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Last Updated : Oct 01, 2020 11:50 AM IST | Source: Moneycontrol.com

Brokerages pick 10 stocks for up to 46% upside

ICICI Bank, JK Lakshmi Cement, Ashoka Buildcon among stocks on brokerages' radar

Sensex

Benchmark indices ended with marginal gains on September 30 supported by the FMCG and IT stocks. The Sensex ended 94.71 points higher at 38067.93, while Nifty was up 25.10 points to close at 11247.50.

L&T Technology Services | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 1,615 | Target: Rs 1,825 | Upside: 13 percent. Company's stock price moved up by around 23% in the last three months on the back of improvement in overall demand environment across its verticals and expectations of higher spending on digital engineering space. Sharekhan believes that company is well-placed to gain market share among global competitors as it is the preferred engineering partner among clients, multi-domain expertise, strong account mining activities and leadership depth. However, Macroeconomic uncertainties could affect earnings. Further, loss of key customers and/or lower ERD spends/R&D budgets may impact growth trajectory are among key risks.

L&T Technology Services | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 1,615 | Target: Rs 1,825 | Upside: 13 percent. Sharekhan believes the company is well-placed to gain market share among global competitors as it is the preferred engineering partner among clients, multi-domain expertise, strong account mining activities and leadership depth. However, macroeconomic uncertainties could affect earnings. Further, loss of key customers and/or lower ERD spends/R&D budgets may impact growth trajectory are among key risks.

Aurobindo Pharma | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 796 | Target: Rs 1,030 | Upside: 29 percent. Motilal Oswal expect company to deliver 15% earnings CAGR over FY20-22E, led by new launches /increased market share in key markets of the US/EU and lower financial leverage. It remain positive on company's capability to build a niche portfolio in the Injectables/Biosimilars/Inhaler space, established presence across the manufacturing value chain in the US market, and improving trajectory of profitability in the EU market.

Aurobindo Pharma | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 796 | Target: Rs 1,030 | Upside: 29 percent. Motilal Oswal expects the company to deliver 15 percent earnings CAGR over FY20-22E, led by new launches /increased market share in key markets of the US/EU and lower financial leverage. It remain positive on the company's capability to build a niche portfolio in the Injectables/Biosimilars/Inhaler space, established presence across the manufacturing value chain in the US market, and improving trajectory of profitability in the EU market.

HDFC Bank | Brokerage: Emkay | Rating: Buy | LTP: Rs 1,079 | Target: Rs 1,300 | Upside: 20 percent. The bank believes that NPAs may not cross the peak seen post GFC at 2% (2010), though Emkay prefer to remain little cautious amid Covid-19. The bank has higher exposure to the trader segment, where disruption is high. However, the overall restructuring rate will be lower (around low single digits) for the bank, given its practice of recognizing stress upfront and low share of the mortgage book.

HDFC Bank | Brokerage: Emkay | Rating: Buy | LTP: Rs 1,079 | Target: Rs 1,300 | Upside: 20 percent. The bank believes that NPAs may not cross the peak seen post GFC at 2% (2010), though Emkay prefer to remain little cautious amid Covid-19. The bank has higher exposure to the trader segment, where disruption is high. However, the overall restructuring rate will be lower (around low single digits) for the bank, given its practice of recognizing stress upfront and low share of the mortgage book.

ICICI Bank | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 353 | Target: Rs 485 | Upside: 37 percent. Using the SOTP methodology sharekhan value the standalone operations of the bank at around 1.4x its FY2023E BV and rest of the subsidiaries at Rs 112 per share. Broking house believe valuations are reasonable, considering the overall franchise value as a whole and strong capitalisation and a high provision coverage ratio (PCR) being key comfort factors. The capital raising has further augment capital base and balance sheet strength.

ICICI Bank | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 353 | Target: Rs 485 | Upside: 37 percent. Using the SOTP methodology sharekhan value the standalone operations of the bank at around 1.4x its FY2023E BV and rest of the subsidiaries at Rs 112 per share. Broking house believe valuations are reasonable, considering the overall franchise value as a whole and strong capitalisation and a high provision coverage ratio (PCR) being key comfort factors. The capital raising has further augment capital base and balance sheet strength.

JK Lakshmi Cement | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 255 | Target: Rs 372 | Upside: 46 percent. The company is expected to benefit from sustained rural sector demand along with improvement in infrastructure demand expected from Q3FY2021. Sharekhan expect its standalone net revenue to register an 11.5% CAGR during FY2021E-FY2023E. The company is likely to announce its much-awaited brownfield capacity expansion in the near term, which would provide further head room for growth. The company is one of the preferred picks in the sector owing to its healthy balance sheet, efficient operations, favourable regional operations, and attractive valuation.

JK Lakshmi Cement | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 255 | Target: Rs 372 | Upside: 46 percent. The company is expected to benefit from sustained rural sector demand along with improvement in infrastructure demand expected from Q3FY2021. Sharekhan expect its standalone net revenue to register an 11.5% CAGR during FY2021E-FY2023E. The company is likely to announce its much-awaited brownfield capacity expansion in the near term, which would provide further head room for growth. The company is one of the preferred picks in the sector owing to its healthy balance sheet, efficient operations, favourable regional operations, and attractive valuation.

Crompton Greaves Consumer Electricals | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 292 | Target: Rs 308 | Upside: 5 percent. Broking house reiterate its positive stance on company given its strategy of investing in long term strategic initiatives like distribution & GTM initiatives, creating new legs of growth in large durable categories and sustained product innovations to consolidate its position in Fans, Lighting and Pumps. Company is creating & scaling up new legs of growth in Geysers, Air Coolers and now with Mixer-Grinders (Rs65bn category).

Crompton Greaves Consumer Electricals | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 292 | Target: Rs 308 | Upside: 5 percent. Broking house reiterate its positive stance on the company given its strategy of investing in long term strategic initiatives like distribution & GTM initiatives, creating new legs of growth in large durable categories and sustained product innovations to consolidate its position in Fans, Lighting and Pumps. The company is creating & scaling up new legs of growth in Geysers, Air Coolers and now with Mixer-Grinders (Rs65bn category).

Ashoka Buildcon | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 64.50 | Target: Rs 88 | Upside: 36 percent. The company has surprised through its strong execution over the past two years. However, the pending PE exit in its asset portfolio has been an overhang on stock performance. A strong order book and continuous improvement in the balance sheet augur well for stock.

Ashoka Buildcon | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 64.50 | Target: Rs 88 | Upside: 36 percent. The company has surprised through its strong execution over the past two years. However, the pending PE exit in its asset portfolio has been an overhang on stock performance. A strong order book and continuous improvement in the balance sheet augur well for stock.

Supreme Industries | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 1,400 | Target: Rs 1,650 | Upside: 18 percent. After posting around 27% YoY revenue drop in Q1FY21, Supreme Industries (SIL) saw a strong demand recovery at the start of Q2FY21. Despite intermediary lockdowns and concerns over low discretionary expenditure, the piping segment saw ~98% demand recovery in May-August 2020. Broking house believe saving in other costs in addition to better gross margins would help drive EBITDA margin in FY21E-23E. Further, company will continue its Rs 350 crore of capex plans in FY21 to augment capacity of the piping & packaging business. This would help it to gain market share in the long run.

Supreme Industries | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 1,400 | Target: Rs 1,650 | Upside: 18 percent. Broking house believe saving in other costs in addition to better gross margins would help drive EBITDA margin in FY21E-23E. Further, company will continue its Rs 350 crore of capex plans in FY21 to augment capacity of the piping & packaging business. This would help it to gain market share in the long run.

Zydus Wellness | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 1,839 | Target: Rs 2,300 | Upside: 25 percent. With the ‘three pillars’ strategy and reduction in debt on books, Zydus Wellness is well-versed to achieve a 27% earnings CAGR over FY2020-23. The company has strong presence in niche categories, which are largely health & hygiene centric, gaining good acceptance amid the current pandemic. The company is focusing on expanding in the rural markets with the help of scaled-up distribution led by the Heinz acquisition and expanding footprint internationally. This will be supported by a lean balance sheet with negative working capital.

Zydus Wellness | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 1,839 | Target: Rs 2,300 | Upside: 25 percent. The company has strong presence in niche categories, which are largely health & hygiene centric, gaining good acceptance amid the current pandemic. The company is focusing on expanding in the rural markets with the help of scaled-up distribution led by the Heinz acquisition and expanding footprint internationally. This will be supported by a lean balance sheet with negative working capital.

KNR Construction | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 258 | Target: Rs 310 | Upside: 20 percent. Given the company’s strong order book position and superior execution capability, Motilal Oswal expect a revenue CAGR of 18% over FY20–22E. Owing to a strong balance sheet position, company is well-positioned to bid on new projects as and when bidding commences in the Roads sector. It increases FY21/FY22E EPS by 6%/4% on account of the early realization of asset monetization, leading to lower interest costs. It forecast a revenue/EBITDA/PAT CAGR of 18%/12%/25% over FY20–22E.

KNR Construction | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 258 | Target: Rs 310 | Upside: 20 percent. Given the company’s strong order book position and superior execution capability, Motilal Oswal expect a revenue CAGR of 18% over FY20–22E. Owing to a strong balance sheet position, company is well-positioned to bid on new projects as and when bidding commences in the Roads sector. It increases FY21/FY22E EPS by 6%/4% on account of the early realization of asset monetization, leading to lower interest costs. It forecast a revenue/EBITDA/PAT CAGR of 18%/12%/25% over FY20–22E.

First Published on Oct 1, 2020 11:40 am
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