Sharekhan bets on these 10 stocks with 10-41% upside

Aurobindo Pharma, NTPC, L&T and LIC Housing are on the buying list of the broking house and could give 10-41 percent return.

December 31, 2020 / 11:28 AM IST
The Indian market continued to gain for the six straight session and ended near the day's high level on December 30, with the Nifty closing a shy of the 14,000-mark. Here are 10 stocks on Sharekhan's radar:
The Indian market continued to gain for the six straight session and ended near the day's high level on December 30, with the Nifty closing a shy of the 14,000-mark. Here are 10 stocks on Sharekhan's radar:
KEI Industries | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 540 | Upside: percent. Company's outlook is expected to be positive with its diversified user industries, increased focus on retail, high-margin EHV cables, and export sales along with focused industry approach as well as utilisation-driven capex plans likely to help in sustaining strong growth trajectory. Expect revenue and PAT to report a CAGR of 18% and 24%, respectively, during FY2021-2023E.
KEI Industries | Rating: Buy | LTP: Rs 490 | Target: Rs 540 | Upside: 10 percent. The company's outlook is expected to be positive with its diversified user industries, increased focus on retail, high-margin EHV cables and export sales. Its industry-focused approach as well as the utilisation-driven capex plans will also help in sustaining strong growth trajectory. Expect revenue and PAT to report a CAGR of 18% and 24%, respectively, during FY2021-2023E.
Granules India Ltd.
Aurobindo Pharma | Rating: Buy | LTP: Rs 906 | Target: Rs 1,024 | Upside: 13 percent. The company expects strong growth momentum in the US business to sustain. A sturdy pipeline of new product launches lined up over FY21 and FY22, improving traction in lucrative injectables and expected momentum in recently launched products would drive US sales. After a weak performance in H1FY2021, European revenues have also bounced back and are likely to improve backed by a healthy demand outlook. On account of a transition from TLE to TLD, the anti-retroviral segment’s revenues are likely to grow impressively. To support growth, Aurobindo is investing $180-200 million towards capacity expansion each in FY2021 & FY2022. This provides ample growth visibility. Improving growth prospects, better earnings visibility and a strengthening balance sheet would be the key drivers for growth and would support P/E multiple expansion.
Jubilant Food_pizza
Jubilant FoodWorks | Rating: Buy | LTP: Rs 2,682 | Target: Rs 3,145 | Upside: 17 percent. The broking house has fine-tuned its earnings estimates to factor in better than earlier performance in the coming quarters. The company’s strategy to expand its portfolio (pizzas, Chinese cuisine and now Biryani along with gravies/sauces) would help the company gain market share from standalone players. It can leverage its delivery and store expertise in new ventures such as Chinese cuisines (Hong’s Kitchen) and Indian ethnic food (Ekdum Biryani) to capture a large pie of the domestic restaurant space in the coming years.
Affle (India) | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 4,600 | Upside: percent. With an end-to-end offering plus focus on the CPCU model and a presence in high-growth segments, Affle is well placed to derive benefits from increasing advertising budgets towards mobile advertising. Broking firm continue to like the company, considering its strong balance sheet along with a positive cash flow conversion and a long runway for growth. Company's revenue and earnings to report a CAGR of 29.5% and 31%, respectively, over FY2020-FY2023E.
Affle (India) | Rating: Buy | LTP: Rs 3,771 | Target: Rs 4,600 | Upside: 22 percent. With an end-to-end offering plus focus on the CPCU model and a presence in high-growth segments, Affle is well placed to derive benefits from increasing advertising budgets towards mobile advertising. The broking firm continues to like the company, considering its strong balance sheet along with a positive cash flow conversion and a long runway for growth. The company's revenue and earnings to report a CAGR of 29.5% and 31%, respectively, over FY2020-FY2023E.
NTPC | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 140 | Upside: percent. Brokerage house expect gradual re-rating for NTPC as operational performance would improve, commercialisation is likely to drive 10% CAGR in regulated equity and improving mix of renewable energy would allay concern of ESG. Company's buyback price of Rs 115 is close to NTPC’s FY2020 book value and provides support to the stock price. NTPC also offers a healthy dividend yield of 6-7% and is trading at an attractive valuation of 0.8x its FY2023E P/BV.
NTPC | Rating: Buy | LTP: Rs 99 | Target: Rs 140 | Upside: 41 percent. The brokerage house expects gradual re-rating for NTPC as operational performance improves. Commercialisation is likely to drive 10% CAGR in regulated equity and improving mix of renewable energy would allay concern of ESG. The company's buyback price of Rs 115 is close to NTPC’s FY2020 book value and provides support to the stock price. NTPC also offers a healthy dividend yield of 6-7% and is trading at an attractive valuation of 0.8x its FY2023E P/BV.
RBL Bank | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 295 | Upside: percent. Broking house believe while asset-quality performance is yet to stabilise, adequate capitalisation and limited overhang from the legacy stressed corporate book are positives. It believe asset-quality challenges continue and FY2021E is likely to see elevated credit cost and lower growth, but stable profitability. It believe risk reward is favourable for long-term investment.
RBL Bank | Rating: Buy | LTP: Rs 232 | Target: Rs 295 | Upside: 27 percent. The broking house believes while asset-quality performance is yet to stabilise, adequate capitalisation and limited overhang from the legacy stressed corporate book are positives. It believes asset-quality challenges will continue and FY2021E is likely to see elevated credit cost and lower growth but stable profitability. The risk-reward is favourable for long-term investment.
Tech Mahindra | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,100 | Upside: percent. Management remains confident to deliver accelerated revenue growth without 5G opportunities in FY2022. Further, it targets 15% EBIT margin in FY2022E, led by higher offshoring and reduced sub-con costs. Company is well placed to benefit from the expansion of 5G value chain across networks and IT services, when pick up in investments by CSPs and higher 5G adoption by enterprise would happen. Broking house prefer the stock given an anticipated strong revenue growth potential in the enterprise business, opportunities from 5G and scope for margin improvement.
Tech Mahindra | Rating: Buy | LTP: Rs 983 | Target: Rs 1,100 | Upside: 12 percent. The management remains confident to deliver accelerated revenue growth without 5G opportunities in FY2022. Further, it targets 15% EBIT margin in FY2022E, led by higher offshoring and reduced sub-con costs. The company is well placed to benefit from the expansion of 5G value chain across networks and IT services when a pick up in investments by CSPs and higher 5G adoption by enterprise would happen. The broking house prefers the stock given a strong revenue growth potential in the enterprise business, opportunities from 5G and scope for margin improvement.
LIC Housing Finance | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 440 | Upside: percent. Company has comfortable access to liquidity and enjoys high credit ratings and is well placed to manage the expected competitive intensity in the home loan segment and is likely to be able to keep margins steady. The pall of the pandemic is lifting and healthy traction is encouraging. Assetquality outlook along with normalising business traction improves the company’s overall outlook. Company has strengths in its borrowing profile and has been able to bring down its cost of funds, helped by its strong parent profile.
LIC Housing Finance | Rating: Buy | LTP: Rs 360 | Target: Rs 440 | Upside: 22 percent. The company has comfortable access to liquidity, enjoys high credit ratings and is well placed to manage the expected competitive intensity in the home loan segment. It will likely to be able to keep margins steady. The pall of the pandemic is lifting and healthy traction is encouraging. Asset quality outlook along with normalising business traction improves the company’s overall outlook. The company has strengths in its borrowing profile and has been able to bring down its cost of funds, helped by its strong parent profile.
Sundram Fasteners | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 650 | Upside: percent. Company is witnessing a strong traction from domestic and global OEMs, driven by recovery in automotive and nonautomotive demand. Outlook remains positive with strong recovery expected from FY2022, driven by normalisation of economic activities. Operating profit margins would expand on the back of operating leverage and cost-control measures.
Sundram Fasteners | Rating: Buy | LTP: Rs 522 | Target: Rs 650 | Upside: 24 percent. The company is witnessing a strong traction from domestic and global OEMs, driven by recovery in automotive and nonautomotive demand. The outlook remains positive with a strong recovery expected from FY2022, driven by the normalisation of economic activities. Operating profit margins would expand on the back of operating leverage and cost-control measures.
Larsen & Toubro | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,550 | Upside: percent. Company remains at the forefront to reap benefits from the recently announced Atma Nirbhar Bharat Scheme from the Government of India in defence. Further, company has showed strong order inflow momentum during Q3FY2021 post weak H1, which along with strong order prospects pipeline is expected to maintain healthy order inflow momentum for the balance fiscal year and FY2022. Company’s strong order backlog along with presence across verticals and geographies in its core E&C business provides healthy revenue visibility. Sharekhan expect L&T to benefit from strong traction in its core E&C business.
Larsen & Toubro | Rating: Buy | LTP: Rs 1,292| Target: Rs 1,550 | Upside: 20 percent. The company remains at the forefront to reap benefits from the government's Atmanirbhar Bharat scheme for the defence sector. The company has showed strong order inflow momentum during Q3FY2021 post weak H1, which along with strong order prospects pipeline is expected to maintain healthy order inflow momentum for the balance fiscal year and FY2022. The company’s strong order backlog along with presence across verticals and geographies in its core E&C business provides healthy revenue visibility. Sharekhan expect L&T to benefit from strong traction in its core E&C business.
Rakesh Patil
first published: Dec 31, 2020 11:05 am

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