Voltas CMP 533 Target 680
Going forward, management expects the EMPS margin to move towards the 7-8% range as newer projects with better profitability come into execution in FY18.
Overall, management focus remains on booking only good quality orders both in India and overseas in terms of profitability. It will be sustaining margins at 11-12% in the longer term.
Favorable macros in the AC industry (low penetration and increasing affordability) along with foray into other consumer durable categories providing multi-year growth visibility for Voltas.
At CMP the stock is trading at 26.6x FY16E earnings and 21.1x FY17E earnings respectively. We recommend a BUY on the stock with a target price of 680 per share.
CMP 218 Target 264
DNL is one of the leading global players for several niche chemical products used in - Colorants, Petrochemicals, Agrochemicals, Rubber, Pharmaceuticals, Paper, Textile
DNL has recently increased its focus on adding high value products. (Greenfield expansion plan at Dahej, Gujarat for manufacturing phenol (2, 00,000 ton/year) and acetone (1, 20,000 T/year).
With the completion of its Phenol project, the top line for the company is expected to almost get doubled by FY-19E.
Also, due to India’s heavy dependence on the imports due to lack of domestic production capacity and imposition of around 7.5% cumulative anti dumping duties, the macro scenarios for the domestic market looks promising for the company.
At CMP, the stock is trading 27x time FY18E and 11.3x FY19E earnings. We recommend BUY on Deepak Nitrite Limited with a target price of Rs.264 per share.
Bharat Forge CMP 640 Target 815
BFL is now ready to look beyond FY17 through continued focus on product innovation, new technology and advanced manufacturing. It is eyeing global opportunities in aerospace, rail and defense segments along with enhancing presence in passenger vehicle segment.
The increasing product portfolio, early signs of improvement across the businesses, foraying into new industrial sector coupled with the Government’s Make in India strategy puts BFL in a sweet spot to capture this opportunity.
We expect BFL’s revenue to grow at ~15-18% in FY18 with the traction in PV exports/non-auto and bottoming of US Class-8trucks. EBITDA margin expected to be maintained at 28-30%.
We believe that Defence, new technologies and newly acquired business to drive company’s top-line growth forward.
At CMP the stock is trading at PE of 35.5x its FY18E EPS & 27.7x its FY19E EPS. We recommend BUY on the stock with a target of Rs.815.
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