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Last Updated : Oct 09, 2020 01:49 PM IST | Source: Moneycontrol.com

Brokerages pick 11 stocks for a 6-60% return; do you own any?

Tata Motors, Marico, Sagar Cements and Reliance Industries are among 10 stocks which are likely to give 6-60% return.

Sensex

Indian benchmark indices ended higher for the fifth consecutive day on October 7 with Nifty closing comfortably above 11,700 and Sensex rising more than 300 points.

Filatex India | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs | Upside: percent. Despite being capital intensive in nature, company has maintained a capital efficient business model with stringent working capital policy (NWC days: 15) and high asset T/O (2.0x), generating healthy RoCE of 14%. While revenue growth is expected to be flattish in FY20-22E (owing to lower realisations), company's strategy of focusing on high value added products and reduction in power cost will translate into enhancement in EBITDA margins over medium to longer term.

Filatex India | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 26.50 | Target: Rs 33 | Upside: 24 percent. Despite being capital intensive in nature, the company has maintained a capital efficient business model with stringent working capital policy (NWC days: 15) and high asset T/O (2.0x), generating healthy RoCE of 14%. While revenue growth is expected to be flattish in FY20-22E owing to lower realisations, the company's strategy of focusing on high value added products and reduction in power cost will translate into enhancement in EBITDA margins over medium to longer term.

Reliance Industries | Brokerage: KRChoksey | Rating: Buy | LTP: Rs | Target: Rs 2,394 | Upside: percent. RIL is expected to continue its capital raising momentum with Reliance Retail Venture Ltd attracting long term capital from leading investors. This also speaks of investors’ confidence of faster than normal scale up in business performance in its Retail business. The acquisition of Future Group by Reliance Industries Ltd will benefit the company through vast economies of scale and robust back end infrastructure. KRChoksey continue to maintain positive view on the long-term performance of RIL and like the business re-organization initiatives at RIL (HoldCo – OpCo structure) and its ability to attract long term investors. Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd. which published moneycontrol.com

Reliance Industries | Brokerage: KRChoksey | Rating: Buy | LTP: Rs 2257 | Target: Rs 2,394 | Upside: 6 percent. RIL is expected to continue its capital raising momentum with Reliance Retail Venture Ltd attracting long term capital from leading investors. This also speaks of investors’ confidence of faster than normal scale up in business performance in its Retail business. The acquisition of Future Group by Reliance Industries Ltd will benefit the company through vast economies of scale and robust back end infrastructure. KRChoksey continue to maintain positive view on the long-term performance of RIL and like the business re-organization initiatives at RIL (HoldCo – OpCo structure) and its ability to attract long term investors. (Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd. which published moneycontrol.com)

Gujarat Gas | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 388 | Upside: percent. Prabhudas Lilladher initiate coverage on Gujarat Gas with buy rating and a DCF based target price of Rs 388. Company is India’s largest City Gas Distribution (CGD) player and the company has many growth levers led by 1) increased penetration one of India’s most industrialized states of Gujarat 2) tightening environmental policy towards cleaner fuels and 3) potential entry into new geographical areas (GA’s) for future growth. Company's industrial volumes remains relatively immune to competition given the first mover advantage to access large customers, along with its ability to match new players pricing threat.

Gujarat Gas | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 304 | Target: Rs 388 | Upside: 27 percent. Prabhudas Lilladher initiated coverage on Gujarat Gas with buy rating and a DCF based target price of Rs 388. The company is India’s largest City Gas Distribution (CGD) player. It has many growth levers led such as increased penetration in one of India’s most industrialized states of Gujarat; tightening environmental policy towards cleaner fuels; and potential entry into new geographical areas (GA’s) for future growth. The company's industrial volumes remains relatively immune to competition given the first mover advantage to access large customers, along with its ability to match new players pricing threat.

Sagar Cements | Brokerage: AnandRathi | Rating: Buy | LTP: Rs | Target: Rs 733 | Upside: percent. Doubling its capacity every 10 years with greater profitability and less balance-sheet stress remains the core focus. Aiming at 10m tpa by FY25, capacity is to be increased to 8.25m tons by Q2 FY22 and operations extended to the Central and growing Eastern regions. The present strong pricing environment and greater operating efficiencies are expected to result in robust operations. With a re-rating on the cards on the greater capacity over the next one year, AnandRathi retain buy rating, with a target price of Rs 733.

Sagar Cements | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 564 | Target: Rs 733 | Upside: 30 percent. Doubling its capacity every 10 years with greater profitability and less balance-sheet stress remains the core focus. Aiming at 10m tpa by FY25, capacity is to be increased to 8.25m tons by Q2 FY22 and operations extended to the Central and growing Eastern regions. The present strong pricing environment and greater operating efficiencies are expected to result in robust operations. With a re-rating on the cards on the greater capacity over the next one year, AnandRathi retained buy rating with a target price of Rs 733.

Emami | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 440 | Upside: percent. The recovery in rural market, new launches and expansion in the distribution reach remains one of the key growth drivers in the near to medium term. Further, the company is also focusing on reducing the seasonality in the business by revamping its portfolio. The stock is currently trading at discounted valuation of 21x its FY2022E EPS as compared to close peers. Improving growth prospects and receding risk of promoters pledging makes it a better pick in the mid-cap FMCG space.

Emami | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 351 | Target: Rs 440 | Upside: 25 percent. The recovery in rural market, new launches and expansion in the distribution reach remains one of the key growth drivers in the near to medium term. Further, the company is also focusing on reducing the seasonality in the business by revamping its portfolio. The stock is currently trading at discounted valuation of 21x its FY2022E EPS as compared to close peers. Improving growth prospects and receding risk of promoters pledging makes it a better pick in the mid-cap FMCG space.

Kansai Nerolac Paints | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 550 | Upside: percent. The company stands to gain from strong wholesale demand for Auto led by MSIL in 2Q post 7 quarters of decline in industrial paints volumes. It believes low base in Auto paints and gradual recovery in other industrials led by consumer durables will result in positive momentum. Decorative paints are on a solid wicket given strong post unlock demand from tier 2/3 cities and low base for Kansai in J&K where it has 60-70% market share. It estimate 14.8% PAT CAGR over FY20-23 and 26.3% PAT CAGR over FY21-23.

Kansai Nerolac Paints | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 480 | Target: Rs 550 | Upside: 14 percent. The company stands to gain from strong wholesale demand for auto led by MSIL in 2Q post 7 quarters of decline in industrial paints volumes. It believes low base in Auto paints and gradual recovery in other industrials led by consumer durables will result in positive momentum. Decorative paints are on a solid wicket given strong post unlock demand from tier 2/3 cities and low base for Kansai in J&K where it has 60-70% market share. It estimate 14.8% PAT CAGR over FY20-23 and 26.3% PAT CAGR over FY21-23.

Britannia Industries | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 4,279 | Upside: percent. Prabhudas Lilladher cutting FY21/22/23E EPS by 5.9/6.8/7.5% despite EBIDTA change by -1/2.7/1% due to higher interest burden (proposed bonus debentures of Rs10bn) and Rs 28.4 bn dividend payout for FY20/FY21. It believe best quarter is behind and impact of unlocking and pantry destocking has started softening growth rates. It estimate EBIDTA CAGR of 19% and PAT CAGR of 13.8% due to lower other income and higher interest.

Britannia Industries | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 3,786 | Target: Rs 4,279 | Upside: 13 percent. Prabhudas Lilladher cutting FY21/22/23E EPS by 5.9/6.8/7.5% despite EBIDTA change by -1/2.7/1% due to higher interest burden (proposed bonus debentures of Rs10bn) and Rs 28.4 bn dividend payout for FY20/FY21. It believe best quarter is behind and impact of unlocking and pantry destocking has started softening growth rates. It estimate EBIDTA CAGR of 19% and PAT CAGR of 13.8% due to lower other income and higher interest.

HDFC Bank | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 1,280 | Upside: percent. HDFC Bank has delivered strong business growth despite weak economic trends and consumer sentiment. The bank has also reflected strong deposit trends, led by CASA. Thus, Motilal Oswal expect banks strong liability franchise and the fixed rate nature of the book to continue to support the margin trajectory. On the asset quality front, slippages are likely to pick up in 2HFY21 due to the COVID19 disruption, which could keep credit costs elevated.

HDFC Bank | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,162 | Target: Rs 1,280 | Upside: 10 percent. HDFC Bank has delivered strong business growth despite weak economic trends and consumer sentiment. The bank has also reflected strong deposit trends, led by CASA. Thus, Motilal Oswal expect banks strong liability franchise and the fixed rate nature of the book to continue to support the margin trajectory. On the asset quality front, slippages are likely to pick up in 2HFY21 due to the COVID19 disruption, which could keep credit costs elevated.

Tata Motors | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 226 | Upside: percent. JLR’s 2QFY21 retail volumes (incl CJLR) declined ~11.9% YoY to ~113.6k units, with ~26.7% decline in Jaguar retails and ~5.9% decline in LR retails. JLR sales saw significant improvement sequentially (+53.3% QoQ) but continue to be impacted by Covid 19. China retails grew ~3.7% YoY, driven by CJLR retails growth of ~10% YoY. UK retails declined ~3% YoY, whereas North America declined ~16%, Europe declined ~20% and RoW declined ~30%. Motilal Oswal estimating ~12% YoY decline in 2QFY21E wholesale (incl JV) to 118.5k. The stock trades at 12.2x FY22E consolidated EPS and 0.9x P/B.

Tata Motors | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 141 | Target: Rs 226 | Upside: 60 percent. JLR’s 2QFY21 retail volumes (incl CJLR) declined 11.9% YoY to 113.6k units, with 26.7% decline in Jaguar retails and 5.9% decline in LR retails. JLR sales saw significant improvement sequentially (+53.3% QoQ) but continue to be impacted by Covid 19. China retails grew 3.7% YoY, driven by CJLR retails growth of 10% YoY. The UK retails declined 3% YoY, whereas North America declined 16%, Europe declined 20% and RoW declined 30%. Motilal Oswal estimating 12% YoY decline in 2QFY21E wholesale (incl JV) to 118.5k. The stock trades at 12.2x FY22E consolidated EPS and 0.9x P/B.

Marico | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 440 | Upside: percent. Company's resilient product portfolio has seen an uptick across categories as consumer sentiment improved across the country. Growth in Parachute amid the current environment is highly encouraging. The foods and edible oils portfolio is likely to continue its growth momentum with higher consumer focus on health, hygiene and immunity boosting products. Riding this tailwind, the company is also launching new products in these categories, the success of which will be critical for medium-term growth. Outlook for the international business is getting better. Furthermore, while material costs may see mild inflation, the company is well placed to offset it through higher growth and cost optimization.

Marico | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 369 | Target: Rs 440 | Upside: 19 percent. Company's resilient product portfolio has seen an uptick across categories as consumer sentiment improved across the country. Growth in Parachute amid the current environment is highly encouraging. The foods and edible oils portfolio is likely to continue its growth momentum with higher consumer focus on health, hygiene and immunity boosting products. Riding this tailwind, the company is also launching new products in these categories, the success of which will be critical for medium-term growth. Outlook for the international business is getting better. Furthermore, while material costs may see mild inflation, the company is well placed to offset it through higher growth and cost optimization.

Titan Company | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 1,253 | Target: Rs 1,450 | Upside: 15 percent. Given the encouraging demand recovery trends, ICICIdirect revise its revenue and earnings estimates upwards for FY21E by 10% and 15%, respectively. Titan remains a quality franchise with strong brand patronage. Over the years, the company has consistently exhibited its ability to gain market share amid a tough industry scenario. It continue to remain structurally positive on the company and its long term growth prospects.

Titan Company | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 1,253 | Target: Rs 1,450 | Upside: 15 percent. Given the encouraging demand recovery trends, ICICIdirect revise its revenue and earnings estimates upwards for FY21E by 10% and 15%, respectively. Titan remains a quality franchise with strong brand patronage. Over the years, the company has consistently exhibited its ability to gain market share amid a tough industry scenario. It continue to remain structurally positive on the company and its long term growth prospects.

First Published on Oct 8, 2020 11:02 am
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