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10 long term buying ideas by Sharekhan for 11-37% upside

Titan Company, HCL Tech, HPCL and Repco Home Finance are among the stocks that the brokerage is bullish on.

January 28, 2021 / 01:15 PM IST
Sensex
On January 27, the market remained in a tight grip of the bears which pulled the Nifty below 13,950 and the Sensex by 1,000 points intraday. We have collated a list of long term buying ideas from the broking house Sharekhan that have come in January with a time horizon of more than 12 months. These long term ideas could give an upside of 11-37 percent calculated from the closing of January 27, 2021.
Century Plyboards | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 295 | Upside: percent. Century Plyboards is expected to benefit from strong traction seen in residential segment pan-India. The central government’s focus on affordable housing and various state government incentives to the residential housing sector is expected to maintain the momentum going forward. We expect Century to benefit in FY2022 from a low base and structural demand growth drivers in the affordable housing segment as pent-up demand gradually eases out. The company has key positive triggers lying ahead in terms of the government’s plans of enhancing domestic manufacturing and making it globally competitive.
Century Plyboards | Rating: Buy | LTP: Rs 265.75 | Target: Rs 295 | Upside: 11 percent. Century Plyboards is expected to benefit from strong traction seen in the residential segment pan-India. The government’s focus on affordable housing and various state governments' incentives to the residential housing sector are expected to maintain the momentum. The brokerage expects Century to benefit in FY2022 from a low base and structural demand growth drivers in the affordable housing segment as pent-up demand gradually eases out. The company has key positive triggers lying ahead in terms of the government’s plans of enhancing domestic manufacturing and making it globally competitive, it said.
Titan Company
Titan Company | Rating: Buy | LTP: Rs 1,440.70 | Target: Rs 1,710 | Upside: 18 percent. For Titan’s jewellery business, the festive demand momentum continued to fetch benefits. The brokerage expects a double-digit growth trajectory in the jewellery business to hold with sustained higher demand for wedding jewellery. In the eyewear business, the focus is on improving the profitability while in watches the focus is more on achieving sustainable revenue growth in the coming years. Overall, we expect Titan to benefit from people shifting to trusted brands and market share gains.
Arvind | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 68 | Upside: percent. Arvind will be one of the key beneficiaries of government revamped focus on improving the textile industry’s growth prospects and higher demand for textile products in international markets. We expect strong recovery in FY2022, driven by strong recovery in the B2C retail industry in the domestic market, sustained growth in the AMD space, and improving demand in export markets. Improved visibility of sustainable revenue growth and better margins in the coming years would be key re-rating triggers for the stock.
Arvind | Rating: Buy | LTP: Rs 49.65 | Target: Rs 68 | Upside: 37 percent. Arvind will be one of the key beneficiaries of the government's revamped focus on improving the textile industry’s growth prospects and higher demand for textile products in international markets. We expect a strong recovery in FY2022, driven by a strong recovery in the B2C retail industry in the domestic market, sustained growth in the AMD space and improving demand in export markets. Improved visibility of sustainable revenue growth and better margins in the coming years would be key re-rating triggers for the stock.
SRF | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 6,760| Upside: percent. SRF’s capex intensity focuses on the specialty chemical business, which would drive sustainable double-digit earnings growth and re-rating as share of high-growth specialty chemical business would increase over next few years. Robust earnings growth outlook (expect 23% PAT CAGR over FY2021E-FY202E), strong return ratio (RoE/RoCE of 20%/21%), and robust cash flows (to support the growth plan) keep us constructive on medium to long-term growth prospects of SRF.
SRF | Rating: Buy | LTP: Rs 5,361.70 | Target: Rs 6,760| Upside: 26 percent. SRF’s capex intensity focuses on the specialty chemical business, which would drive sustainable double-digit earnings growth and re-rating as the share of high-growth specialty chemical business would increase over next few years. Robust earnings growth outlook (expect 23% PAT CAGR over FY2021E-FY202E), strong return ratio (RoE/RoCE of 20%/21%), and robust cash flows (to support the growth plan) keep us constructive on medium to long-term growth prospects of SRF.
Vinati Organics | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,550 | Upside: percent. Vinati Organics’ dominant global market share in ATBS/IBB segments, a pipeline of 12 new products in R&D phase and massive export opportunities in specialty chemical sector (amid China plus one strategy by global customers) would drive sustained long-term high double-digit earnings growth. Moreover, concerns on ATBS demand and margins are also expected to recede as strong global economic recovery has led to sharp rise in oil price.
Vinati Organics | Rating: Buy | LTP: Rs 1,187.95 | Target: Rs 1,550 | Upside: 30 percent. Vinati Organics’ dominant global market share in ATBS/IBB segments, a pipeline of 12 new products in R&D phase and massive export opportunities in the specialty chemical sector (amid China plus one strategy by global customers) would drive sustained long-term high double-digit earnings growth. Moreover, concerns over ATBS demand and margins are also expected to recede as a strong global economic recovery has led to a sharp rise in oil price.
Repco Home Finance | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 330 | Upside: percent. Repco has focused on niche, small-ticket, non- salaried home loans, resulting in higher spreads for the company, along with reasonably controlled Asset quality. Going forward, we believe margins to sustain as disbursement growth picks up spreads could moderate given competition and pressure on yields. We expect EPS growth to clock a ~10% CAGR over FY20-23E, with stable asset quality. A strong business model, stable ratings and strong historical underwriting, with attractive return ratios make RHFL among the attractive players in the niche Housing financing space, and we believe that with economic recovery demand along with resilient rural economy brighten the growth outlook.
Repco Home Finance | Rating: Buy | LTP: Rs 247.45 | Target: Rs 330 | Upside: 33 percent. Repco has focused on niche, small-ticket, non- salaried home loans, resulting in higher spreads for the company, along with reasonably controlled asset quality. We believe margins will sustain as disbursement growth picks up, spreads could moderate, given competition and pressure on yields. We expect EPS growth to clock a ~10% CAGR over FY20-23E, with stable asset quality. A strong business model, stable ratings and strong historical underwriting, with attractive return ratios make RHFL among the attractive players in the niche housing financing space, and we believe that with the recovery, demand, along with a resilient rural economy, brightens the growth outlook.
 (Image: HCL)
HCL Technologies | Rating: Buy | LTP: Rs 955.50 | Target: Rs 1,250 | Upside: 30 percent. We have raised earnings estimates for FY2021E/FY2022E/FY2023E, to factor in strong all-round Q3 results, strong deal wins, robust deal pipeline and improving spends on digital transformation. The brokerage believes that HCL Tech’s capabilities in infrastructure and application will support its growth in a strong cloud adoption environment. The company would return to the industry-level growth trajectory in the next few years on the back of capabilities in the digital foundation, consistent in deal wins and traction for its products portfolio.
HPCL | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 275 | Upside: percent. We expect healthy dividend yield of 7% on account of strong earnings growth and completion of capex cycle (refinery expansion at Mumbai, Vizag, and new refinery in Rajasthan) to improve FCF generation from FY2023. HPCL’s attractive valuation across valuation parameters and potential re-rating of the marketing business (in case of successful completion of privatisation of BPCL) makes us constructive on HPCL. We see risk reward favourable, given earnings visibility, attractive valuation and healthy dividend yield.
HPCL | Rating: Buy | LTP: Rs 216.65 | Target: Rs 275 | Upside: 27 percent. The brokerage expects a healthy dividend yield of 7% on account of strong earnings growth and completion of the capex cycle (refinery expansion at Mumbai, Vizag, and new refinery in Rajasthan) to improve FCF generation from FY2023. HPCL’s attractive valuation across valuation parameters and potential re-rating of the marketing business (in case of successful completion of privatisation of BPCL) makes the brokerage constructive on HPCL. It sees risk-reward favourably, given earnings visibility, attractive valuation and a healthy dividend yield.
Mastek | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,300 | Upside: percent. Though the abrupt exit of Mr. John Owen might have some impact on UK business in the medium term because of his incomplete work, we believe the company would manage growth momentum given its multi-layer relationships with UK public accounts and deep relationship with the UK government. The company also has UK citizen employees at the top level and a recovery in the UK’s private sector would also help. Further, Evosys is well-poised to deliver strong growth in next 2-3 years led by strong traction for Cloud-related technologies.
Mastek | Rating: Buy | LTP: Rs 1,123.50 | Target: Rs 1,300 | Upside: 15 percent. Though the abrupt exit of  John Owen might have some impact on UK business in the medium term because of his incomplete work, the company would manage growth momentum, given its multi-layer relationships with the UK public accounts and deep relationship with the government. The company also has UK citizen employees at the top level and a recovery in the country's private sector would also help. Further, Evosys is well-poised to deliver strong growth in the next two-three years led by strong traction for Cloud-related technologies.
Tata Consumer Products | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 685 | Upside: percent. Company’s management near term focus on smooth integration of Tata Chemical’s consumer business and building a large consumer business in the domestic market. In the near term the focus will be on increasing growing the new ventures such as retail coffee and water beverages business and entering into new categories through relevant new launches in view of expected improvement in the out-of-consumption. The company is well-poised to achieve double-digit revenue and PAT growth of 11% and 23% respectively over FY2020-23 with a gradual improvement in OPM.
Tata Consumer Products| Rating: Buy | LTP: Rs 572.65 | Target: Rs 685 | Upside: 19 percent. The management's near-term focus will be on smooth integration of Tata Chemical’s consumer business and building a large consumer business in the domestic market. In the near term, the focus will be on increasing growth in new ventures such as retail coffee and water beverages business and entering into new categories through relevant new launches in view of the expected improvement in the out-of-consumption. The company is well-poised to achieve double-digit revenue and PAT growth of 11% and 23% respectively over FY2020-23 with a gradual improvement in OPM.
Rakesh Patil
first published: Jan 28, 2021 09:58 am

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