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Fundamental picks: YES Securities bets on these 4 stock for the long-term

Despite a bout of correction and uncertainty regarding what lies ahead, YES Securities expects these four stocks to perform in the long-term

February 19, 2021 / 09:06 AM IST
Sensex
Indian market ended in the red for the third straight session on February 18 with Nifty breaking key support level of 15,200. At close, the Sensex was down 379.14 points or 0.73% at 51,324.69, and the Nifty was down 89.90 points or 0.59% at 15,119. Despite a bout of correction and uncertainty regarding what lies ahead, YES Securities expects these four stocks to perform in the long-term:
ABB India | The company is well placed with its advanced services and innovative O&M strategies. Currently, ABB is focusing towards co‐creating pioneering technologies and digital solutions with customers and partners. Company is witnessing consistent improvements over the past couple of months with higher order execution across some key segments and industries, which have ramped up production, post easing of lockdown. Stock is currently trading at an attractive valuation of 21x FY23E P/E and 21x FY23E EV/EBITDA. Return ratios are likely to remain healthy (ROEs at 20%+ post FY22E).
ABB India | The company is well placed with its advanced services and innovative O&M strategies. Currently, ABB is focusing on co‐creating pioneering technologies and digital solutions with customers and partners. The company has been witnessing consistent improvements over the past couple of months with higher order execution across key segments and industries, which have ramped up production, post easing of lockdown. The stock is currently trading at an attractive valuation of 21x FY23E P/E and 21x FY23E EV/EBITDA. Return ratios are likely to remain healthy (ROEs at 20%+ post FY22E).
Sundram Fasteners | Improvement in financial performances across major business units is likely to keep ROEs at 18%+ post FY22E period. We believe company is likely to see accelerated growth between FY22‐25 as both automotive and non‐automotive verticals will do well, which would also lead to re‐rating in the stock. Given the quality play, the stock is currently trading at an attractive valuation of 22x FY23E P/E and 13x FY23E EV/EBIDTA.
Sundram Fasteners | Improvement in financial performances across major business units is likely to keep ROEs over 18% post FY22E period. We believe the company is likely to see accelerated growth between FY22‐25 as both automotive and non‐automotive verticals will do well, which would also lead to re‐rating in the stock, YES Securities said. Given the quality play, the stock is currently trading at an attractive valuation of 22x FY23E P/E and 13x FY23E EV/EBIDTA.
Cummins India | Despite sharp rally seen in stock price recently, we believe stock can re‐rate further on account of strong structural growth outlook which would not only improve earning but also sentiments. We expect improvement in profitability ratio (expects ROE to move to 18% by FY23 from 15.5% in FY20). The stock is trading at an attractive valuation of 21x of FY23E.
Cummins India | Despite the sharp rally seen in stock price recently, the brokerage believes it can re‐rate further on account of strong structural growth outlook which would not only improve earning but also sentiments. It expects an improvement in profitability ratio with ROE moving to 18% by FY23 from 15.5% in FY20. The stock is trading at an attractive valuation of 21x of FY23E.
Steel Strips Wheels | We believe, company is well placed with a) higher contribution from better margin segment ‐ Alloy Wheels and exports to drive volumes and margins, b) antidumping Duty and CVD on Chinese Wheels in EU & USA – opportunity of ~10mn High Speed Trailer Steel Wheels. c) recent budget announcements directly or indirectly would have positive impact on Automobile industry like voluntarily vehicle scrappage policy, PLI (product linked incentive) scheme, focus on capability development, large push on infrastructure spending and reduction in custom duty on steel to 7.5%
Steel Strips Wheels | The brokerage believes the company is well placed with a) higher contribution from better margin segment; b) antidumping Duty and CVD on Chinese Wheels in EU & USA; c) recent Budget announcements such as vehicle scrappage policy, PLI (product linked incentive) scheme, focus on capability development, large push on infrastructure spending and reduction in customs duty on steel to 7.5%
Rakesh Patil
first published: Feb 19, 2021 09:06 am

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