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Budget 2021

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Sharekhan picks these 10 stocks for a upside of up to 42%

Amara Raja Batteries, Maruri Suzuki, UPL and Strides Pharma Science are among the top 10 picks of Sharekhan.

December 24, 2020 / 12:53 PM IST
Sensex
Extending the gains into the second consecutive session, headline indices the Sensex and Nifty ended with healthy gains on December 23 amid mixed global cues. The Sensex was 437 points, or 0.95 percent, higher at 46,444.18, and the Nifty settled 135 points, or 1 percent, higher at 13,601.10. Here are 10 stocks brokerage firm Sharekhan is betting on:
Mahindra Logistics | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 490 | Upside: percent. Expect company to benefit from improved growth outlook in auto segment coupled with strong growth momentum in its non M&M business (driven by E-commerce and consumer segments). The company’s continuous addition of warehousing capacities along with flexi warehousing to cater to short term demand is expected to improve its margin profile and return ratios keeping the balance sheet healthy. Broking house belives that the company is on the right path of improving its earnings growth trajectory going ahead.
Mahindra Logistics | Rating: Buy | LTP: Rs 401 | Target: Rs 490 | Upside: 22 percent. Expect the company to benefit from an improved growth outlook in the auto segment coupled with strong growth momentum in its non-M&M business (driven by E-commerce and consumer segments). The company’s continuous addition of warehousing capacities along with flexi warehousing to cater to short term demand is expected to improve its margin profile and return ratios keeping the balance sheet healthy. Broking house believes that the company is on the right path of improving its earnings growth trajectory going ahead.
Bata India | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,765 | Upside: percent. Sharekhan fine-tunned its earnings estimates for FY2021/FY2022/FY2023 to factor in higher-than-earlier expected sales in H2FY2021 with pick-up in festive demand and optimism building up towards launch of the vaccine in early FY2022. 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. The government is also regulating the cheap import of footwear (including leather footwear), which augurs well for the company from a long-term perspective.
Bata India | Rating: Buy | LTP: Rs 1,521 | Target: Rs 1,765 | Upside: 16 percent. Sharekhan fine-tuned its earnings estimates for FY2021/FY2022/FY2023 to factor in higher-than-earlier expected sales in H2FY2021 with a pick-up in festive demand and optimism building up towards the launch of a COVID-19 vaccine in early FY2022. Bata is focusing on expanding its presence through e-commerce/omnichannel 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. The government is also regulating the cheap import of footwear (including leather footwear), which augurs well for the company from a long-term perspective.
Amara Raja Batteries | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,060 | Upside: percent. The company is witnessing recovery in automotive and industrial demand. The outlook remains positive with strong recovery expected from FY2022, driven by normalisation of economic activities. Operating profit margins would expand on back of operating leverage and costcontrol measures. Broking firm retained its earnings estimates, however, have increased target P/E multiple, given improved business outlook.
Amara Raja Batteries | Rating: Buy | LTP: Rs 923 | Target: Rs 1,060 | Upside: 15 percent. The company is witnessing recovery in automotive and industrial demand. The outlook remains positive with strong recovery expected from FY2022 driven by normalisation of economic activities. Operating profit margins would expand on the back of operating leverage and cost control measures. Broking firm retained its earnings estimates, however, have increased target P/E multiple, given improved business outlook.
L&T Finance Holding | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 120 | Upside: percent. The stock has seen significant derating in the past two years due to challenges faced by most players in the NBFC sector. Hence, despite the recent up move, the stock is still down by ~31% from its highs and is still at a discount to valuations enjoyed by larger peers. If things improve from here, in terms of asset quality and growth outlook, Sharekhan believe there is big room for further re-rating for LTFH. Going forward, factors such as LTFH’s well-capitalised balance sheet (Consolidated Tier 1 at 17.29%; board approval for Rs. 3,000 crore rights issue), improving outlook on disbursements and margins, and provision buffer are positive cushions against medium-term challenges.
L&T Finance Holding | Rating: Buy | LTP: Rs 85.40 | Target: Rs 120 | Upside: 40 percent. The stock has seen significant derating in the past two years due to challenges faced by most players in the NBFC sector. Hence, despite the recent up move, the stock is still down by 31% from its highs and is still at a discount to valuations enjoyed by larger peers. If things improve from here, in terms of asset quality and growth outlook, Sharekhan believess there is big room for further re-rating for LTFH. Going forward, factors such as LTFH’s well-capitalised balance sheet (Consolidated Tier 1 at 17.29%; board approval for Rs. 3,000 crore rights issue), improving outlook on disbursements and margins, and provision buffer are positive cushions against medium-term challenges.
Solara Active Pharma Sciences | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,450 | Upside: percent. Solara is witnessing a strong demand environment for its business with the API business likely to benefit from the “China +1” strategy being adopted by global pharma companies. This coupled with the company’s strong customer relationship and capabilities, new product launches, commissioning of Vizag plant (Phase I) would support growth and provides ample confidence on achieving the management’s guidance of 30% topline growth and 40% EBITDA growth for FY2021. The company’s emphasis on growing the CRAMS business bodes well, though it would bear fruits over the medium term and would support the double-digit growth trajectory.
Solara Active Pharma Sciences | Rating: Buy | LTP: Rs 1,161 | Target: Rs 1,450 | Upside: 25 percent. Solara is witnessing a strong demand environment for its business with the API business likely to benefit from the “China +1” strategy being adopted by global pharma companies. This coupled with the company’s strong customer relationship and capabilities, new product launches, commissioning of Vizag plant (Phase I) would support growth and provides ample confidence on achieving the management’s guidance of 30% topline growth and 40% EBITDA growth for FY2021. The company’s emphasis on growing the CRAMS business bodes well, though it would bear fruits over the medium term and would support the double-digit growth trajectory.
KNR Constructions | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 367 | Upside: percent. The company is expected to be one of the key beneficiaries from the government’s planned investments in the road sector up to FY2025. An already strong order backlog, normalising labour availability, increasing industry tendering, rising toll collections and improving balance sheet are some growth levers, which can lead to earnings upgrade for the company going ahead.
KNR Constructions | Rating: Buy | LTP: Rs 332 | Target: Rs 367 | Upside: 10 percent. The company is expected to be one of the key beneficiaries from the government’s planned investments in the road sector up to FY2025. An already strong order backlog, normalising labour availability, increasing industry tendering, rising toll collections and improving balance sheet are some growth levers, which can lead to earnings upgrade for the company going ahead.
Maruti Suzuki | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 8,500 | Upside: percent. Company is witnessing strong recovery in domestic demand with sales volume in the festive season. Sales enquiry is strong even after the festive season, underpinning our view of genuine demand in the PV segment. Expect strong recovery from FY2022, driven by normalisation of economic activity. Margins are expected to improve, driven by operating leverage and cost-control measures.
Maruti Suzuki | Rating: Buy | LTP: Rs 7,395 | Target: Rs 8,500 | Upside: 15 percent. Company is witnessing strong recovery in domestic demand with sales volume in the festive season. Sales enquiry is strong even after the festive season, underpinning our view of genuine demand in the PV segment. Expect strong recovery from FY2022, driven by normalisation of economic activity. Margins are expected to improve, driven by operating leverage and cost-control measures.
UPL | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 632 | Upside: percent. UPL’s stock price has corrected by 12% since mid-September and is down 23% from its 52-week high despite improved earnings outlook (expect a CAGR of 16% in PAT over FY2020-FY2023E; RoE of 16- 17%) led by strong growth across regions and rise in margins. The recent fall in the stock price provides a good entry point as valuations are attractive at 9.8x its FY2023E EPS (discount of 26% to historical average one-year forward PE of 13.2x) despite robust growth outlook and potential re-rating from balance sheet deleveraging.
UPL | Rating: Buy | LTP: Rs 444 | Target: Rs 632 | Upside: 42 percent. UPL’s stock price has corrected by 12% since mid-September and is down 23% from its 52-week high despite improved earnings outlook (expect a CAGR of 16% in PAT over FY2020-FY2023E; RoE of 16- 17%) led by strong growth across regions and rise in margins. The recent fall in the stock price provides a good entry point as valuations are attractive at 9.8x its FY2023E EPS (discount of 26% to the historical average one-year forward PE of 13.2x) despite robust growth outlook and potential re-rating from balance sheet deleveraging.
KPR Mill | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 980 | Upside: percent. Broking firm increased its earnings estimates for FY2022/23 by 4% and 12% to factor in the impact of capacity augmentation. The stock has given a handsome of return of ~27% in last two months. The increase in garmenting capacity, improving growth prospects in exports markets backed strong government reforms and focus on adding value-added products provides a further upside to the stock with better earnings visibility.
KPR Mill |  Rating: Buy | LTP: Rs 880 | Target: Rs 980 | Upside: 11 percent. Broking firm increased its earnings estimates for FY2022/23 by 4% and 12% to factor in the impact of capacity augmentation. The stock has given a handsome return of 27% in last two months. The increase in garmenting capacity, improving growth prospects in exports markets backed strong government reforms and focus on adding value-added products provides a further upside to the stock with better earnings visibility.
Cummins India | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 690 | Upside: percent. Cummins, being the market leader, is in a sweet spot to leverage on gradual pickup in demand in the power generation segment (HHP and mid horse power diesel gensets), led by infrastructure, commercial real estate, data centres, and 5G rollout. Further, the industrial segment’s sales will be driven by demand from railways, metro, road (compressors), and bottoming out of diesel generator demand for water well rigs. Improvement in core business and increased outsourcing of maintenance services by clients are expected to boost the distribution business.
Cummins India | Rating: Buy | LTP: Rs 576 | Target: Rs 690 | Upside: 20 percent. Cummins, being the market leader, is in a sweet spot to leverage on gradual pickup in demand in the power generation segment (HHP and mid horsepower diesel gensets), led by infrastructure, commercial real estate, data centres, and 5G rollout. Further, the industrial segment’s sales will be driven by demand from railways, metro, road (compressors), and bottoming out of diesel generator demand for water well rigs. Improvement in core business and increased outsourcing of maintenance services by clients are expected to boost the distribution business.
Strides Pharma Science | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 980 | Upside: percent. Company is witnessing improved traction across its business segments, which is expected to sustain going ahead. Performance is expected to be driven by sturdy growth across segments of regulated and emerging markets. In the recent past, the company has re-entered the high-value sterile injectables space, which offers substantial growth potential, albeit over the medium term. The areas of bio-pharmaceuticals and bio-similar are expected to pick up gradually and would contribute to the topline in FY2023 with a meaningful contribution likely from FY2024. A strong product pipeline, growth in the base business, and expected traction in new product launches would result in strong growth in the US business.
Strides Pharma Science | Rating: Buy | LTP: 768 Rs | Target: Rs 980 | Upside: 27 percent. Company is witnessing improved traction across its business segments, which is expected to sustain going ahead. Performance is expected to be driven by sturdy growth across segments of regulated and emerging markets. In the recent past, the company has re-entered the high-value sterile injectables space, which offers substantial growth potential, albeit over the medium term. The areas of bio-pharmaceuticals and bio-similar are expected to pick up gradually and would contribute to the topline in FY2023 with a meaningful contribution likely from FY2024. A strong product pipeline, growth in the base business, and expected traction in new product launches would result in strong growth in the US business.
Rakesh Patil
first published: Dec 23, 2020 10:54 am

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