Anand Rathi Share & Stock Brokers recommends the following stocks:
CMP Rs 255 Target Rs 352
On 18 percent YoY growth in its products business (and 16 percent in projects), Kirloskar Brothers’ standalone sales in Q1FY18, rose 18 percent YoY to RS 4.4 billion
The EBITDA margin expanded 200 bps to 2.7 percent, resulting in lower losses (Rs 70 million vs Rs 210 million, a year ago). Margins are likely to improve due to faster project execution and lower provisioning from suffering losses in FY16, the company turned profitable.
The order book (standalone) was Rs 16 billion (up 6 percent YoY), consolidated, Rs 24.1 billion (up 4 percent YoY).
Good order inflows in the next two years are expected due to oil & gas capex, pick-up in “smart” buildings and also greater demand for small pumps in solar and agriculture activities.
With more OMC maintenance contracts and onshore business, sales of SPP pumps are likely to increase, which should result in gradual margin improvement in the next two years.
Lower provisioning would lead to greater profitability and pick-up in subsidiary performances would lead to strong earnings growth.
We retain a Buy, with a target price of Rs 352 (11x FY19e EV/EBITDA)
CMP Rs 220 Target Rs 296
Graphite India is third largest in the world, excluding Chinese graphite-electrode manufacturers. The company directly depends on the steel industry. Low demand and sliding steel prices have hit realisations. We expect a turnaround in realisations, expected to increase 100 percent in the next one year.
In the last six months, steel prices have recovered 100 percent, but graphite-electrode prices are still to recover, and realisations to be better for companies such as Graphite India due to earlier fixed-price contracts.
Despite a significant drop in profitability, the company maintained strong operating cash-flows in FY16-17, of Rs 250cr-330 crore. With greater profitability, its return ratios would significantly improve.
Operating leverage and better realisations would lead to strong earnings growth and a valuation re-rating.
We initiate coverage on Graphite India, with a Buy rating and a target price of Rs 296 (86 percent potential). The stock trades at 13x FY18e and 5.3x FY19e EV/EBITDA.
CMP Rs 1,155 Target Rs 1,500
Domestic business grew by 17 percent led by an increase in MHCV demand on account of pre-buying before BS-4 transition and stronger defense revenue. Revenue from the defense sector grew from Rs 100 crore to Rs 175 crore.
BHFC expects US Class 8 truck to witness 15-20 percent YoY growth in FY18 on the back of present trend of order book growth of 40 percent.
Latest news- North America Class 8 truck sales for July at 18,255 units, up 78 percent year-on-year and up 4 percent quarter-on-quarter.
Management expects its global Industrial segment to outperform. FY19, domestic CV is also expected to turn positive, therefore, the company indicates healthy outlook for FY18 and FY19.
The management expects its new business/products (railways, aerospace and defence), currently 5 percent of revenues, to grow to 15 percent of revenues over the next few years
We continue to maintain Buy rating with a price target of Rs 1,500.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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