Anand Rathi Advisory recommends the following stocks:
CMP 2907 Target 3460
Dalmia continues to surpass industry volume growth and with its premium products and market-leading position, it should post a strong performance.
With 25m tpa (south 12.1m, east & north-east 12.9m), Dalmia enjoys a 9.2 percent market share.
Its high cement-to-clinker ratio, optimized fuel-mix and logistic costs, the proposed 9MW waste-heat-recovery plant in Odisha and corporate restructuring would help raise its EBITDA/ton to Rs.1,327 in FY20 (vs. Rs.1,202 in FY17)
The better operating performance, rising capacity utilization and no major capex would help improve the RoE and RoCE from 4.5 percent and 5 percent in FY16 respectively to 16.8 percent and 13.6 percent in FY20
Our revised target of Rs 3,460 (earlier Rs.3,202) is based on 13x Sept’19e EV/EBITDA, reflecting an EV/ton of $197.
CMP 112 Target 140
Federal Bank has a diversified credit book comprising Corporate (39 percent), SME (22 percent), and Retail & Agri (39 percent) portfolios.
Credit growth is robust, with the high-rated corporate portfolio (~70 percent of corporate loans are to “A” and above rated corporate) driving the growth. We model net NPAs of ~1.2 percent in FY18 and ~1 percent in FY19.
We expect growth to accelerate in the SME book and sustainable growth in the corporate book; accordingly we have modeled FY18-19 credit-book growth of ~25 percent CAGR.
In the quarter NIM was a healthy 3.31 percent, relatively higher than its peers.. We expect NIM levels to be a steady ~3.3 percent by FY19. We forecast ~1 percent RoA and ~14 percent RoE for FY19.
Our FY19 target price of Rs.140 implies a ~2x multiple on its FY18e book and ~1.8x on its FY19e book.
CMP 250 Target 335
The company is the largest producer of manganese ore by volume in the country with large reserves of high/medium grade of manganese ore.
The company is currently witnessing increase in its ore prices with continuous price rise followed by capacity addition over next few years.
It plans to double the current production level of ~ 1.1 MT to 2MT by 2021 and is targeting 2.5MT by 2025 and 3MT of manganese ore production by 2030.
It also has promising prospects in terms of electric vehicle/battery push as EMD is produced by the company which is a key ingredient in battery manufacturing process.
We continue to remain positive on the company and increase in our target price to Rs.335 per share.
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