M&M, Colgate, ICICI Lombard, Infosys among 10 stocks on brokerages radar for double-digit upside

Despite the market currently placed at overbought zones, brokerages see further upside in these 10 stocks

January 05, 2021 / 11:31 AM IST
Sensex
Benchmark indices ended at record closing level on January 4 with Nifty above 14,100 and Sensex above 48,000 level. BSE Midcap and Smallcap indices jumped over 1 percent each. Despite the market currently placed at overbought zones, brokerages see further upside in these 10 stocks:
Minda Corporation | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 105 | Upside: percent. With a history of capital efficient operations, net debt free B/S (September 2020) and presence across new model launches like Mahindra Thar & Bajaj Chetak, Broking house believe the risk-reward is favourable at the company. ICICIdirect enthused by MCL’s intent to clock ~12% margins & ~20%+ RoIC in future and would closely monitor its forward journey, consistency in performance for any further upgrades in our fair value calculation.
Minda Corporation | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 93 | Target: Rs 105 | Upside: 13 percent. With a history of capital efficient operations, net debt-free balance sheet (September 2020) and presence across new model launches like Mahindra Thar & Bajaj Chetak, the broking house believe the risk-reward is favourable for the company. 
Amber Enterprises | Brokerage: AnandRathi | Rating: Buy | LTP: Rs | Target: Rs 3,012 | Upside: percent. Broking house raised its FY21e and FY23e to factor in greater volumes as the two factories would be operational by Q4FY22. It now model FY21-FY23 revenue/PAT CAGRs of 36%/86%, resulting in RoCE (after tax) rising to 13.5% (from 6.6% in FY21). The risks are inability to ramp up component manufacturing and predatory pricing and longer credit terms being offered by global vendors.
Amber Enterprises | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 2,398.50 | Target: Rs 3,012 | Upside: 25 percent. The broking house raised its FY21e and FY23e to factor in greater volumes as the two factories would be operational by Q4 FY22. It now expects FY21-FY23 revenue/PAT CAGRs of 36%/86%, resulting in RoCE (after tax) rising to 13.5% (from 6.6% in FY21). The risks are the inability to ramp up component manufacturing and predatory pricing and longer credit terms being offered by global vendors.
Colgate Palmolive | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 1,860 | Upside: percent. While progress in terms of new launches is encouraging, most of the launches appear niche. 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. Progress on two factors is a key monitorable, the company’s plans to enter into new categories by capitalising on its distribution strength of over 6m outlets and the longer term benefits of the brushing twice a day that it is formulating.
Colgate Palmolive | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,576.10 | Target: Rs 1,860 | Upside: 18 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. Progress on two factors is a key monitorable, the company’s plans to enter into new categories by capitalising on its distribution strength of over 6 million outlets and the longer-term benefits of the brushing twice a day that it is formulating.
Mahindra & Mahindra | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 840 | Upside: percent. Since Apr’20, company has decided to exit five loss-making businesses as part of its decision to exit non-strategic and loss-making businesses. SYMC has been MM’s biggest pain point and the former’s bankruptcy filing is the last option which it has to see if it can be sold. Company is the best proxy on a rural recovery in the auto segment, with a strong footing in tractors and LCVs. For the SUV business, broking house are not building in any major traction and have not built in benefits from any upcoming product launches or material benefit on product development from MM's recent JV with Ford India. While MM’s core business would recover faster, its focus on tightening capital allocation could act as a re-rating catalyst.
Mahindra and Mahindra | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 749.10 | Target: Rs 840 | Upside: 12 percent. Since April 2020, the company has decided to exit five businesses as part of its decision to exit non-strategic and loss-making businesses. The company is the best proxy on a rural recovery in the auto segment, with a strong footing in tractors and LCVs. For the SUV business, broking house are not building in any major traction and have not built in benefits from any upcoming product launches or material benefit on product development from MM's recent JV with Ford India. While MM’s core business would recover faster, its focus on tightening capital allocation could act as a re-rating catalyst.
Infosys | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 1,436 | Upside: percent. Company’s deal pipeline remains strong with clients focusing on accelerated digital transformation, cloud deployment, SaaS and automation projects to improve cost efficiencies. Infosys stays the top pick in the sector as it benefits from near term margin defense and long term growth acceleration from DX/cloud/AI megatrends.
Infosys | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 1,288.25 | Target: Rs 1,436 | Upside: 11 percent. The company’s deal pipeline remains strong with clients focusing on accelerated digital transformation, cloud deployment, SaaS and automation projects to improve cost efficiencies. Infosys stays the top pick in the sector as it benefits from near term margin defence and long term growth acceleration from DX/cloud/AI megatrends.
Power Grid Corporation of India | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 220 | Upside: percent. Company’s regulated RoE model is resilient in current uncertain times and provides strong earnings visibility without any concerns of environment, social and governance (ESG) rating. Monetisation of five TBCB assets worth Rs 7,164 crore and further reduction in outstanding dues from discoms are key near-term catalyst for Power Grid. Company's inexpensive valuation of 1.2x FY2023E P/BV, healthy dividend yield of 5% and huge growth opportunity from investment in renewable power capacity makes Sharekhan positive on the stock.
Power Grid Corporation of India | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 188.45 | Target: Rs 220 | Upside: 16 percent. The company’s regulated RoE model is resilient in current uncertain times and provides strong earnings visibility without any concerns of environment, social and governance (ESG) rating. Monetisation of five TBCB assets worth Rs 7,164 crore and a further reduction in outstanding dues from discoms are the key near-term catalyst for Power Grid. 
Dhanuka Agritech | Brokerage: Emkay | Rating: Buy | LTP: Rs | Target: Rs 890| Upside: percent. The balance sheet remains strong with cash of Rs 1.6bn/Rs 2.8/Rs 2.9bn in FY21/22/23E. Key risks include lower rainfall affecting demand for agrochemicals, fewer pest attack, and sharp increase in raw material prices. Emkay upgrade its earnings estimates and retain buy as it expect the company to continue to outperform the industry and generate robust cash flow.
Dhanuka Agritech | Brokerage: Emkay | Rating: Buy | LTP: Rs 779.85 | Target: Rs 890| Upside: 14 percent. The balance sheet remains strong with cash of Rs 1.6bn/Rs 2.8/Rs 2.9bn in FY21/22/23E. Key risks include lower rainfall affecting demand for agrochemicals, fewer pest attack, and a sharp increase in raw material prices. Emkay upgraded its earnings estimates and retain buy as it expects the company to continue to outperform the industry and generate robust cash flow.
Coal India | The stock has fallen-36 percent in 2020 to Rs 135.10 as of December 29, 2020 from 211.35 on December 31, 2019.
Coal India | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 137.25 | Target: Rs 190 | Upside: 38 percent. With the government’s focus on increasing its renewable footprint and push towards an Atmanirbhar Bharat, PSUs such as NTPC and Coal have been looking to diversify away from coal. Investments (particularly of the size as indicated in media reports) would likely happen through JVs. This a route well used by COAL in the past and can be crucial given the lack of its implementation experience in the module/renewable business.
Crompton Greaves Consumer Electricals | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 373.70 | Target: 440 | Upside: 18 percent. Company has maintained strong EBITDA margin of ~13%, which is one of the best in the industry. In addition, it also has one of the best cash conversion cycle of ~23 days among peers, followed by Havells India (27 days) & Orient Electric (61 days). Low capital requirements along with elevated margin profile have led to better RoE, RoCE of 34%, 38%, respectively, by FY20. Company's revenue, earnings are likely to grow at 13% CAGR each in FY20-23E supported by elevated margins and saving in interest outgo. The strong brand, quality management and robust free cash flows (~80% of OCF) make company a strong franchise in the fast moving electrical goods (FMEG) industry.
Crompton Greaves Consumer Electricals | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 373.70 | Target: 440 | Upside: 18 percent. The company has maintained a strong EBITDA margin of 13%, which is one of the best in the industry. In addition, it also has one of the best cash conversion cycle of 23 days among peers. Low capital requirements along with elevated margin profile have led to better RoE, RoCE of 34%, 38%, respectively, by FY20. Company's revenue, earnings are likely to grow at 13% CAGR each in FY20-23E supported by elevated margins and saving in interest outgo. The strong brand, quality management and robust free cash flows (80% of OCF) make company a strong franchise in the fast moving electrical goods (FMEG) industry.
ICICI Lombard General Insurance | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 1,549.45 | Target: Rs 1,710 | Upside: 10 percent. Company's strong execution capabilities, conservative underwriting, and healthy solvency should help sustain valuations. Broking firm believes the general insurance industry is an attractive space, which has a long runway for long-term growth. Company has demonstrated its strong underwriting, healthy solvency, and improving loss ratios, which should help it ride over medium-term challenges due to COVID-19 disruptions.
ICICI Lombard General Insurance | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 1,549.45 | Target: Rs 1,710 | Upside: 10 percent. Company's strong execution capabilities, conservative underwriting, and healthy solvency should help sustain valuations. Broking firm believes the general insurance industry is an attractive space, which has a long runway for long-term growth. Company has demonstrated its strong underwriting, healthy solvency, and improving loss ratios, which should help it ride over medium-term challenges due to COVID-19 disruptions.
Rakesh Patil
first published: Jan 5, 2021 11:31 am

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