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AnandRathi bets on these 10 stocks for 10-30% upside

Balkrishna Industries, Firstsource Solutions, Greenply Industries, MRF and TTK Prestige are among 10 stocks on Anand Rathi's radar

February 13, 2021 / 01:20 PM IST
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Indian market saw some consolidation this week but ended with a percent gain on the back of robust quarterly reports from India Inc and continued FII support. Despite the recent-up in equities,  broking house Anand Rathi sees an upside of up to 30 percent in these 10 stocks.
Kirloskar Oil Engines | Rating: Buy | LTP: Rs 147.85 | Target: Rs 193 | Upside: 30 percent. Driven by 44%/63% y/y growth in its Agriculture/Industrials divisions, Kirloskar Oil Engines’ Q3 FY21 Rs 8 bn revenue was better than expected (ARe: Rs7.5bn). Industrials revenue growth was driven by strong demand from all its sub-segments aided by advance buying of BS-III engines. Agriculture revenue growth was led by crop irrigation pumps, farm mechanisation, tractor parts and exports. Power generation (PG) was dented by weak execution in railways. Based on the strong outlook for agri and industrials and likely improvement in PG in the near to medium term, we raise our FY21e/FY22e earnings 28%/ 31%.
Kirloskar Oil Engines | Rating: Buy | LTP: Rs 147.85 | Target: Rs 193 | Upside: 30 percent. Driven by 44%/63% YoY growth in its Agriculture/Industrials divisions, Kirloskar Oil Engines’ Q3 FY21 Rs 8 billion revenue was better than expected. Industrials revenue growth was driven by strong demand from all its sub-segments aided by advance buying of BS-III engines. Agriculture revenue growth was led by crop irrigation pumps, farm mechanisation, tractor parts and exports. Power generation (PG) was dented by weak execution in railways. Based on the strong outlook for agri and industrials and likely improvement in PG in the near to medium term, we raise our FY21e/FY22e earnings 28%/ 31%.
MRF | Rating: Buy | LTP: Rs 91,278.05 | Target: Rs 1,04,823 | Upside: 15 percent. We continue to remain positive regarding the outlook for MRF as demand for TBRs PCRs and two-wheelers have started to return. We expect demand to continue in the following quarters, barring production issues. With operations normalising at MRF, we expect strong revenue growth in FY22.
MRF | Rating: Buy | LTP: Rs 91,278.05 | Target: Rs 1,04,823 | Upside: 15 percent. We continue to remain positive on MRF as demand for TBRs PCRs and two-wheelers have started to return. We expect demand to continue in the following quarters, barring production issues. With operations normalising at MRF, we expect strong revenue growth in FY22.
Suven Pharmaceuticals | Rating: Buy | LTP: Rs 490.35 | Target: Rs 594 | Upside: 21 percent. Strong 53.8%/96.2% sales/PAT growth in Q3 FY21 led to full recovery for Suven’s 9M FY21, otherwise hit by the Covid pandemic. Its 50% EBITDA margin expanded 568bps y/y due to more supplies for clinical stage molecules. Management has maintained its FY21 overall 15-20% profit growth guidance. We expect a strong, 20.1%, CAGR over FY20-23 in sales, driven by more orders, initiating commercial supplies for two specialty-chemicals products and one in the pharmaceutical division, and the launch of 3-5 formulations products a year.
Suven Pharmaceuticals | Rating: Buy | LTP: Rs 490.35 | Target: Rs 594 | Upside: 21 percent. Strong 53.8%/96.2% sales/PAT growth in Q3 FY21 led to full recovery for Suven’s 9M FY21, otherwise hit by the pandemic. Its 50% EBITDA margin expanded 568bps y/y due to more supplies for clinical stage molecules. Management has maintained its FY21 overall 15-20% profit growth guidance. We expect a strong, 20.1%, CAGR over FY20-23 in sales, driven by more orders, initiating commercial supplies for two specialty-chemicals products and one in the pharmaceutical division, and the launch of 3-5 formulations products a year.
Greenply Industries | Rating: Buy | LTP: Rs 164.40 | Target: Rs 192 | Upside: 17 percent. With near normal plywood volumes and good margins, Greenply’s Q3 was decent. Operation/market-related issues hurt Gabon (should pick up). Tight WC continued to support liquidity positions. Management retained its guidance of ~14% EBITDA margin and debt-free status by FY23. We introduce FY23e and expect 8%/15% CAGRs in revenue/adj. PAT over FY20-23.
Greenply Industries | Rating: Buy | LTP: Rs 164.40 | Target: Rs 192 | Upside: 17 percent. With near normal plywood volumes and good margins, Greenply’s Q3 was decent. Operation/market-related issues hurt Gabon (should pick up). Tight WC continued to support liquidity positions. Management retained its guidance of 14% EBITDA margin and debt-free status by FY23. We introduce FY23e and expect 8%/15% CAGRs in revenue/adj. PAT over FY20-23.
J Kumar Infraprojects | Rating: Buy | LTP: Rs 189.15 | Target: Rs 239 | Upside: 26 percent. With each passing quarter, execution efficiency continues to recover from the Covid-led disruptions. Revenue assurance and the balance sheet, the two other key requisites for any infrastructure name, too, are buoyant. Consequently, the stage seems set for inspiring times ahead.
J Kumar Infraprojects | Rating: Buy | LTP: Rs 189.15 | Target: Rs 239 | Upside: 26 percent. With each passing quarter, execution efficiency continues to recover from the COVID-led disruptions. Revenue assurance and the balance sheet, the two other key requisites for any infrastructure name, too, are buoyant. Consequently, the stage seems set for inspiring times ahead.
Firstsource Solutions | Rating: Buy | LTP: Rs 97.45 | Target: Rs 121 | Upside: 24 percent. Company had $185m revenues, up 16% q/q, 26% y/y, scaling up fast, driven by BFS/mortgage (up 16% q/q, 53% y/y), CMT (up 26% q/q, 18% y/y) and Healthcare (up 8% q/q, down 2% y/y). BFSI (cyclical) and CMT (driven by normalization) may ease in FY22 but HPHS (augmented by PatientMatters) will likely accelerate, ensuring 6-7% growth in FY22. For FY21, guidance was raised to 16-17% CC (from 9-12%).
Firstsource Solutions | Rating: Buy | LTP: Rs 97.45 | Target: Rs 121 | Upside: 24 percent. Company had $185m revenues, up 16% q/q, 26% y/y, scaling up fast, driven by BFS/mortgage (up 16% q/q, 53% y/y), CMT (up 26% q/q, 18% y/y) and Healthcare (up 8% q/q, down 2% y/y). BFSI (cyclical) and CMT (driven by normalization) may ease in FY22 but HPHS (augmented by PatientMatters) will likely accelerate, ensuring 6-7% growth in FY22. For FY21, guidance was raised to 16-17% CC (from 9-12%).
Star Cement | Rating: Buy | LTP: Rs 95.80 | Target: Rs 124 | Upside: 29 percent. The logistics issue and high exceptional cost hurt Star’s volumes and profits. With a healthy demand-pricing outlook, the Siligudi GU ramp-up would enhance volume growth and cost savings with rationalised logistics/raw-material procurement. The environment clearance continues for the Meghalaya clinker unit. The strong net cash B/S continues positive.
Star Cement | Rating: Buy | LTP: Rs 95.80 | Target: Rs 124 | Upside: 29 percent. The logistics issue and high exceptional cost hurt Star’s volumes and profits. With a healthy demand-pricing outlook, the Siligudi GU ramp-up would enhance volume growth and cost savings with rationalised logistics/raw-material procurement. The environment clearance continues for the Meghalaya clinker unit. The strong net cash B/S continues positive.
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Nilkamal | Rating: Buy | LTP: Rs 1,879.80 | Target: Rs 2,206 | Upside: 17 percent. Good demand from logistics/e-commerce sectors, market-share gains from informal sector, healthy margin (cost-controls, OpLev benefits) and liquidity were key highlights of Nilkamal’s Q3 performance. On the robust outlook for non-plastic furniture, it is investing in new sales channels and manufacturing ability. After weak revenue growth (4%) over FY14-20, we see bright prospects due to market-share gains, sharper focus on non-plastic furniture/online sales, rising industrial activity and deeper penetration in e-commerce.
TTK Prestige | Rating: Buy | LTP: Rs 7,389.85 | Target: Rs 8,181 | Upside: 10 percent. The strong y/y performances in all its categories were highlights of TTK’s Q3 FY21. The blended ~ 9% price hike supported the 280bp EBITDA margin expansion. With the demand outlook robust even in Jan’21, TTK is well-placed to capitalise on growth opportunities as supply-side constraints have eased in the quarter. After its robust performance in Q3 FY21, we have raised our FY21e-FY23e PAT ~ 28%, as we factor in the improving demand scenario.
TTK Prestige | Rating: Buy | LTP: Rs 7,389.85 | Target: Rs 8,181 | Upside: 10 percent. The strong y/y performances in all its categories were highlights of TTK’s Q3 FY21. The blended ~ 9% price hike supported the 280bp EBITDA margin expansion. With the demand outlook robust even in Jan’21, TTK is well-placed to capitalise on growth opportunities as supply-side constraints have eased in the quarter. After its robust performance in Q3 FY21, we have raised our FY21e-FY23e PAT ~ 28%, as we factor in the improving demand scenario.
Balkrishna Industries | Rating: Buy | LTP: Rs 1,655.15 | Target: Rs 1,946 | Upside: 17 percent. Driven by robust pent-up demand in the agricultural sector across regions, Balkrishna’s growth momentum continues strong. Also, its backward integration at plants led to the better margin profile and continues to contribute to earnings.
Balkrishna Industries | Rating: Buy | LTP: Rs 1,655.15 | Target: Rs 1,946 | Upside: 17 percent. Driven by robust pent-up demand in the agricultural sector across regions, Balkrishna’s growth momentum continues strong. Also, its backward integration at plants led to the better margin profile and continues to contribute to earnings.
Rakesh Patil
first published: Feb 13, 2021 01:19 pm

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