Last Updated : Nov 05, 2020 02:42 PM IST | Source: Moneycontrol.com

KRChoksey bets on these 6 stocks for 15-35% upside

Cipla, Persistent Systems and Granules India are among the top six buying ideas by the broking firm KRChoksey.

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Indian indices were trading strong in the afternoon of November 5, with the Nifty reclaiming the 12000-mark and the Sensex rising more than 600 points on the back of supportive global cues. Here is a list of six stocks that broking firm KRChoksey expects will do well:

Hindustan Unilever | Rating: Buy | Target: Rs 2556 | Potential Upside: 24 percent. Company delivered a decent numbers for Q2FY21 both on the volume and profitability front amidst headwinds on margins slump in discretionary consumption. Going forward, broking house believe, H2FY21 will see the recovery across segments and HUL will capture decent market share backed by increase in Advertising and promotion expenses and its focus on innovation and market development (launched 100+ new SKUs in the last six months) compared to its peers. It expect Revenue/PAT CAGR to grow by 11.3%/16.6% FY20-22E, respectively.

Hindustan Unilever | Rating: Buy | Target: Rs 2556 | Potential Upside: 24 percent. The company delivered a decent set of numbers for Q2FY21, both on the volume and profitability front amid headwinds on margins slump in discretionary consumption. The broking house says H2FY21 will see recovery across segments and HUL will capture decent market share backed by an increase in advertising and promotion expenses and its focus on innovation and market development (launched 100+ new SKUs in the last six months) compared to its peers. It expects revenue/PAT CAGR to grow by 11.3%/16.6% FY20-22E, respectively.

ITC | Rating: Buy | Target: Rs 228 | Potential Upside: 34 percent. Despite the ongoing COVID-19 related slowdown, KRChoksey see recovery signs in recent months and the current valuation attractive. Besides, it expect the cigarette business to revive in the future with strict regulation from government on curbing the sale of illegal cigarettes.

ITC | Rating: Buy | Target: Rs 228 | Potential Upside: 34 percent. Despite the ongoing COVID-19 related slowdown, KRChoksey sees recovery signs in recent months and finds the current valuation attractive. It expects the cigarette business to revive with strict regulation from the government on curbing the sale of illegal cigarettes.

Cipla | Rating: Buy | Target: Rs 894 | Potential Upside: 15 percent. Respiratory drugs has seen traction in demand owing to COVID-19 and market leader like Cipla is eyeing greater attention from the investment community. The company was able to garner 65% market share (Q1FY21) in Proventil market with its newly launched Albuterol Sulfate. Approval for another promising ANDA, Advair Diskus of GSK (having an addressable market of USD 2.9 bn) is also expected soon. Cipla’s domestic business is on track after disruption in trade generics. Broking house expect Cipla’s topline to grow at a CAGR of 9.1% over FY20-22E period and net profit to grow at a CAGR of ~38%. It is optimistic of company’s growth prospects and continue to apply a P/E multiple of 24.5x on FY22E EPS of Rs 36.5/share.

Cipla | Rating: Buy | Target: Rs 894 | Potential Upside: 15 percent. Respiratory drugs have seen a growing demand due to COVID-19 and market leaders like Cipla are getting greater attention from investors. The company was able to garner 65% market share (Q1FY21) in Proventil market with its newly launched Albuterol Sulfate. Approval for another promising ANDA, Advair Diskus of GSK (having an addressable market of $ 2.9 bn), is expected soon. Cipla’s domestic business is on track after disruption in trade generics. The Broking house expects Cipla’s topline to grow at a CAGR of 9.1% over FY20-22E period and net profit to grow at a CAGR of ~38%. It is optimistic about Cipla's growth and continues to apply a P/E multiple of 24.5x on FY22E EPS of Rs 36.5/share.

Granules India | Rating: Buy | Target: Rs 459 | Potential Upside: 22 percent. Granules India’s long-term investments in backward and forward integration from APIs to FDs (Finished Dosages) is bearing fruits now as demonstrated by extraordinary last two quarters. The company has also managed to keep a check on its balance sheet by reducing gross debt from Rs 870 crore in the previous quarter to Rs 861 crore in the current quarter. KRChoksey expect Granules India to post Revenue/PAT CAGR of 18.5%/33.6% over FY20-22.

Granules India | Rating: Buy | Target: Rs 459 | Potential Upside: 22 percent. Granules India’s long-term investments in backward and forward integration from APIs to FDs (Finished Dosages) is bearing fruit, as demonstrated by the extraordinary last two quarters. The company has also managed to keep a check on its balance sheet by reducing gross debt from Rs 870 crore in the previous quarter to Rs 861 crore. KRChoksey expects Granules India to post revenue/PAT CAGR of 18.5%/33.6% over FY20-22.

Persistent Systems | Rating: Buy | Target: Rs 1415 | Potential Upside: 25 percent. Persistent Systems posted a robust 2QFY21 performance, led by large deal execution, while margin improved aided by cost optimisation and higher utilisation. The mid-sized IT firm won several large deals across technology, BFSI and medical devices verticals, providing good medium-term visibility. Wage hikes will be awarded in 3QFY21, which will be offset by revenue growth and offshore shift of large deals. Broking firm expect Persistent to clock 11.1%/13.7%/14.7% revenue/EBIT/EPS CAGR over FY21-FY23E.

Persistent Systems | Rating: Buy | Target: Rs 1415 | Potential Upside: 25 percent. Persistent Systems posted a robust 2QFY21 performance, led by large deal execution, while margin improved on cost optimisation and higher utilisation. The mid-sized IT firm won several large deals across technology, BFSI and medical devices verticals, providing good medium-term visibility. Wage hikes will be awarded in 3QFY21, which would be offset by revenue growth and offshore shift of large deals. The broking firm expects Persistent to clock 11.1%/13.7%/14.7% revenue/EBIT/EPS CAGR over FY21-FY23E.

CreditAccess Grameen | Rating: Buy | Target: Rs 843 | Potential Upside: 35 percent. As on Jun’20, company has offered ~88% of it overall gross loan portfolio of Rs 117.2 bn for Income generation loans. It has a wide network of 1,388 branches across 14 states and Union Territory providing loans to ~4 mn borrowers. Promoter holding has reduced to 74%, as Rs 800 crore worth of funds raised through QIP issue. Additionally, board of directors have approved issue of NCDs worth Rs 100 crore to strengthened its liquidity. It is a good quality stock with strong asset quality, expected regional penetration & high promoter holding.

CreditAccess Grameen | Rating: Buy | Target: Rs 843 | Potential Upside: 35 percent. As on June 2020, the company has offered ~88% of its overall gross loan portfolio of Rs 117.2 bn for Income generation loans. It has a network of 1,388 branches in 14 states and union territories providing loans to around four million borrowers. Promoter holding has reduced to 74%, as Rs 800 crore worth of funds were raised through a QIP issue. The board has approved issue of NCDs worth Rs 100 crore to strengthened liquidity. It is a good quality stock with strong asset quality, expected regional penetration and high promoter holding.

First Published on Nov 5, 2020 01:30 pm
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