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Buy Vesuvius India with upside potential of 28%

ICICI Securities has a ‘Buy’ rating Vesuvius India for a target price of Rs. 1445, i.e. an upside of 28 percent from the last traded price of Rs. 1130 per share.

Vesuvius India (VIL) is a Vesuvius Group (UK) subsidiary. It is a well-known metal flow engineering firm. Shaped refractories are responsible for 37% of revenue in CY20, followed by unshaped refractories (37%), and services (26%).

What should investors do?

“We expect decent earnings in long term led by

operational efficiency, product innovation, R&D and strong steel capex pipeline. Target Price and Valuation: We value VIL at Rs 1445 i.e. 24x on CY22E EPS,” the brokerage has said.

Key triggers for future price-performance:

• Focused on acquiring domestic market share through localised manufacturing and innovative product introductions in the manufactured goods category. Currently, manufactured items account for 50-55 percent of total exports.
• Focusing on the margin-enhancing solution oriented services category, which grew at a 34.4 percent CAGR from CY13 to CY20 and now accounts for 26% of revenue, up from 4% in CY13.
• Demand for refractories is projected to be driven by increased steel production and technological improvement. With increasing infrastructure spending and a solid steel capex pipeline, India’s crude steel output is predicted to grow at a CAGR of 5.5 percent to 121 MT in FY20P-23E.
• We expect VIL to return to superior margins of 14-16 percent in the next years as a result of cost reductions and specialised product launches.
• Balance sheet strength is provided by net debt free b/s, double-digit return ratios, excellent cash flows, and cash and investment of Rs 559 crore.

Buy Bata India with upside potential of 21%

With a presence in the men’s, women’s, and children’s footwear segments, Bata India is a key participant in the Indian footwear market.

ICICI Securities has a ‘Buy’ rating Bata India for a target price of Rs. 2120, i.e. an upside of 21 percent from the last traded price of Rs. 1750 per share.

Steady revenue recovery to aid premiumisation play.

“Bata has, over the last one year, delivered ~33% return whereas Relaxo delivered 77% returns owing to increased market share due to enhanced consumer preference towards open footwear. Strategies like cost reduction, focus on omni channel and calibrated expansion of retail network through asset light franchisee route can be structurally positive for Bata’s business. Strong revenue growth coupled with recovery in margin profile would enable Bata to reduce the valuation gap with Relaxo. We maintain our BUY rating on the company, the brokerage has said.

Key triggers for future price performance:

• Bata has increased its digital initiatives, with e-commerce accounting for 15% of total revenue in FY21. Bata stores fulfilled 60% of marketplace orders and 100% of orders for its own website due to its focus on omni-channel shopping.
• Bata is currently servicing 25000 multi-branded retailers, resulting in a 12 percent increase in revenue from wholesale distribution. This allows them to take advantage of its brand strength in newer cities. Bata is also expanding into Tier IIIV cities through franchises, adding 64 and seven locations in FY21 and Q1FY22, respectively, bringing the total number of franchise stores to 234 in total.
• In FY22-24E, we predict the company to add 240 locations net, bringing the total store count to 1765.
• We anticipate that when the pandemic’s impact fades, it will be able to resume its revenue growth trajectory thanks to its strong brand patronage and pan-India retail reach.

Disclaimer

The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advice to buy or sell stocks, gold, currency, or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature.

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