Category: Personal Finance

1. SBI- Buy SBI for a target price of Rs. 572

The PSB lender is expected to see gains of up to 8 percent from current price levels. The price target for the stock is Rs. 572. The stock last closed at a price of Rs. 530.45 per share.

The bank has surprised the street with its positive results despite fully accounting for one-time accelerated pension cost of Rs. 74bn, given a

sustained improvement in asset quality. Gross slippages came in at 0.7 percent

There has been reported growth in loan category led by increase in retail loans.”With favourable trends on impairment and recoveries/upgrades resulting in gradual credit cost normalisation, SBI’s incremental RoA reflation to potential ~1% is now contingent on higher asset yields. We revise our FY22 earnings estimates by -8% to factor in accelerated pension costs and credit cost normalisation. We maintain BUY with a revised SOTP-based target price of INR572 (core at 1.2x Sep’23 ABVPS)”, says the HDFC Securities’ report.

Steady-state asset quality: SBI’s GNPA/NNPA stood at 4.9%/1.5% (Q1FY22: 5.3%/1.8%), benefitting from recoveries (large HFC) and sharp inter-quartile

upgrades. Net slippages, at 0.7%, stemmed from the corporate segment and included one NBFC exposure.

“Need for growth and reflation in asset yields: SBI’s P&L performance was skewed by accelerated pension costs, large write-backs, and low interest

reversals. As back book asset quality issues recede, our incremental focus is likely to be on how SBI can potentially reflate asset yields to drive 1% RoA

through gradual portfolio repricing and re-risking (without adding to credit

costs) and better operating efficiencies”, adds the report.

2. Tata Motors- Buy Tata Motors for a target of Rs. 560

The Nifty Auto stock is expected to see gains of up to 14 percent from current price level of Rs. 489.7 to a price target of Rs. 560 per share. The ‘Buy’ on the stock is recommended by the brokerage house even as the company reported Q2FY22 loss of Rs. 45bn due tothe ongoing chip shortages. The management expects production trends to improve over H2, as suppliers are recovering from the plant fires/lockdownsin Asia. The dealer inventory at JLR is at a multi-year low of 30Kunits – at the same time the order book is robust at 125K units ( about 3-month sales). Tata has monetised its India passenger car EV business at a valuation of USD6.7-9.1bn,by selling a 11-15% stake to TPG Rise (which is a marquee PE firm). We are raising our SOTP value to INR 560, based on Sep’23 earnings (from Jun’23 earlier). We ascribe a higher value to the India business of INR 330 to factor in the EV business valuation, as stated above. We also value the JLR business at 2.75x on EV/EBITDA (from 2.5x earlier) to factor in an improving supplyoutlook as well as the expected roll-out of the new Range Rover in Q4FY22.

JLR accounts for INR 218 per share (including CJLR).

Key highlights on the scrip as described by the brokerage

(1) Supplies to improve in H2: The chip production is

likely to improve from here on as vendors are coming out of the lockdown. Cash flows (-GBP 664mn) were impacted due to higher working capital,

which will normalise.

(2) New RR launch in Q4: The new RR will drive

volumes in FY23E. The PHEV variant offers class leading EV range of 100kms, with the BEV option to be rolled out in 2024. The model is built on

the new MLA Flex platform.

(3) India car business is gaining share: With

the launch of the new ‘Punch’, Tata has received a 50% increase in bookings.

The OEM is steadily gaining market share – Q2 share at 11.3% (+130bps QoQ) is at a eight-year high. Electric traction: Domestic EV car sales have crossed the 1,000 unit p.m. milestone, with a sharp rise in the order backlog. Post TPG’s infusion, the EV business is valued at 5-7x on FY26/27E revenue.

Disclaimer:

The 2 stocks are taken from the report of HDFC Securities and are not a recommendation to buy into these stocks. Remember Indian equities are highly expensive and investors need to do their own stock study and analysis before taking a dig into this risky asset class.

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1. Flomic Global Logistics Ltd.:

This is an IATA recognized air freight service provider. The company’s range of services include ocean freight, domestic transportation by air/ rail, reefer container, exhibition and event logistics among other. The country with over 30 years of existence caters to as many as 84 plus nations.

The 1-year return of the scrip of Flomic has been a staggering 14850 per cent from a price of just above Rs. 1 to now at Rs. 167.45. The stock is not traded on the NSE. The stock’s latest m-cap stands at Rs. 120 crore.

2. HCP Plastene Bulkpack/ Gopala Polyplast:

HCP Plastene Bulkpack … Gopala Polyplast (GPL) is engaged in the manufacturing of HDPE/PP Woven sacks with an installed capcaity of 7925 tons and diversified into. textile woven labels (inst. cap. : 59 mln pa) at a total cost of Rs 13.17 cr..Textile woven labels find their application in readymade garments (shirts, trousers, dresses), hosiery, terry towels, leather shoes, knitwear, etc.

The scrip in the last 1-year moved up from Rs. 5.72 as on November 5, 2020 to currently quote at Rs. 629.4, giving an outstanding return of 10903 percent return in the last 1-year. Know more about how this stock gave such outstanding returns.

3. Xpro India:

This Birla group company is a diversified multi-divisional, multi-locational enterprise in the polymer processing sector. The packaging company’s latest m-cap is Rs 816 crore.

Product portfolio of the company includes BOPP films, Coex cast films, coex sheets among others.

The company enjoys leadership position when it comes to manufacturing packaging material for capacitors in India being only the single entity in the space. The surge in the stock price as detailed in a report is on the government’s supportive measure in relation to electronic manufacturing and hence given this the company has begin to see some profits for the last some quarters. So with improvement in cash flow, the company is on the path of cutting down its debt.

The stock of Xpro during the last 1-year has registered gains to the tune of 3145.54 percent. The stock last closed at a price of Rs. 691.3 per share. The upside in the stock price is likely to continue given the now scope of electric vehicles. Furthermore, as the government has corrected the inverted duty structure for the segment, there is expected more resilience into the space.

Disclaimer:

The stocks mentioned herein are just to provide an idea of how these stocks fared in the last one year. Note equities are highly expensive currently and one can take a buy on dip take on 5 percent correction in the future course.

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