Category: Personal Finance

1. Buy the stock of Dabur India for 18% upside

Broking firm, Motilal Oswal has said to buy the stock of Dabur India with an upside target of 18% on the stock. According to the broking firm, the management’s confidence remains double-digit sales growth prospects for FY22, despite a challenging base for the Healthcare business in the remaining quarters. It also has a target of maintaining or growing FY22 EBITDA margin YoY, despite the ongoing rise in material costs, is encouraging.

“Dabur has delivered double-digit topline growth in two of the past three years, unlike most peers, and is likely to do so again in FY22.

New products now contribute 5-6% of sales. Earnings growth, after the ongoing investment in these initiatives, will be even stronger than topline growth after completion of the investment phase for the above mentioned initiatives (and a temporary reset on account of a step up in taxation levels to 22% in FY22 from 17.6% in FY21). We maintain our buy rating,” the brokerage has said.

2. Castrol

Brokerage firm, Motilal Oswal also has a buy call on the stock of Castrol, with a 22% upside target from the current levels.

According to the brokerage firm, the management guided that demand momentum has picked up since June’21 and is expected to continue (although a potential third wave may be a critical development).

“Castrol has always enjoyed its brand equity heritage, and we believe it would be able to secure its profitability with a better product mix, cost control, and the launch of advanced products with better realization. We value the stock at 20 timesJune’23E EPS to arrive at target price of Rs 170. Maintain Buy,” the brokerage has said.

3. Punjab National Bank

Motilal Oswal has a neutral call on the stock of Punjab National Bank, but, sees an upside of 11% on the stock from current levels.

Punjab National Bank reported a healthy performance, supported by a pick-up in net interest income, higher other income, and lower operational expenditure, even as provisions stood stable QoQ.

“Business growth remains muted, however margin witnessed a sequential uptick. The bank expects growth to pick up, led by RAM segments, while the Corporate book too would undergo a gradual recovery. Asset quality was largely stable, despite higher slippages, supported by recoveries and upgrades. SMA 1 and 2 book stands elevated at 3.9% of loans, while restructured book, at 2.02% of loans (expect a further restructuring of Rs 15-20 billion), keeps us watchful over the near term. We estimate a RoA/RoE of 0.6%/8.8% by FY23E. We resume coverage with a Neutral rating and a target of Rs 45 (0.6 times FY23E ABV),” the brokerage has said.

4. Bharti Airtel

The brokerage is also bullish on the stock of Bharti Airtel. The brokerage says that Africa will remain the underdog and the business saw strong 9% EBITDA growth QoQ, backed by all-round growth in Data and Airtel Money consistently over the last few quarters. It generates Rs 400-500m FCF and remains a business that exhibits low leverage and healthy growth. Motilal Oswal says that despite robust data traffic volumes of 108b GB (18.9 GB/user), data traffic/subscribers are 50% that of RJio.

According to Motilal Oswal the EBITDA has been 30% higher for the last year, highlighting that the healthy subs/ARPU equation is showing gains. All this without any tariff hikes, the brokerage has said. It has a buy on the stock, but has not indicated any target prices for the same.

Disclaimer

The above stocks are based on the report Motilal Oswal. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks. Please consult a professional advisor.

Buy Gokaldas Exports with a 39% upside

ICICI Direct has a buy on the stock of Gokaldas Exports, with a solid price target of 39% from the current level. Gokaldas Exports (GEL) is one of India’s largest garment exporters, with a 30-million-piece yearly capacity.

The broking firms see an impressive clientele of well-known multinational brands, with GAP and H&M contributing significantly to sales. 65 percent of sales are generated in the United States.

According to the brokerage firm, revenue fell 35% quarter-on-quarter to Rs 241.0 crore, but EBITDA margins were steady at 7.4%, with absolute EBITDA falling 35% to Rs 17.9 crore.

Why buy the shares of Gokaldas Exports?

“Since our initiation report, the stock price has appreciated ~3.4x (from Rs 60 in September 2020 to | 202 in August 2021). We like GEL as a structural long term story to play the apparel export space. We maintain our BUY recommendation on the stock Target Price and Valuation: We value GEL at Rs 280 i.e. 15x FY23E EPS,” the brokerage has said.

Production is running at maximum capacity, with a strong order book for the next six months. Demand from the US apparel sector (a key market for GEL) continues to be strong (trading ahead of pre-Covid levels). Capex of Rs 120 crore is planned over the next two years, with the potential to create additional revenue of Rs 450 crore. With a net debt/equity ratio of 0.6x, B/s strength remains constant.

Buy Kansai Nerolac Paints: ICICI Direct

Brokerage firm, ICICI Direct also has a buy on the stock of Kansai Nerolac Paints. According to the brokerage firm, a favorable base and strong demand for decorative paints helped drive revenue up by 118% YoY to Rs 1301 crore, supported by a favorable base and strong topline growth.

Given the shorter repainting cycle, greater urbanisation, and increased distribution reach of organised players, ICICI Direct expects decorative paint will continue to rise at a rate of 2x GDP. A recovery in 45 percent of KNL’s revenue portfolio would be aided by a rebound in passenger car sales and strong demand momentum in industrial paints.

Why buy the shares of Kansai Nerolac Paints?

“Kansai’s share price has grown by ~2x over the past five years (from Rs 370 in July 2016 to Rs 630 levels in August 2021). We maintain our BUY rating on the stock Target Price and Valuation: We value Kansai at | 750 i.e. 48x P/E on FY23E EPS.

Demand for decorative and industrial paints was driven by a favorable base and increasing demand following the lifting of lockdown limitations. As a result, revenue increased by 118 percent year over year to Rs 1301 crore. When compared to pre-Covid sales, however, the recovery was 87 percent, owing primarily to a delayed rebound in industrial paints,” the brokerage has said.

Buy JK Lakshmi Cement: ICICI Direct

With a total capacity of 13.3 MT, JK Lakshmi primarily serves the north, west, and eastern markets (including subsidiary).

Broking firm, ICICI Direct in its recent research report has recommended the stock of JK Lakshmi Cement

According to the broking firm, JK Lakshmi Cement has 105 MW power plant that fulfills 75% of its total power requirement. The company is now adding 2.5 MT cement capacity through its subsidiary unit UCWL at a cost of Rs 1400 crore.

JK Lakshmi Cement: Buy the stock for a target of Rs 800

“JK Lakshmi’s share price has grown by ~2.5x over the past three years (from Rs 331 in August 2018 to Rs 816 in July 2021). We remain positive on the company and maintain our BUY rating Target Price and Valuation: We value the stock at Rs 800 i.e. 9.5x FY23E EV/EBITDA,” the brokerage firm has said.

ICICI Direct believes that with expected utilization of 94%+ for FY22E, we expect operating leverage benefit to continue led by fixed cost rationalization. WHRS of 10 MW to get commissioned by Q3FY22. This should help contain the power cost. B/s strength to remain strong despite newly announced capex of Rs 1400 crore for its subsidiary unit UCWL.

Disclaimer

The above stocks are based on the report of ICICI Direct. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks. Please consult a professional advisor.