The market gained for the fourth consecutive session with benchmark indices closing at fresh record highs on December 28. The BSE Sensex was up 380.21 points or 0.81% at 47,353.75, and the Nifty was up 123.90 points or 0.90% at 13,873.20. Despite some jitters at the top, brokerages are betting on these 12 stocks for double-digit returns:
2/13
Colgate Palmolive | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,582 | Target: Rs 1,860 | Upside: 17 percent. While progress in terms of new launches is encouraging, most of the launches appear niche. The company’s right to win in the broader Naturals space still appears unclear. While market share gains in recent quarters have been encouraging, this needs to sustain. Moreover, with 40% of its sales coming from rural, the outlook on volume growth is good for the next few quarters. Progress on two factors is a key monitorable (a) the company’s plans to enter into new categories by capitalising on its distribution strength of over 6 million outlets and (b) the longer-term benefits of brushing twice a day that it is formulating.
3/13
City Union Bank | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 182 | Target: Rs 225 | Upside: 23 percent. Factors such as increasing retail focus, being adequately capitalised (Tier-1 at 16.3%), and incremental lending to better-rated borrower(s) are positives. The bank’s management commentary is encouraging, indicating better pickup in business by the end FY2021 and asset-quality stress easing out. Sharekhan believes the bank’s ability to maintain a relatively decent core operating/return ratios in the long term is supported by strong execution of a focused management.
4/13
Marico | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 406 | Target: Rs 477 | Upside: 17 percent. Gaining market share in the core domestic portfolio through new launches and improving penetration in key markets, scaling up the food business and improving growth prospects in countries such as Bangladesh and Vietnam are some of the key growth levers for Marico in the near to medium term. Raw material headwinds will be mitigated with judicious cost-saving measures and careful price hikes in the near future. With better cash flows, the company’s dividend payout has improved to 98% in FY2020 from 67% in FY2017.
APL Apollo Tubes | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 808 | Target: Rs 915 | Upside: 13 percent. The company has successfully created a brand name for itself in the niche structural steel tubes space and has superior growth outlook, robust RoE of 23%-25%, and focus to become debt-free by FY2021 (ahead of street expectation of FY2022). Moreover, the recent stock split from one equity share of the face value of Rs 10 into five equity shares having a face value of Rs. 2 each would improve the liquidity of shares.
6/13
Exide Industries | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 186 | Target: Rs 229 | Upside: 23 percent. Exide is witnessing recovery in automotive and industrial demand. The outlook remains positive with strong recovery expected from FY2022, driven by normalisation of economic activities. Operating profit margin (OPM) would expand because of operating leverage and cost-control measures.
7/13
Navin Fluorine | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 2,591 | Target: Rs 3,000 | Upside: 15 percent. To strengthen its specialty chemicals division and for growth, Navin Fluorine announced Rs 1.95bn capex in agro and pharma, expected to be funded through internal accruals and debt. The multi-purpose plant at its wholly-owned subsidiary, Navin Fluorine Advanced Sciences, at Dahej, Gujarat, is expected to be commissioned in H1 FY23, with ~1.4x asset turnover. The expansion would help launch products of complex fluorinated chemistry and strengthening customer relations.
8/13
NRB Bearings | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 99 | Target: Rs 110 | Upside: 11 percent. NRB’s performance is largely correlated with the domestic auto segment as 70% of the topline comes from domestic OEMs. Hence, demand sustenance in the auto segment in the near term should be a key monitorable. The company has reduced its debt by Rs 58 crore in H1 led by strong CFO generation to the tune of Rs 63 crore. Going ICICIdirect we expect positive operating leverage to improve margins from 11% in FY20 to 16% by FY22E.
Burger King India | Brokerage: Dolat Capital | Rating: Buy | LTP: Rs 178 | Target: Rs 212 | Upside: 19 percent. The QSR category is expected to continue strong growth momentum. Dolat capital believes that the category would command a higher premium compared to other discretionary categories as the opportunity for growth in the domestic market is humongous.
10/13
SBI Life Insurance Company | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 901 | Target: Rs 1,030 | Upside: 14 percent. The company’s bancassurance channel comprising the branch network of its parent, State Bank of India as well as other public and private banks is widely spread across the country and is one of the crucial growth levers. It uses different digital marketing tools and data analytics to increase penetration and capture the market share. This has led to an increase of 56% in policies sold through online channel and web aggregators in FY20. The company has a healthy solvency ratio of 2.45 against regulatory mandate of 1.50, low surrender ratio of 2.7% in H1FY21 and improving persistency ratio of 85.9% in the 13th month.
11/13
Coromandel International | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 850 | Target: Rs 1,012 | Upside: 19 percent. The Company has 16 manufacturing facilities, producing a wide range of Nutrient and Crop Protection products, which are marketed through an extensive network of dealers, institutional customers its own retail centres. The company reported The company generated operating cash flow of Rs 2083 crore in H1FY21. It plans to expand its Kakinada and Vizag plants from internal accruals and will incur a Capex of upto Rs 500 crore.
12/13
Infosys | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 1,248 | Target: Rs 1,385 | Upside: 11 percent. Broking house remains optimistic on Infosys given its strong digital portfolio, healthy deal pipeline, account expansion, cost discipline and upbeat management expectations. Also, the company is set to benefit from the rapid increase in demand for digitization across industries amid the pandemic.
13/13
Godrej Consumer Products | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 726 | Target: Rs 850 | Upside: 17 percent. Market share gains in the HI category (both in India and Indonesia); sustained innovation (hygiene products gaining good traction), crosspollination (plans to scale up the launch HI products in Africa soon) and expansion in distribution network are some key growth levers for the company in the medium to long term. Reduction in debt augurs well for the company from strengthening of balance sheet. Broking house believes stable revenue and earnings growth and strengthening of the balance sheet would help valuation multiple to improve in the coming years.
