Anand Rathi Share and Stock Brokers recommends the following scrips:
CMP 158 Target 199
Karnataka Bank’s core operating performance holds strong (its pre provision profit was up 57.4 percent YoY, the best of the last 10 quarters) and its PPOP has registered a stable ~10-11 percent CAGR over the past five years despite the turbulent economic context
The loan book is up 12.3 percent y/y and has been clocking a modest ~14 percent CAGR over the past five years.
Management expects to maintain this through its focus on retail and incrementally higher-rated corporate loans. The bank is adequately capitalised, with the current CAR at ~12.5 percent, to fund this growth.
We expect the bank to maintain NIM above 3 percent over FY18-19 and RoE in FY19 to improve to ~12 percent.
With the bank’s focus on a higher-rated corporate portfolio, We forecast net NPAs of ~2.4 percent in FY18, and ~2 percent in FY19.
Our FY19 target price of `199 is based on the capital excess/deficit method as banks have to meet the 8 percent core tier-1 ratio by FY19. This implies a ~0.8x multiple on its FY18e book, and ~0.73x on its FY19e book.
CMP 270 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.
CMP 451 Target 574
In Q2FY18 YOY, Revenue was up 36 percent, EBITDA up by 806 percent, EBITDA margin at 28.2 percent vs. 4.5 percent, Net Profit up by 465 percent. Graphite India is third largest in world, excluding Chinese graphite-electrode manufacturers
EBITDA is expected to expand strongly due to a realizations rocketing (from $2,000 a tonne to ~$7,000).Spot prices of graphite electrode have already risen from a low of $2,000 a tonne to $30,000-35,000.
Graphite electrode volumes grew 40 percent y/y to 19,000 tonnes at 95 percent utilization on greater demand from the domestic steel industry.According to management interaction, re-negotiation of contracts would be reflected in coming quarters and lead to better realizations for the rest of FY18, and in FY19.
We expect earnings to grow a robust 119 percent in FY18, and 121 percent in FY19. Better realizations would lead to strong earnings growth and ensure a valuation re-rating.We retain our Buy recommendation, assigning 9x EV/EBITDA to FY19e and arriving at a target price of Rs.574. We expect earnings to shoot up a robust 310 percent in FY18, and 173 percent in FY19.
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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