY21. Also strong cash flows on the back of better operating performance will result in lower debt, aiding lower interest cost which will further be earnings accretive”, adds the brokerage.

The stock is currently trading at valuation of 10x FY23E earnings. We feel the base case fair value of the stock is Rs. 738 (11.5x FY23E) and bull case fair value is Rs. 818 (12.75x FY23E). We recommend investors to buy the stock in the band of Rs. 658-696 and further add at Rs. 593.

2. Nippon Life India:

HDFC Securities is positive on the AMC for gains of over 15% and sets a target price of Rs. 505 to be realized in the next 2 quarters. The stock last traded at a price of Rs. 436.8.

In existence since last 25 years, Nippon is a leading non-bank run AMC with a strong global parentage. Product launches keeping in view HNI as well as retail clientele has been its key area. Also, the margin accretive PMS and AIF business helps the company that yield in a higher return. The company’s debt funds have also been garnering investors after the company has got stringent with its debt portfolio mix.

“The brokerage envisages a rise of 15.5% CAGR for topline while PAT is expected to grow by 7.6% CAGR over FY21-23E. Operating margin is estimated to grow to 59% in FY23E compared to current 52.5%. Assets Under Management is expected to rise by 14% annually over same time frame. RoE is expected to hover around current level. Market share trend both in equity and debt segment will be the key thing to watch out for. Cash and investments of the company is Rs. 29,106 mn as at FY21 (~11% of the market capitalization). The company has been constantly paying healthy dividend to its shareholders”, adds the brokerage report.

The company advices investors can buy NAM India at the LTP of Rs.440 (35xFY23E EPS) and add on dips to Rs.390 (31xFY23E EPS) band for Base case fair value of Rs.478 (38xFY23E EPS) and the Bull case fair value of Rs.505 (40xFY23E EPS) over next 6 months. In terms of Mcap to AUM, NAM India is available at a reasonable valuation (7.9x FY23E P/AUM) as compared to other peers.

3. IPCA Lab:

The company sees this pharma player to gain up to 10% in the 2 quarter period and hit a target price of Rs. 2867, from the last traded price of Rs. 2596.15. The company’s key therapeutic areas include cardiac, Pain Management (Rheumatology), Anti-Malarial and Anti-Diabetic etc. The company’s constant endeavor in the direction of backward integration will provide it a cost advantage.

Re-rating of the stock can be seen in future

“Despite US FDA issues remaining unresolved, Ipca has managed to post strong performance in FY20 and FY21. It can be attributed to healthy growth from domestic business, export of APIs and UK business”, says the brokerage. IPCA continues to maintain leadership position in segments such as rheumatoid arthritis and orthopedic therapies in the domestic market. Export growth momentum is expected to sustain on the back of healthy growth in API segment in the international market. Timely resolution of import alert issued by the US FDA could provide additional uptick to revenue growth and profitability. Any favorable outcome from US FDA for its facilities would further rerate the stock.

HDFC Securities is positive on Ipca Labs on the back of: i) strong volume growth in domestic formulation across therapeutic areas, ii) cost competitive and consistent quality driving better business prospects in API segment, iii) robust debt free B/S with strong liquidity in the form of cash, liquid investments to the tune of around Rs 920cr as on June, 2021 and strong return ratios and iv) better traction in the international markets such as Europe and Asia. We feel investors can buy the stock on declines at Rs 2359 and add more on dips to Rs 2080 (20.5x FY23E EPS) for base case target of Rs 2664 (26.25x FY23E EPS) and bull case target price of Rs 2867 (28.25x FY22E EPS) over the next two quarters.

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Disclaimer:

The stocks are taken from brokerage report and is just for informational use and should not be construed for investment advice.

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Buy Minda Corporation with target price of Rs 148, says Axis Securities

Axis Securities has set a price target of Rs 148 on the stock, as against the current market price of Rs124, with a potential upside of 19%.

The Spark Minda group’s flagship company, Minda Corporation has a strong presence in all categories, including 2W, CV, PV, and Aftermarket, which accounted for 52 percent, 21 percent, 11 percent, and 16 percent of its FY21 sales, respectively.

“We expect Minda Corp’s profitability to improve over FY22-23E in the backdrop of its wide product basket, robust market share, consistent new product addition, and operating leverage. The company is expected to deliver excellent profitability growth by FY23E owing to the attributes such as improved content-per-vehicle as well as higher indigenous content. We value the company at 15x FY23E EPS to arrive at a target price of Rs 148, implying an upside potential of 19% from CMP,” the brokerage has said.

According to the brokerage, the migration to BS6 will benefit Minda Corp significantly, as its wire harness product (25-30 percent market share) would likely see tremendous demand in terms of both value and volume. We like the company’s growth storey, which is being driven by improving kit-per-vehicle value, exiting loss-making divisions, and the potential for an opportunistic inorganic acquisition by leveraging its cash-rich position.

Buy APL Apollo Tubes, says HDFC Securities

HDFC Securities has set a price target of Rs 2,226 on the stock, as against the current market price of Rs 1,865.

With a capacity of 2.6 million tonnes per annum (mtpa) and a pan-India presence, APL Apollo Tubes (APL) is India’s foremost structural steel tube maker. APL’s market share increased from 27% in FY16 to 50% in FY21, because to a robust distribution network, branding, customised and innovative product offerings, and capacity expansion.

“We expect APL’s revenue/PAT to grow at CAGRs 20%/34% over FY21-24E, led by healthy volume growth, margin expansion, reduced working capital, and reduced debt. We thereby initiate coverage with a BUY rating and a TP of INR2,226/share (based on 35x FY24E EPS). The multiple of 35x is based on the APL’s superior performance, operational efficiency and strong positive outlook going ahead,” the brokerage said in its research report.

“APL has successfully gained the mindshare of fabricators and architects, making its steel tubes their first option for applications,” according to the brokerage.

Buy Nazara Technologies with a target price of Rs 2,208, says Yes Securities

Yes Securities has set a price target of Rs 2,208 on the stock, as against the current market price of Rs 1,929.

Nazara is predicted to generate revenue of Rs11.4 billion in FY24, with a 36.0 percent CAGR from FY21 to FY24E. The stock could climb 20-50 percent from current levels due to the general gaming market craze, growing interest in platform businesses, and bright prospects for the gaming industry in India. In the next 12 months, our base case target price is up 23.8 percent.

“Given the long term uncertainty in this business, we initiate coverage with REDUCE Rating and target price of Rs 2,208 at EV/EBITDA(FY24E) of 25x, taking into account valuation multiples of global peers like Electronic Arts, Activision Blizzard, and Tencent Holding, (adjusted for 30% growth in Indian market compared to 12-15% growth in the US and Chinese gaming markets). The stock currently trades EV/EBITDA of 19.4x,” the brokerage has said.

According to Yes Securities, the number of Mid/Hard Core gamers is predicted to expand to 120 million by FY25 from 35 million in FY21, driving ARPU growth (currently $9/pa) through In-App sales.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article.