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Brokerages see up to 25% upside in these 11 stocks even as Sensex scales 50K

Exide Industries, JMC Projects, JSPL and Titan are among 11 stocks which, according to analysts, could give up to 25 percent return.

January 21, 2021 / 11:35 AM IST
Sensex
Indian markets continued to scale new heights with Sensex hitting the 50,000 mark for the first time. Despite the unprecedented levels, experts see up to 25 percent upside in these 11 stocks. Take a look:
Varun Beverages | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 1,100 | Upside: percent. We expect strong demand traction over the next few years due to: a) VBL being a monopoly play in PepsiCo India’s business, b) rising penetration on the back of a robust distribution network, c) diversifying product portfolio, d) greater refrigerator penetration in rural/and semi-rural areas per household and higher power availability hours, and e) increasing discretionary spending per capita.
Varun Beverages | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 916.90 | Target: Rs 1,100 | Upside: 20 percent. We expect strong demand traction over the next few years due to: a) VBL being a monopoly play in PepsiCo India’s business, b) rising penetration on the back of a robust distribution network, c) diversifying product portfolio, d) greater refrigerator penetration in rural/and semi-rural areas per household and higher power availability hours, and e) increasing discretionary spending per capita.
Exide Industries | Brokerage: LKP Research | Rating: Buy | LTP: Rs | Target: Rs 233 | Upside: percent. Exide has its revenue and cost drivers well in place and is poised to take advantage of any positive triggers in the automotive or industrial segments. With strong initiatives on cost savings, we envisage clear improvement in margins hereon. Company’s first mover advantage on the Lithium ion battery JV shall enable them to ride the EV wave. Reduced capex and restriction of investments in insurance arm will lead to strong FCF over the coming years.
Exide Industries | Brokerage: LKP Research | Rating: Buy | LTP: Rs 200.25 | Target: Rs 233 | Upside: 16 percent. Exide has its revenue and cost drivers well in place and is poised to take advantage of any positive triggers in the automotive or industrial segments. With strong initiatives on cost savings, we envisage clear improvement in margins hereon. Company’s first mover advantage on the Lithium ion battery JV shall enable them to ride the EV wave. Reduced capex and restriction of investments in insurance arm will lead to strong FCF over the coming years.
Jindal Steel and Power | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 375 | Upside: percent. Led by strong EBITDA growth, limited capex and Oman divestment proceeds, we estimate JSP’s net debt to decline by Rs 185 bn (Rs 181/sh) over FY20-22E to Rs 194 bn (Rs 191/sh), implying a net debt-toEBITDA of 1.8x. This should give flexibility to JSP to consider expanding its upstream and downstream steel capacity. With improved coal supply in 3QFY21, its PLF has improved to ~50%. With the availability of cheaper coal from Gare Palma from 2HFY22 onwards, we expect it to operate ~43%/~45% PLF in FY22E/FY23E.
Jindal Steel and Power | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 305.05 | Target: Rs 375 | Upside: 23 percent. Led by strong EBITDA growth, limited capex and Oman divestment proceeds, we estimate JSP’s net debt to decline by Rs 185 bn (Rs 181/sh) over FY20-22E to Rs 194 bn (Rs 191/sh), implying a net debt-toEBITDA of 1.8x. This should give flexibility to JSP to consider expanding its upstream and downstream steel capacity. With improved coal supply in 3QFY21, its PLF has improved to ~50%. With the availability of cheaper coal from Gare Palma from 2HFY22 onwards, we expect it to operate ~43%/~45% PLF in FY22E/FY23E.
LIC Housing Finance | Brokerage: LKP Research | Rating: Buy | LTP: Rs | Target: Rs 488 | Upside: percent. High liquidity and decline in interest rate bodes well for cost of funds, enabling LICHF to protect its margins despite heightened pricing pressure in mortgage. We model 19%/16% earnings growth in FY21/22 translating into ROE of 13.6%/13.7% in FY21/22 from 13.2% in FY20. We believe the current valuation factors the stress on the portfolio. Incremental positive data pertaining to credit cost and restructuring would be key triggers for the stock.
LIC Housing Finance | Brokerage: LKP Research | Rating: Buy | LTP: Rs 431.40 | Target: Rs 488 | Upside: 13 percent. High liquidity and decline in interest rate bodes well for cost of funds, enabling LICHF to protect its margins despite heightened pricing pressure in mortgage. We model 19%/16% earnings growth in FY21/22 translating into ROE of 13.6%/13.7% in FY21/22 from 13.2% in FY20. We believe the current valuation factors in the stress on the portfolio. Incremental positive data pertaining to credit cost and restructuring would be key triggers for the stock.
Elgi Equipments | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 190 | Upside: percent. Going ahead, further traction in the international market, new products like oil free compressors (AB series) would aid growth while green shoots of revival visible in India business would further aid topline. Also, its strategy on cost reduction, focus on cash business would help deal with working capital, debt reduction and liquidity situation. We expect revenue, EBITDA growth of 12.2%, 34.9%, CAGR, respectively, in FY20-23E backed by international growth and positive operating leverage.
Elgi Equipments | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 161.85 | Target: Rs 190 | Upside: 17 percent. Going ahead, further traction in the international market, new products like oil free compressors (AB series) would aid growth while green shoots of revival visible in India business would further aid topline. Also, its strategy on cost reduction, focus on cash business would help deal with working capital, debt reduction and liquidity situation. We expect revenue, EBITDA growth of 12.2%, 34.9%, CAGR, respectively, in FY20-23E backed by international growth and positive operating leverage.
Bharat Electronics | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 170 | Upside: percent. Overall, expected double digit revenue growth, sustainable margins, better order inflows and strong order book of Rs 52148 crore suggests strong performance in long term. Also, strategy to diversify into non-defence areas, focus on increasing exports and services share would aid long term growth and help de-risk its business model.
Bharat Electronics | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 135.50 | Target: Rs 170 | Upside: 25 percent. Overall, expected double digit revenue growth, sustainable margins, better order inflows and strong order book of Rs 52,148 crore suggests strong performance in long term. Also, strategy to diversify into non-defence areas, focus on increasing exports and services share would aid long term growth and help de-risk its business model.
Finolex Cables | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 450 | Upside: percent. We believe the company’s operations are expected to improve as supply chain becomes stable with an improving demand environment and rising infrastructure investments. Further, COVID-19 led impact on unorganised players provides the company to increase its market share. Finolex’s strong balance sheet and net cash position provide comfort in the present environment. Further, the government’s push for optical fibre cable will aid business and boost demand for telecom cables for the company. The stock is trading at a reasonable valuation of 17x and 14x its FY2022E and FY2023E earnings, respectively.
Finolex Cables | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 377.65 | Target: Rs 450 | Upside: 19 percent. We believe the company’s operations are expected to improve as supply chain becomes stable with an improving demand environment and rising infrastructure investments. Further, COVID-19-led impact on unorganised players provides the company to increase its market share. Finolex’s strong balance sheet and net cash position provide comfort in the present environment. Further, the government’s push for optical fibre cable will aid business and boost demand for telecom cables for the company. The stock is trading at a reasonable valuation of 17x and 14x its FY2022E and FY2023E earnings, respectively.
JMC Projects | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 83 | Upside: percent. Company has rebounded well after being severely hit by the COVID-19 led lockdown during Q1FY2021. Further, despite H1 too suffering the impact of COVID-19 JMC is optimistic of achieving positive revenue growth in FY2021 and maintain a healthy OPM of 10.5-11%. The company also received strong order inflows for YTD leading to strong order backlog, which provides healthy revenue visibility. Improving road sector outlook bodes well for divestment of its BOT assets (remained a key hangover due to weak macro environment) and continued loss funding of assets. However, it has been able to reduce loss-funding of assets and has been actively looking for buyers, which should aid significant de-leveraging of consolidated and standalone balance sheet.
JMC Projects | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 69.10 | Target: Rs 83 | Upside: 20 percent. The company has rebounded well after being severely hit by the COVID-19-led lockdown during Q1FY2021. Further, despite H1 too suffering the impact of COVID-19, JMC is optimistic of achieving positive revenue growth in FY2021 and maintain a healthy OPM of 10.5-11%. The company also received strong order inflows for YTD leading to strong order backlog, which provides healthy revenue visibility. Improving road sector outlook bodes well for divestment of its BOT assets (remained a key hangover due to weak macro environment) and continued loss funding of assets. However, it has been able to reduce loss-funding of assets and has been actively looking for buyers, which should aid significant de-leveraging of consolidated and standalone balance sheet.
Polycab India | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,530 | Upside: percent. Polycab is expected to maintain healthy performance led by strong traction in housing segment, input cost led price hikes undertaken in C&W segment, rising exports and scaling up of FMEG business with new product launches. The company has also strong growth tailwinds in terms of rising infrastructure investments and revival in private capital expenditure. Polycab’s strategy of deepening penetration in the semi-urban and rural markets focus along with premiumisation of existing portfolio and increasing share of FMEG sales in existing network bodes well in providing sustainable long term growth.
Polycab India | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 1,216.60 | Target: Rs 1,530 | Upside: 25 percent. Polycab is expected to maintain healthy performance led by strong traction in housing segment, input cost led price hikes undertaken in C&W segment, rising exports and scaling up of FMEG business with new product launches. The company has also strong growth tailwinds in terms of rising infrastructure investments and revival in private capital expenditure. Polycab’s strategy of deepening penetration in the semi-urban and rural markets focus along with premiumisation of existing portfolio and increasing share of FMEG sales in existing network bodes well in providing sustainable long term growth.
Schaeffler India | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 5,258 | Upside: percent. Schaeffler is witnessing recovery in demand with both industrial and automotive segments reporting growth in Q3CY20. We expect strong recovery from CY21 driven by normalisation of economic activity. An increase in content/vehicle in auto OEMs, strong growth in wind power and railways segment and new product introduction in aftermarket segment would continue to drive growth. We have increased our earnings estimates by 5-7% for CY2021-22E to factor in an improved business outlook.
Schaeffler India | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 4,590.85 | Target: Rs 5,258 | Upside: 14 percent. Schaeffler is witnessing recovery in demand with both industrial and automotive segments reporting growth in Q3CY20. We expect strong recovery from CY21 driven by normalisation of economic activity. An increase in content/vehicle in auto OEMs, strong growth in wind power and railways segment and new product introduction in aftermarket segment would continue to drive growth. We have increased our earnings estimates by 5-7% for CY2021-22E to factor in an improved business outlook.
Titan Company | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,531.30 | Target: Rs 1,750 | Upside: 14 percent. Company's end-of-quarter update, indicating 15% growth in Jewelry in 3QFY21 (excluding raw gold sales), reflects a strong rebound in consumer sentiment, supported by the bunching up of wedding and festive demand. Despite elevated gold prices, though marginally lower sequentially, the surge in demand demonstrates resilience for its offerings. It would appear that a large part of the COVID travails are now behind it. W expect some pressure on margin despite this recovery due to the impact of Rs 3.3b of pure gold sales and lower mix of studded jewelry YoY. Both these factors are temporary in nature and should not affect subsequent quarters.
Titan Company | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,531.30 | Target: Rs 1,750 | Upside: 14 percent. Company's end-of-quarter update, indicating 15% growth in Jewelry in 3QFY21 (excluding raw gold sales), reflects a strong rebound in consumer sentiment, supported by the bunching up of wedding and festive demand. Despite elevated gold prices, though marginally lower sequentially, the surge in demand demonstrates resilience for its offerings. It would appear that a large part of the COVID travails are now behind it. We expect some pressure on margin despite this recovery due to the impact of Rs 3.3b of pure gold sales and lower mix of studded jewelry YoY. Both these factors are temporary in nature and should not affect subsequent quarters.
Rakesh Patil
first published: Jan 21, 2021 11:31 am

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