Watch sustainability champions reveal key solutions, innovations accelerating India's SDGs at ‘The Sustainability 100+ Dialogues 2021’-Haryana Roundtable on March 5 at 12pm

Biocon, Bandhan Bank among 11 stocks that brokerages are betting on for double-digit return

SBI Life Insurance, South Indian Bank, Mphasis and HDFC Life Insurance also figure on the list

February 16, 2021 / 11:37 AM IST
After witnessing consolidation for the entire last week, the market started the week on stronger note with benchmark indices rising 1 percent on the back of buying seen in the financial and realty sectors. The Sensex rose 609.83 points or 1.18% at 52,154.13, while Nifty added 151.40 points or 1% at 15,314.70.
After witnessing consolidation for the entire last week, the market started the week on stronger note with benchmark indices rising 1 percent on the back of buying seen in the financial and realty sectors. The Sensex rose 609.83 points or 1.18% at 52,154.13, while Nifty added 151.40 points or 1% at 15,314.70.
Birla Corporation | Brokerage: Dolat Capital | Rating: Buy | LTP: Rs | Target: Rs 1,135 | Upside: percent. We broadly maintain revenue and EBITDA estimates and increase our APAT estimates for FY21E considering 9MFY21 results. We broadly maintain FY22E and FY23E estimates. We like company’s focus on trade segment (80% share), increasing share of premium products (48% share in trade), higher share (93%) of high margin blended cement and sizable presence in relatively better regions of Central, North and expansion in West. We expect 9.5%/ 11.8%/ 15.5% revenue/ EBITDA/ APAT CAGR over FY20-23E led by -4.1%/ 14.8%/ 18.0% volume growth and 0.4%/ 0.5%/1.0% cement realization growth in FY21E/ FY22E/ FY23E.
Birla Corporation | Brokerage: Dolat Capital | Rating: Buy | LTP: Rs 895.95 | Target: Rs 1,135 | Upside: 26 percent. We broadly maintain revenue and EBITDA estimates and increase our APAT estimates for FY21E considering 9MFY21 results. We broadly maintain FY22E and FY23E estimates. We like company’s focus on trade segment (80% share), increasing share of premium products (48% share in trade), higher share (93%) of high margin blended cement and sizable presence in relatively better regions of Central, North and expansion in West. We expect 9.5%/ 11.8%/ 15.5% revenue/ EBITDA/ APAT CAGR over FY20-23E led by -4.1%/ 14.8%/ 18.0% volume growth and 0.4%/ 0.5%/1.0% cement realization growth in FY21E/ FY22E/ FY23E.
DCB Bank | Brokerage: Dolat Capital | Rating: Buy | LTP: Rs | Target: Rs 160 | Upside: percent. While growth challenges will continue over the near term, we expect asset quality risks to be limited for DCB. Even as restructuring expectations at ~ 5% are higher relative to peers, we expect eventual stress from this book to be much below industry. Improvement in cost ratios, normalization of credit costs, and better capital consumption remain key earning drivers going forward.
DCB Bank | Brokerage: Dolat Capital | Rating: Buy | LTP: Rs 114.65 | Target: Rs 160 | Upside: 39 percent. While growth challenges will continue over the near term, we expect asset quality risks to be limited for DCB. Even as restructuring expectations at ~ 5% are higher relative to peers, we expect eventual stress from this book to be much below industry. Improvement in cost ratios, normalization of credit costs, and better capital consumption remain key earning drivers going forward.
HDFC Life Insurance | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 850 | Upside: percent. Premium valuation to sustain as HDFC Life has a better diversified product bouquet (no segment contributing to more than 30% of the APE), best-in-class branding, and strong metrics. We believe the company is well placed to deliver strong and sustainable long-term APE growth. Aided by strong fundamentals (robust balance sheet and consistent profitability) and high long-term growth potential for the Indian insurance industry in general and HDFC Life, in particular, we find HDFC Life an attractive long-term bet.
HDFC Life Insurance | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 695.15 | Target: Rs 850 | Upside: 22 percent. Premium valuation to sustain as HDFC Life has a better diversified product bouquet (no segment contributing to more than 30% of the APE), best-in-class branding, and strong metrics. We believe the company is well placed to deliver strong and sustainable long-term APE growth. Aided by strong fundamentals (robust balance sheet and consistent profitability) and high long-term growth potential for the Indian insurance industry in general and HDFC Life, in particular, we find HDFC Life an attractive long-term bet.
Biocon | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 470 | Upside: percent. Biocon is facing headwinds on account of COVID-19 which has affected operational, regulatory and commercial functions, leading to a delay in market expansion as well as in tenders in emerging markets. With COVID-19 vaccination drives commencing world over, Biocon expects the pandemic led impact to be short-lived and sees normalcy return by next fiscal. Steady market share in the biosimilars space in the US, tapping new markets such as Europe for existing biosimilars and gradual traction expected in existing biosimilars could fuel the growth of the biologics segment.
Biocon | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 407.60 | Target: Rs 470 | Upside: 15 percent. Biocon is facing headwinds on account of COVID-19 which has affected operational, regulatory and commercial functions, leading to a delay in market expansion as well as in tenders in emerging markets. With COVID-19 vaccination drives commencing world over, Biocon expects the pandemic led impact to be short-lived and sees normalcy return by next fiscal. Steady market share in the biosimilars space in the US, tapping new markets such as Europe for existing biosimilars and gradual traction expected in existing biosimilars could fuel the growth of the biologics segment.
SRF | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 6,760 | Upside: percent. We maintain our FY2021-FY2023 earnings estimates given largely inline Q3FY2021 operating performance. SRF’s capex intensity focuses on the specialty chemical business, which would drive a sustainable double-digit rise in earnings and re-rating as share of high-growth specialty chemical business would increase over next few years.
SRF | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 5,622.95 | Target: Rs 6,760 | Upside: 20 percent. We maintain our FY2021-FY2023 earnings estimates given largely inline Q3FY2021 operating performance. SRF’s capex intensity focuses on the specialty chemical business, which would drive a sustainable double-digit rise in earnings and re-rating as share of high-growth specialty chemical business would increase over next few years.
Mphasis | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 1,950 | Upside: percent. Impressive deal wins over the last two to three quarters and a healthy deal pipeline would likely drive near term growth. While the DXC business (~13% of revenue) related overhang persists, strong traction in Direct International should continue to drive overall performance. Guidance on its ability to defend margin is a key positive. Higher exposure to largely stable verticals (BFSI – ~63% of revenue) should also help mitigate risks to some extent.
Mphasis | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,670.25 | Target: Rs 1,950 | Upside: 16 percent. Impressive deal wins over the last two to three quarters and a healthy deal pipeline would likely drive near term growth. While the DXC business (~13% of revenue) related overhang persists, strong traction in Direct International should continue to drive overall performance. Guidance on its ability to defend margin is a key positive. Higher exposure to largely stable verticals (BFSI – ~63% of revenue) should also help mitigate risks to some extent.
MCX | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 2,050 | Upside: percent. While we remain positive on a gradual increase in ADT, we factor in slower recovery in crude volumes, therefore reducing our revenue growth estimate. Progress on other growth initiatives, such as bullion/metal index futures, gold spot exchange, and institutional participation, are also encouraging. We continue to like the company for its near-monopoly in the Commodity Exchange (97% market share) segment in India.
MCX | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,536.20 | Target: Rs 2,050 | Upside: 33 percent. While we remain positive on a gradual increase in ADT, we factor in slower recovery in crude volumes, therefore reducing our revenue growth estimate. Progress on other growth initiatives, such as bullion/metal index futures, gold spot exchange, and institutional participation, are also encouraging. We continue to like the company for its near-monopoly in the Commodity Exchange (97% market share) segment in India.
SBI Life Insurance | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 1,050 | Upside: percent. Company reported strong growth in the Protection and Non-PAR businesses, while the ULIP business is also seeing gradual recovery. We expect growth to revive further from FY22E. The company has also reported improvement in persistency trends across cohorts, while the control on cost ratios has been commendable. We estimate the VNB margin to reach ~ 22% by FY23E, enabling a 23% VNB CAGR over FY20–23E.
SBI Life Insurance | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 877.25 | Target: Rs 1,050 | Upside: 19 percent. Company reported strong growth in the Protection and Non-PAR businesses, while the ULIP business is also seeing gradual recovery. We expect growth to revive further from FY22E. The company has also reported improvement in persistency trends across cohorts, while the control on cost ratios has been commendable. We estimate the VNB margin to reach ~ 22% by FY23E, enabling a 23% VNB CAGR over FY20–23E.
Bandhan Bank | Brokerage: KRChoksey | Rating: Buy | LTP: Rs | Target: Rs 457 | Upside: percent. We have lowered our estimates for the FY21-22E considering bank’s provisioning for 9MFY21. We estimate 21.1% growth in net profit over FY20-22E. Reduction in borrowings and consistent growth in CASA deposits has improved cost of funding. Less than ~28% cost to income ratio for 9MFY21 was best in the industry. Disbursements picked up during Dec’20 quarter with 59% of sequential growth. Rise in micro credit demand led by normalcy in economic operations to support advances growth. We expect bank to deliver ROA of 3.7% and ROE of 22.1% in FY22E. We are long-term positive on the operationally efficient model. Though we are vigilant on bank’s asset quality concerns during this pandemic situation, we believe structural reforms are expected to bring overall efficiency across segments leveraging its strong operating network.
Bandhan Bank | Brokerage: KRChoksey | Rating: Buy | LTP: Rs 340 | Target: Rs 457 | Upside: 34 percent. We have lowered our estimates for the FY21-22E considering bank’s provisioning for 9MFY21. We estimate 21.1% growth in net profit over FY20-22E. Reduction in borrowings and consistent growth in CASA deposits has improved cost of funding. Less than ~28% cost to income ratio for 9MFY21 was best in the industry. Disbursements picked up during Dec’20 quarter with 59% of sequential growth. Rise in micro credit demand led by normalcy in economic operations to support advances growth. We expect bank to deliver ROA of 3.7% and ROE of 22.1% in FY22E. We are long-term positive on the operationally efficient model. Though we are vigilant on bank’s asset quality concerns during this pandemic situation, we believe structural reforms are expected to bring overall efficiency across segments leveraging its strong operating network.
South Indian Bank | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 10 | Upside: percent. Company reported a loss of Rs 951mn (PLe: profit of Rs484mn) on higher provisioning on pro-forma NPAs & enhancing PCR which has been lower than peers. Operating performance was also on weaker side with interest reversals leading to flattish NII growth. Pro-forma slippages were on higher side at Rs 13-14bn with slightly more likely to come in Q4 with overall stress guidance of 3.7-3.9% in FY21 which will continue to require higher provisions. We slightly lower our restructured book impact on BV, while retail largely NPA numbers for FY21 with increase credit cost to 220bps from 195bps in FY21.
South Indian Bank | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 8.07 | Target: Rs 10 | Upside: 24 percent. Company reported a loss of Rs 951mn (PLe: profit of Rs484mn) on higher provisioning on pro-forma NPAs & enhancing PCR which has been lower than peers. Operating performance was also on weaker side with interest reversals leading to flattish NII growth. Pro-forma slippages were on higher side at Rs 13-14bn with slightly more likely to come in Q4 with overall stress guidance of 3.7-3.9% in FY21 which will continue to require higher provisions. We slightly lower our restructured book impact on BV, while retail largely NPA numbers for FY21 with increase credit cost to 220bps from 195bps in FY21.
Jindal Steel & Power | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 400 | Upside: percent. JSP reduced net debt by 33%/Rs151bn over last five years through organic route. Trajectory would sustain at Rs 30bn/year for next couple of years on back of stable earnings in both steel and Jindal Power (JPL) and judicious spend on capex. Admittedly, margins have peaked out due to revival of supplies and softness in demand coupled with abnormal rise in prices. However, we remain confident on normalised margins of Rs 11,000/t on back of enhanced operational efficiencies associated with commissioning of coke oven/pelletisation/slurry pipeline facilities, stabilisation of Angul DRI and cost effective raw material procurement coupled with strong financial condition.
Jindal Steel & Power | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 308.35 | Target: Rs 400 | Upside: 29 percent. JSP reduced net debt by 33%/Rs151bn over last five years through organic route. Trajectory would sustain at Rs 30bn/year for next couple of years on back of stable earnings in both steel and Jindal Power (JPL) and judicious spend on capex. Admittedly, margins have peaked out due to revival of supplies and softness in demand coupled with abnormal rise in prices. However, we remain confident on normalised margins of Rs 11,000/t on back of enhanced operational efficiencies associated with commissioning of coke oven/pelletisation/slurry pipeline facilities, stabilisation of Angul DRI and cost effective raw material procurement coupled with strong financial condition.
Rakesh Patil
first published: Feb 16, 2021 11:34 am

stay updated

Get Daily News on your Browser
Sections