Stocks Given A ‘Buy’ For Up To 47% Upside By Reputed Brokerage Firms

1. Indo Count Industries

Edelweiss Financial Services in its report dated July 15 has given a buy recommendation for Indo Count Industries for a target price of Rs. 293, an upside of 47% from the current price levels of Rs. 199.35 per share.

Rebate of State and Central Taxes and Levies to provide boost to Indian textile exports

The small cap textile company commands a market cap of Rs. 2,786 crore. The brokerage in its report specified on the rebate to the Indian textiles exporters’ called Rebate of State and Central Taxes and Levies (RoSCTL) scheme on exports of Apparels, Garments and Made-Ups till 31st Mar’24. With this clarity there is expected that Indian textiles will get a boost and also enable the industry to become competitive in the US.

“This event is a big positive for ICIL, and thus, we maintain ‘BUY’ rating on the stock with an increased target price of INR293/share (previous TP: INR257/share)”, said the brokerage.

Several other tailwinds a big positive for ICIL

Export incentives with RoSCTL is a big positive for ICIL. The brokerage further adds ‘With the issue of export incentives out of the way, the textiles industry is now lobbying for FTA to go through with Europe, which will open a whole new market for India and allow it to compete with Pakistan and Bangladesh (which face nil tariffs in Europe). This along with factors like (a) retail recovery in the US, (b) China + 1 strategy playing out, (c) increasing share of branded/fashion bedding, and (d) capacity expansion to meet the strong demand will enable ICIL to further unlock its potential’

“We are optimistic about ICIL’s growth prospects and expect it to deliver revenue/EBITDA/PAT CAGR of 13%/19%/20% over FY21-23E. At CMP, ICIL is trading at an attractive valuation of 11x/10x on FY22E/FY23E earnings estimates. With removal of a key headwind (uncertainty over export incentive rates), upward revision of US retail sales estimates for CY21 and continued increase in India’s home textiles market share in the US”, we reiterate ‘BUY’ recommendation on ICIL with an increased target price of INR293/share (previous TP: INR257/share).

2. Mayur Uniquoters:

ICICI Securities has suggested to ‘Buy’ Mayur for an upside of 26% for a target of Rs. 625 from the current price of Rs. 496.65 per share.

The company is the largest manufacturer of artificial leather and has begun its PU coating facility with a current capacity of 6 lacs linerar meter per month.

Healthy RoCE and debt free cash rich Balance sheet

Mayur Uniquoters (MUL) is a leading player in the technical textile domain, manufacturing synthetic leather for automotive, footwear & apparels, etc. MUL has, over the years, exhibited healthy capital efficiency with five year RoCE at ~21% amid healthy EBITDA margin profile at ~20%+. It has debt free cash rich b/s with surplus cash of ~| 200 crore (FY21).

FY21 results

-Net sales decline was limited to 3% YoY to Rs. 513 crore

– EBITDA in FY21 was at Rs. 125 crore, up 20% YoY with margins at 24.4%

– Consequent PAT was at | 90 crore (up 12.5% YoY)

MUL supplying to Mercedes Benz seen to be a big positive

MUL’s share price has been a laggard in the past and has just given CAGR returns of ~5% in the last five years. This was amid a delay in setting up of new plant & high gestation period for breaking into premium auto OEMs. With new capacities in place and MUL starting to supply to Mercedes Benz (South Africa), we remain positive and retain our BUY rating on the stock Target Price and Valuation: We value MUL at Rs. 625 i.e. 22x P/E on FY23E EPS.

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Disclaimer:

Stock market investment is subject to risk associated with the stock markets and hence investors need to be very careful. Neither the author, nor the brokerage, nor Greynium Information Technologies Pvt Ltd would be responsible for losses incurred based on a decision to buy into the stocks based on the above article. TStock indices are currently at lifetime highs and hence investors needs to be cautious.