Category: Personal Finance

Buy SBI Life Insurance

The firm has set a price target of Rs 1,500 on the stock of SBI Life Insurance as against the current market price of Rs 1,155.

SBI Life Insurance reported a strong 2QFY22, with APE growth of 46% YoY (5% beat) and VNB growth at a stellar 91% YoY (10% beat). VNB margin improved to 25.9% (up 560bp YoY). However, shareholders’ PAT declined by 18% YoY on account of higher claims settled in 2QFY22.

“Persistency has improved across cohorts on a YoY basis, with 13th/49th month persistency improving by 180bp/300bp YoY to 87.7%/69.3% and steady trends in the 61st month to 60.7%,” the brokerage has said.

“SBI Life Insurance continues to maintain its cost leadership, while persistency trends have improved on a YoY basis. We estimate APE growth at 23% CAGR over FY21-24E. VNB margin is estimated to reach 26.2% by FY24E, thus enabling 28% VNB CAGR and 18% EV CAGR over FY21-24E. We maintain our Buy rating with a revised target price of Rs 1,500 per share (2.7x Sep’23E EV),” the brokerage has said.

Buy IndusInd Bank

Motilal Oswal has set a price target of Rs 1,400 on the stock of IndusInd Bank. Loan growth picked up sharply, led by Corporate and MFI/Credit Cards, while the Vehicle book remains muted. Retail disbursements have crossed pre-COVID levels across most segments. Deposit trends continue to remain strong, led by Retail term deposits.

“IndusInd Bank reported an in line operating performance, with loan growth witnessing traction, while its liability franchise continues to improve, driving a consistent reduction in funding cost.

“We expect IndusInd Bank to deliver a FY23E RoA/RoE of 1.8%/15.1%. We roll forward our estimates to Sep’23E and maintain our Buy rating with a target price of Rs 1,400 per share (1.9x 1HFY24E ABV),” the brokerage has said.

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

Gujarat Gas

Motilal Oswal sees a near 25% upside in the stock of Gujarat Gas and has recommended buying the same for an upside target of Rs 775.

“In our conference last month, the company had reiterated its intent to sustain margins at Rs 4.5-5.5/scm for the full year FY22/23. To combat the current high spot LNG prices, Gujarat Gas took a price hike of Rs 9.5/scm in PNG-industrial, taking its realisation to Rs 47/scm (highest ever). This hike was in addition to the Rs 4.5/scm hike taken in the last week of Aug’21,” the brokerage has said.

According to the brokerage the addition of 60+ new industrial units at Morbi, expansion of current units, and emergence of a ceramic cluster at Aniyari (potential of 0.5mmscmd) will continue to drive the company’s volume growth.

“We maintain Buy and value the stock at 26x Dec’23E EPS to arrive at our target price of Rs 775. Any underperformance by Gujarat Gas on the EBITDA/scm or volume growth front v/s our projections poses a key risk for the stock,” the brokerage has said.

Dalmia Bharat

Motilal Oswal also has a buy call on the stock of Dalmia Bharat with a price target of Rs 2,500, as against the current market price of Rs 20212.

Dalmia Bharat has commenced commercial production at its 2.25mt grinding unit (Line 2) in Cuttack, Odisha and has also begun trial-runs at the acquired plants of Murli Industries (3mt grinding capacity in Maharashtra).

“We estimate Dalmia Bharat to achieve a sales volume CAGR of 10.8% over FY21-24E, driven by its capacity expansions. The company’s capital allocation policy aims to improve shareholder return and should be taken positively if executed properly. We maintain our estimates and Buy rating on the stock,” the brokerage has said.

AU Small Finance Bank

AU Small Finance Bank reported a net profit of Rs 2.8 billion (up 42% YoY – adjusted for the AAVAS sale in 2QFY22; MOSLe: INR2.2b), driven by lower provisions, which stood negligible at Rs 36 million due to sharp recoveries and upgrades, resulting in a release of provisions. These provisions were utilized to increase contingent provisions, which now stand at Rs 3 billion (0.84% of loans).

AU Small Finance Bank reported a strong 2QFY22, led by robust core operating performance, while negligible provisions drove the sharp earnings beat. Asset quality improved significantly, supported by healthy recoveries/upgrades, while collection efficiency improved to 109%.

“On the business front, Retail deposit mix continues to improve, while AUM growth remains strong. We will review our estimate and target price after the earnings concall on 29th Oct’21,” the brokerage has said.

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

Strong order book for L&T

According to Motilal Oswal L&T’s order book grew 11% YoY to Rs 3.3 trillion, with the order book/revenue ratio at 3.2 times.

The international business formed 23% of order book. In terms of clientele, the central/state government formed 10%/33%, PSUs 42%, and the private sector 15% of the company’s total order book.

“L&T has indicated that the bid pipeline remains strong, with the overall pipeline for the remainder of the year standing at Rs 6.8 trillion (+12% YoY). The Infrastructure sector’s prospects stood at Rs 5.3 trillion, while the Hydrocarbon segment’s prospects improved to Rs 1.2 trillion (80% of the prospective business is from the Middle East). The strong bid pipeline is encouraging, although a faster conversion to final awarding holds the key to the company meeting the guidance of a low-to-mid-teen growth in order inflow,” the brokerage has said.

Buy L&T for a price target of Rs 2,285

According to Motilal Oswal After adjusting for the subsidiaries’ valuation (Rs 1,070 per shares), the core E&C business trades at an FY22/FY23E PE multiple of 15.0x/12.9x v/s the historical one-year forward average PE multiple of 22 times.

“Should the stock revert to its historical average trading multiple of 22 times, our target price for the stock will increase to Rs 2,285. Larsen and Toubro remains the best play on the capital expenditure cycle in India. Maintain Buy,” Motilal Oswal has said.

The shares of L&T last closed at Rs 1767 on the NSE.

Buy Maruti Suzuki

Motilal Oswal has set a price target of Rs 8,450 on the stock of Maruti as against the current market price of Rs 7,456. “Demand outlook remains good, with an improvement in both inquiries and bookings. Rural India is doing better and now constitutes over 43% of volume. It has an order backlog of 200k units due to a shortage of semiconductors,” the brokerage has said.

According to Motilal Oswal, precious metal prices have seen some softening, but will benefit in coming quarters due to the lag effect.

Valuation and view on Maruti Suzuki

Strong demand, softening commodity inflation, and improving chip shortage supports a margin recovery.

“We expect a recovery in 2HFY22 in both market share and margin, led by a favorable product lifecycle, operating leverage, and mix as well as price action/cost-cutting,” the brokerage has said.

“The stock trades at 59.1x/25.7x FY22E/FY23E consolidated EPS. We maintain our Buy rating with a target price of Rs 8,450 per share (27x Sep’23E consolidated EPS),” the brokerage has added.

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

1. Dixon Technologies:

About the stock: Dixon Technologies is India’s leading electronic manufacturing

(EMS) provider and one of the largest beneficiaries of the government’s PLI scheme.

• Dixon operates in both original equipment manufacturing (OEM) and original design manufacturing (ODM)

• Revenue growth witnessed in the Q2 quarter of FY22, though the delay in price hike weighed on gross margins. Revenue increased but EBITDA and gross margin registered a decline. Profitability also rose YoY by 20 percent to Rs. 63 crore.

• Strong RoE, RoCE at around 20%, 24%, respectively (three year’s average).

Investors given the huge momentum in stock which has gained 9 times over the past 4 years are suggested to buy in the stock, valuing it at Rs. 5990 i.e. 51x P/E on FY24E EPS. This means an upside of 20 percent from current price level of Rs. 4993.55.

Key triggers for future price performance:

• Indian EMS industry is valued at $23.5 billion. Dixon currently has a market share of 3-4%, which leaves opportunity to expand and grow

• Domestic mobile production is set to grow 5x to Rs. 10.5 lakh crore by FY26 under PLI scheme. Dixon is one of the main beneficiaries

• New segments such as electronics/IT products, telecom products and LED lights & AC component will drive future revenue for Dixon.

Alternate Stock Idea: Other than Dixon, ICICI Direct also like Havells in our coverage

• Trigger for Havells’ future revenue growth would be a revival in Lloyds revenues and improvement in margin

• BUY with a target price of Rs. 1545.

2. Dalmia Bharat Sugar:

For this sugar manufacturer, ICICI Direct has set a target price of Rs. 610, implying return potential of 54.7 percent from current price of Rs. 394.3.

The company is being deemed to deliver consistent performance and is close to reach net debt free status.

Key takeaways about the company

• The company is expanding its sugarcane & molasses and grain based annual distillery capacity from current 8.5 crore litre to 21 crore litre, which would be completed in a phased manner by December 2022

Q2FY22 Results: Owing to higher exports the company delivered steady set of numbers. Sales came in flat on a year basis, EBITDA too saw a marginal decline and PAT rose over 6 percent YoY helped by lower reduced interest expense

Brokerage’s expectation on the stock going ahead

“We expect 2.5x increase in distillery volumes to boost earnings with CAGR of 16.1% during FY21-24E. We maintain our BUY rating on the stock

Target Price and Valuation: We value the stock at | 610, ascribing a multiple of 14x FY23 earnings”, adds the report.

Key triggers for future price performance:

• DBS is fastest in utilising B-heavy, sugarcane juice & grain route to produce ethanol. Distillery volumes to grow 2.5x to 21 crore litre by FY24

• The company been aggressive in exporting sugar & utilising higher global white sugar prices. Freight cost is much lower given its proximity to ports

• With the increasing profitability & reduction in sugar inventories, DBS would be generating cumulative free cash flow of Rs. 626 crore in the next three

years despite around Rs.700 crore capex

Alternate Stock Idea: The company is also bullish on Balrampur Chini. The company is second largest and one of the most efficient sugar companies in India. Along with sugarcane juice, B-heavy, the company is

also utilising grain based ethanol to leverage the ethanol opportunity in India. We value the stock at Rs. 515/share with a BUY recommendation”, adds the report.

Disclaimer:

The two scrips mentioned here are taken from the report ICICI Direct and readers should not construe them as recommendation to buy into these stocks. Stock market investment is risky. Please do your own study and analysis.

GoodReturns.in

IPOs are attracting all classes of investors alike, while the chase for the fashion e-tailer was defined to be fashionable, Policybazaar IPO is said to have garnered huge anchor investor interest alike. Amid fantabulous frenzy for IPOs, here are the IPOs lined up for November 2021:

1. Paytm:

The company backed by China’s Alibaba will open up a huge Rs. 18300 crore IPO on November. Considering the upper end of the price band of Rs. 2150, the company will rank among the country’s top 50 companies’ by market capitalisation, surpassing the valuations of established companies’ such as NTPC among others. The company’s losses reduced for the June period owing to cost control on marketing as well as payment processing charges.

2. Policybazaar:

The fintech company with 2 platforms mainly Policybazaar and another Paisabazaar is slated to come up with an IPO on November 1. The Rs. 5709 crore IPO will include a
fresh issue of Rs. 3,759 crore and an offer for sale of Rs. 1,959 crore by its existing shareholders. The prime revenue source for the company is as commission which is obtained on selling policies from insurers.

3. SJS Enterprises:

Decorative aesthetics supplier SJS Enterprises is also set to launch its IPO on November 1 to raise a total of Rs. 800 crore via a complete OFS. The 2 stakeholders diluting stake are Evergraph and KA Joseph who will be offloading shares worth Rs. 710 and Rs. 90 crore, respectively.

The industries catered to by the company range from commercial vehicles, medical devices, farm equipment and sanitary ware industries. The company’s manufacturing facilities are located in Bengaluru and Pune.

4. Sapphire Foods:

Sapphire Foods will launch its IPO on November 9, 2021 and this will also be entirely an OFS for 1,75,69,941 equity shares being offloaded by investors and promoters.

Promoters – QSR Management Trust will sell 8.5 lakh equity shares, and Sapphire Foods Mauritius will offload 55.69 lakh equity shares through offer for sale. Further, WWD Ruby will sell 48.46 lakh equity shares, Amethyst 39.61 lakh shares, and AAJV Investment Trust will offload 80,169 equity shares.Other investors, Edelweiss Crossover Opportunities Fund and Edelweiss Crossover Opportunities Fund – Series II will sell 16.15 lakh equity shares and 6.46 lakh equity shares, respectively, via OFS.
The company is among one of the YUM’s franchisee operator. The company’s ownership is into food outlets including KFC, Pizza Hut and Taco Bell. The major stake in the firm of 45.52 percent is held by Sapphire Foods Mauritius while 5.83 percent is owned by QSR Management Trust.