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Sharekhan Bets On These 15 Stocks For 10-33% Upside

Bata, Gail India, IGL, Infosys, LIC Housing and Petronet LNG are among 15 buying ideas from Sharekhan with an upside of 10-33 percent.

Nov 17, 2020 / 12:03 PM IST
On the special session held on November 14 for Muhurat trading, indices ended at record closing high with Nifty above 12,750. Here are 15 stocks that Sharekhan is betting on:
On the special session held on November 14 for Muhurat trading, indices ended at record closing high with Nifty above 12,750. Here are 15 stocks that Sharekhan is betting on:
Power Grid Corporation | LTP: Rs | Broking house maintained FY2021-FY2023 earnings estimates. Power Grid has a robust Rs 41,000 crore of project pipeline, which provides earnings visibility for the next 2-3 years. Thus, expect an 11% PAT CAGR over FY2020-FY2023 along with RoE of 17%-19%. Moreover, Power Grid is hopeful to complete the monetisation of 5 TBCB assets (worth Rs. 7,164 crore) in FY2021 and the same would help in value unlocking. The balance sheet is also expected to improve with further reduction in receivables as Power Grid would receive outstanding dues from discom under the power sector liquidity infusion scheme. Recommend buy on Power Grid with a price target of Rs 220.
Power Grid Corporation | LTP: Rs 188 | Upside: 17 percent | Broking house maintained FY2021-FY2023 earnings estimates. Power Grid has a robust Rs 41,000 crore of project pipeline, which provides earnings visibility for the next 2-3 years. Thus, expect an 11% PAT CAGR over FY2020-FY2023 along with RoE of 17%-19%. Moreover, Power Grid is hopeful to complete the monetisation of 5 TBCB assets (worth Rs. 7,164 crore) in FY2021 and the same would help in value unlocking. The balance sheet is also expected to improve with further reduction in receivables as Power Grid would receive outstanding dues from discom under the power sector liquidity infusion scheme. Recommend buy on Power Grid with a price target of Rs 220.
Shree Cements | LTP: Rs | Company is witnessing strong traction in demand in its regional markets and has now revisited its medium to long term capacity expansion plans. Broking firm expect Shree Cement to benefit from sustained demand emanating from rural and semi-urban sectors along with pick up in government led infrastructure projects. Sharekhan expect company to outperform industry growth over FY2021E-FY2023E led by improving capacity utilization and addition of newer capacities. It has revised net earnings estimatesupwards for FY2021E-FY2023E factoring higher volume considering sharp improvement in demand environment and healthy outlook going forward. The price target stands revised to Rs 27,000 and maintain buy rating on the stock.
Shree Cements | LTP: Rs 23,363 | Upside: 15 percent | Company is witnessing strong traction in demand in its regional markets and has now revisited its medium to long term capacity expansion plans. Broking firm expect Shree Cement to benefit from sustained demand emanating from rural and semi-urban sectors along with pick up in government led infrastructure projects. Sharekhan expect company to outperform industry growth over FY2021E-FY2023E led by improving capacity utilization and addition of newer capacities. It has revised net earnings estimatesupwards for FY2021E-FY2023E factoring higher volume considering sharp improvement in demand environment and healthy outlook going forward. The price target stands revised to Rs 27,000 and maintain buy rating on the stock.
Aurobindo Pharma | LTP: Rs | Aurobindo’s US business has clocked a strong double-digit growth and the management expects a strong growth momentum to sustain going ahead. A slew of new launches, relative easing of pricing pressures and expected traction in the recently launched products coupled with likely pick-up in the injectables space would drive US topline. After a decline in the previous quarter, the Europe revenues have also bounced back and are likely to gather pace backed by a healthy demand outlook as stock levels normalise. Improving growth prospects, better earnings visibility, and strengthening balance sheet due to reducing debt, would support P/E multiple expansion. Sharekhan retain buy recommendation on the stock with a revised price target of Rs 1,024.
Aurobindo Pharma | LTP: Rs 852 | Upside: 20 percent | Aurobindo’s US business has clocked a strong double-digit growth and the management expects a strong growth momentum to sustain going ahead. A slew of new launches, relative easing of pricing pressures and expected traction in the recently launched products coupled with likely pick-up in the injectables space would drive US topline. After a decline in the previous quarter, the Europe revenues have also bounced back and are likely to gather pace backed by a healthy demand outlook as stock levels normalise. Improving growth prospects, better earnings visibility, and strengthening balance sheet due to reducing debt, would support P/E multiple expansion. Sharekhan retain buy recommendation on the stock with a revised price target of Rs 1,024.
Petronet LNG | LTP: Rs | Broking house increased its FY2021 earnings estimate to factor higher utilization for Dahej terminal (given beat in Q2FY2021 volumes) and have fine-tuned FY2022-FY2023 earnings estimates. A sharp volume recovery provides strong earnings visibility (expect a 12% earnings CAGR over FY2021E-FY2023E) during these challenges times. Also, PLNG’s RoE/RoCE at ~28% is superior among the gas utilities and FCF yield is also strong at 9% in FY2023E. It maintain buy rating with unchanged price target of Rs 300
Petronet LNG | LTP: Rs 254 | Upside: 18 percent | Broking house increased its FY2021 earnings estimate to factor higher utilization for Dahej terminal (given beat in Q2FY2021 volumes) and have fine-tuned FY2022-FY2023 earnings estimates. A sharp volume recovery provides strong earnings visibility (expect a 12% earnings CAGR over FY2021E-FY2023E) during these challenges times. Also, PLNG’s RoE/RoCE at ~28% is superior among the gas utilities and FCF yield is also strong at 9% in FY2023E. It maintain buy rating with unchanged price target of Rs 300.
Jubilant FoodWorks | LTP: Rs | With the trend of digital ordering increasing at every aspect of consumption and shift to trusted brands, Jubilant FoodWorks is expected to post better performance in the coming quarters. Further, the company can leverage its delivery and store expertise in new ventures such as Chinese cuisine (Hong’s Kitchen) and Indian food to capture a large pie in the domestic restaurant space in the coming years. It expect the company’s revenue and PAT to post a CAGR of ~10% and 26%, respectively, over FY2020-23E. The stock is currently trading at 46x its FY2023E earnings (and 22.4x its FY2023 EV/EBIDTA). Recommend buy on the stock with a price target of Rs 2,799.
Jubilant FoodWorks | LTP: Rs 2,475 | Upside: 13 percent | With the trend of digital ordering increasing at every aspect of consumption and shift to trusted brands, Jubilant FoodWorks is expected to post better performance in the coming quarters. Further, the company can leverage its delivery and store expertise in new ventures such as Chinese cuisine (Hong’s Kitchen) and Indian food to capture a large pie in the domestic restaurant space in the coming years. It expect the company’s revenue and PAT to post a CAGR of ~10% and 26%, respectively, over FY2020-23E. The stock is currently trading at 46x its FY2023E earnings (and 22.4x its FY2023 EV/EBIDTA). Recommend buy on the stock with a price target of Rs 2,799.
LIC Housing Finance | LTP: Rs | Sharekhan believe valuations are reasonable. Company has comfortable access to liquidity and enjoys high credit ratings and is well placed to manage the expected competitive intensity in the home loan segment and is likely to be able to keep margins steady. Company has strengths in its borrowing profile and has been able to bring down its cost of funds, helped by its strong parent profile. Sharekhan believe conservative LTVs and inexpensive valuations make it a reasonably attractive investment. It believe risk reward is favourable for long-term investors. Maintain buy rating on the stock with a revised price target of Rs 370.
LIC Housing Finance | LTP: Rs 315 | Upside : 17 percent | Sharekhan believe valuations are reasonable. Company has comfortable access to liquidity and enjoys high credit ratings and is well placed to manage the expected competitive intensity in the home loan segment and is likely to be able to keep margins steady. Company has strengths in its borrowing profile and has been able to bring down its cost of funds, helped by its strong parent profile. Sharekhan believe conservative LTVs and inexpensive valuations make it a reasonably attractive investment. It believe risk reward is favourable for long-term investors. Maintain buy rating on the stock with a revised price target of Rs 370.
Ashoka Buildcon | LTP: Rs Ashoka, like its peers, has been affected by COVID-19 led disruptions in execution of projects, collection of tolls and a delay in asset monetization plans. However, it has been able to ramp up its execution run-rate and has reached its pre-COVID toll collection run-rate. The company also has a healthy order backlog at 2.5x its TTM standalone revenues that provides earnings visibility in the medium term. However, new project awards and monetization of stake in ACL portfolio has been keenly awaited. Recommend a buy on the stock with a price target of Rs 85 owing to the company’s healthy order backlog, comfortable liquidity position and improving industry outlook.
Ashoka Buildcon | LTP: Rs 69 | Upside: 23 percent | Ashoka, like its peers, has been affected by COVID-19 led disruptions in execution of projects, collection of tolls and a delay in asset monetization plans. However, it has been able to ramp up its execution run-rate and has reached its pre-COVID toll collection run-rate. The company also has a healthy order backlog at 2.5x its TTM standalone revenues that provides earnings visibility in the medium term. However, new project awards and monetization of stake in ACL portfolio has been keenly awaited. Recommend a buy on the stock with a price target of Rs 85 owing to the company’s healthy order backlog, comfortable liquidity position and improving industry outlook.
Lumax Auto Technologies | LTP: Rs | With increased share of business with customers, Shrekhan expect company to deliver healthy 8% topline CAGR between FY20-23. With pick-up in volumes, operating margins are expected to improve, and expect margins to reach FY19 levels in the next fiscal. Company is likely to deliver strong 16% PAT CAGR over FY20-23 period. At the net level, company is a debt free company. Give the better than expected results and strong demand commentary, broking firm raised earnings estimates by 10-12%. Recommend buy on the stock with price target of Rs 125.
Lumax Auto Technologies | LTP: Rs 100 | Upside: 25 percent | With increased share of business with customers, Shrekhan expect company to deliver healthy 8% topline CAGR between FY20-23. With pick-up in volumes, operating margins are expected to improve, and expect margins to reach FY19 levels in the next fiscal. Company is likely to deliver strong 16% PAT CAGR over FY20-23 period. At the net level, company is a debt free company. Give the better than expected results and strong demand commentary, broking firm raised earnings estimates by 10-12%. Recommend buy on the stock with price target of Rs 125.
Infosys Ltd
Infosys | LTP: Rs 1,133.45| Upside: 19 percent | Infosys has been progressing well in terms of growth in digital business and consistence execution under the leadership of Mr. Salil Parekh. Sharekhan expect Infosys would continue to deliver industry-leading numbers in FY2022E/FY2023E, led by continued large deal wins, enhanced digital capabilities (aided by organic investments, acquisitions and partnerships) and strong execution. We prefer Infosys as it is one of the industry leaders with robust execution capabilities, a strong balance sheet, healthy FCF generation capability and higher dividend payout. Maintain buy rating on the stock with an unchanged price target of Rs 1,350.
Abbott India | LTP: Rs | Abbott’s topline is expected to grow in double digits, backed by strong performance of its power brands with 13 of its top 20 brands being top-ranked in their respective categories. The company’s ability to develop mega brands amidst a highly competitive landscape is one of its key strengths. Abbott has a sturdy new products pipeline along with strong pipeline of recently launched products which would drive the growth going ahead. Further efforts to reduce dependence on external manufacturing by shifting production of few key products to the company’s Goa plant is likely to increase efficiencies and lead to margin expansion. Retain buy recommendation on the stock with an unchanged price target of Rs 19,425.
Abbott India | LTP: Rs 15,595 | Upside: 24 percent | Abbott’s topline is expected to grow in double digits, backed by strong performance of its power brands with 13 of its top 20 brands being top-ranked in their respective categories. The company’s ability to develop mega brands amidst a highly competitive landscape is one of its key strengths. Abbott has a sturdy new products pipeline along with strong pipeline of recently launched products which would drive the growth going ahead. Further efforts to reduce dependence on external manufacturing by shifting production of few key products to the company’s Goa plant is likely to increase efficiencies and lead to margin expansion. Retain buy recommendation on the stock with an unchanged price target of Rs 19,425.
Aarti Industries | LTP: Rs | Sharekhan believes that Aarti Industries would be a key beneficiary of China substitute factor, rising domestic demand for specialty chemicals and potential for robust growth in pharma segment (commercialise ongoing APIs and intermediates in next 2-3 quarters). Broking firm thus remain structurally positive on Aarti Industries’ growth prospects and expect strong EBITDA/PAT CAGR of 20/21% over FY2020-FY2023E. Recommend buy on Aarti Industries with a price target of Rs 1,210.
Aarti Industries | LTP: Rs 1101 | Upside: 10 percent | Sharekhan believes that Aarti Industries would be a key beneficiary of China substitute factor, rising domestic demand for specialty chemicals and potential for robust growth in pharma segment (commercialise ongoing APIs and intermediates in next 2-3 quarters). Broking firm thus remain structurally positive on Aarti Industries’ growth prospects and expect strong EBITDA/PAT CAGR of 20/21% over FY2020-FY2023E. Recommend buy on Aarti Industries with a price target of Rs 1,210.
Bata India | LTP: Rs | Bata is focusing on expanding its presence through e-commerce/omni-channel and innovating its product portfolio with new relevant variants to drive growth in the medium to long term. Further, the company will benefit from the shift from non-branded to branded products. Bata is a debt-free company with strong cash balance of close to Rs 800 crore, which along with negative working capital and improving store fundamentals will help the company take care of its near-term expansion plans without any disruptions. Recommend buy on the stock with a price target of Rs 1,550.
Bata India | LTP: Rs 1355 | Upside: 14 percent. Bata is focusing on expanding its presence through e-commerce/omni-channel and innovating its product portfolio with new relevant variants to drive growth in the medium to long term. Further, the company will benefit from the shift from non-branded to branded products. Bata is a debt-free company with strong cash balance of close to Rs 800 crore, which along with negative working capital and improving store fundamentals will help the company take care of its near-term expansion plans without any disruptions. Recommend buy on the stock with a price target of Rs 1,550.
Indraprastha Gas | LTP: Rs | Sharekhan increased FY2021 earnings estimates to factor in faster-than-expected volume recovery for CNG business and have fine-tuned FY2022-FY2023 earnings estimates. The sharp recovery in CNG volumes gives the confidence with respect to normalisation of gas sales volume by Q4FY2021 and focus would shift back of volume growth and margin expansion (given the recent sharp cut in domestic gas price to $1.79/mmbtu) Moreover, IGL’s expansion into new geographical areas (GAs) of Rewari, Karnal, and Gurugram and recent win of three new GAs under the 10th CGD bidding round would accelerate medium to long-term volume growth. Recommend buy on IGL with a price target of Rs 517.
Indraprastha Gas | LTP: Rs 435 | Upside: 19 percent | Sharekhan increased FY2021 earnings estimates to factor in faster-than-expected volume recovery for CNG business and have fine-tuned FY2022-FY2023 earnings estimates. The sharp recovery in CNG volumes gives the confidence with respect to normalisation of gas sales volume by Q4FY2021 and focus would shift back of volume growth and margin expansion (given the recent sharp cut in domestic gas price to $1.79/mmbtu) Moreover, IGL’s expansion into new geographical areas (GAs) of Rewari, Karnal, and Gurugram and recent win of three new GAs under the 10th CGD bidding round would accelerate medium to long-term volume growth. Recommend buy on IGL with a price target of Rs 517.
Finolex Cables | LTP: Rs | Company management indicated that the unlocking across country are leading to improving business sentiments. Sharekhan believe the company’s operations are further expected to improve as supply chain improves further with an improving demand environment and rising infrastructure investments. Further, the COVID-19 led impact on unorganized players provides the company to increase its market share. Finolex’s strong balance sheet and net cash position provides comfort in the present environment. Retain buy rating on the stock with an unchanged price target of Rs 360.
Finolex Cables | LTP: Rs 276 | Upside: 30 percent | Company management indicated that the unlocking across country are leading to improving business sentiments. Sharekhan believe the company’s operations are further expected to improve as supply chain improves further with an improving demand environment and rising infrastructure investments. Further, the COVID-19 led impact on unorganized players provides the company to increase its market share. Finolex’s strong balance sheet and net cash position provides comfort in the present environment. Retain buy rating on the stock with an unchanged price target of Rs 360.
Gail India | LTP: Rs 93 | Upside: 33 percent | Sharekhan lowered FY2021 earnings estimates to factor in loss in the gas trading business and have fine-tuned FY2022-FY2023 earnings estimates. It expect earnings to recover over FY2022E-FY2023E, as volumes has largely reached normal level and higher demand from the fertiliser plant would address concerns of marketing of US LNG contracts and stabilise earnings of the gas marketing business. Recommend buy on GAIL with a price target of Rs 124.
Gail India | LTP: Rs 93 | Upside: 33 percent | Sharekhan lowered FY2021 earnings estimates to factor in loss in the gas trading business and have fine-tuned FY2022-FY2023 earnings estimates. It expect earnings to recover over FY2022E-FY2023E, as volumes has largely reached normal level and higher demand from the fertiliser plant would address concerns of marketing of US LNG contracts and stabilise earnings of the gas marketing business. Recommend buy on GAIL with a price target of Rs 124.
Rakesh Patil
first published: Nov 17, 2020 12:03 pm

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