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UltraTech Cement, L&T and Infosys among 10 stocks that could give double-digit returns

While the investors are in wait-and-watch mode ahead of the Budget 2021, scheduled to be announced on February 1, brokerages are betting on 10 stocks for the long term

January 27, 2021 / 12:17 PM IST
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On January 25, benchmark indices fell for the third straight session amid selling in heavyweights and fresh dispute between India and China at Sikkim border. The Sensex shed 530.95 points or 1.09% at 48,347.59, while Nifty was down 133 points or 0.93% at 14,238.90. While the investors are in wait-and-watch mode ahead of the Budget 2021, scheduled to be announced on February 1, brokerages are betting on 10 stocks for the long term:
Piramal Enterprises | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 1,750 | Upside: percent. Over the past year, the company has executed on all strategic priorities such as reducing Balance Sheet leverage, trimming large exposures, and curtailing loan growth. Going forward, loan growth would accrue from the Retail Lending business. With the team, analytics, infrastructure, etc. well in place, PIEL is poised to grow this business significantly over the medium-to-long term.
Piramal Enterprises | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,466.80 | Target: Rs 1,750 | Upside: 19 percent. Over the past year, the company has worked on all strategic priorities such as reducing Balance Sheet leverage, trimming large exposures, and curtailing loan growth. Going forward, loan growth would accrue from the Retail Lending business. With the team, analytics, infrastructure, etc. well in place, PIEL is poised to grow this business significantly over the medium-to-long term.
Esab India | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 2,230 | Upside: percent. Overall, the company is expected to further strengthen its leadership position through value added new product offerings, penetrating automation and robotics products in the welding industry, which will drive growth and help gain market share. Esab’s debt free status would help further enhance its return ratios and operating cash flows earnings momentum and superior margins in the long run led by cost efficiencies, product mix and global capabilities through Colfax Corp.
Esab India | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 1,810.75 | Target: Rs 2,230 | Upside: 23 percent. Overall, the company is expected to further strengthen its leadership position through value added new product offerings, penetrating automation and robotics products in the welding industry, which will drive growth and help gain market share. Esab’s debt free status would help further enhance its return ratios and operating cash flows earnings momentum and superior margins in the long run led by cost efficiencies, product mix and global capabilities through Colfax Corp.
Infosys| Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 1,600 | Upside: percent. Performance during the quarter is indicative of company’s technical capabilities and strong sales team presence in the market. Growth over the near term would be driven by USD12b deal wins (net new wins of USD8b). We expect company to be a key beneficiary of a recovery in IT spends in FY22. Our relative preference for Infosys over TCS is premised on its headroom for increase growth potential, which was further reinforced by this result.
Infosys | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,322.60 | Target: Rs 1,600 | Upside: 21 percent. Performance during the quarter is indicative of company’s technical capabilities and strong sales team presence in the market. Growth over the near term would be driven by USD12b deal wins (net new wins of USD8b). We expect company to be a key beneficiary of a recovery in IT spends in FY22. Our relative preference for Infosys over TCS is premised on its headroom for increase growth potential, which was further reinforced by this result.
CESC | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 873 | Upside: percent. Subdued power demand has impacted the profitability of CESC’s businesses in the near term. However, the medium-term story remains intact. Dhariwal has turned profitable, and the performances of DFs should continue to improve as the comapny gains a better understanding of the circles and leverages from its experience in Kolkata. Untied generation capacity and scale-up of DFs have the potential to boost earnings.
CESC | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 628 | Target: Rs 873 | Upside: 39 percent. Subdued power demand has impacted the profitability of CESC’s businesses in the near term. However, the medium-term story remains intact. Dhariwal has turned profitable, and the performances of DFs should continue to improve as the company gains a better understanding of the circles and leverages from its experience in Kolkata. Untied generation capacity and scale-up of DFs have the potential to boost earnings.
KEC International | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 450 | Upside: percent. Company is steadily diversifying its business to avoid concentration risk from the Power T&D business, with the Railways and Civil segments emerging as strong growth avenues. A strong promoter parentage and focus on the balance sheet should help KECI emerge stronger from the COVID-19 crisis v/s peers.
KEC International | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 357.35 | Target: Rs 450 | Upside: 26 percent. Company is steadily diversifying its business to avoid concentration risk from the Power T&D business, with the Railways and Civil segments emerging as strong growth avenues. A strong promoter parentage and focus on the balance sheet should help KECI emerge stronger from the COVID-19 crisis v/s peers.
PVR | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 1,673 | Upside: percent. Given prevailing occupancy caps & dearth of fresh content we expect next quarter to be more or less a replica of 3QFY21 where the focus will be on cost management/liquidity. We expect normalcy to resume from FY22 onwards amid strong content pipe-line (pent-up demand due to bunching up of releases) and gradual relaxation in occupancy caps. Further, current trends on ATP (higher/similar to pre-COVID levels for fresh content released in 3QFY21) and SPH (down only 5.0% YoY from pre-COVID base) indicate no structural change in consumer behavior post-COVID.
PVR | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 1,462.65 | Target: Rs 1,673 | Upside: 14 percent. Given prevailing occupancy caps & dearth of fresh content we expect next quarter to be more or less a replica of 3QFY21 where the focus will be on cost management/liquidity. We expect normalcy to resume from FY22 onwards amid strong content pipe-line (pent-up demand due to bunching up of releases) and gradual relaxation in occupancy caps. Further, current trends on ATP (higher/similar to pre-COVID levels for fresh content released in 3QFY21) and SPH (down only 5.0% YoY from pre-COVID base) indicate no structural change in consumer behavior post-COVID.
HDFC Bank | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 1,690 | Upside: percent. HDFC Bank’s earnings were in-line at Rs 87.6 bn (PLe: Rs 87.5 bn) with NII slightly growing slow at 15%, though NIM improved by 10bps to 4.2%. Better treasury gains helped PPOP and made additional Rs 26bn of contingent provisions. Contingency plus floating provisions now stood at 100bps of loans (70bps in Q2FY21) which is quite adequate given normalization in slippage and lower restructured book of 50bps of loans (Rs54bn). Collections also have normalized to pre-COVID levels of 97% but yet varies product to product making growth aspects slightly cautious.
HDFC Bank | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,462.40 | Target: Rs 1,720 | Upside: 17 percent. HDFC Bank has delivered strong business growth as the economy continues to recover from the COVID shock. Business activity has picked up, as reflected from the revival in retail loan growth, and disbursements across multiple segments are now higher than pre-COVID levels. The bank’s operating performance remains steady, aided by healthy revenue growth, improving margins, and controlled opex. The asset quality impact due to COVID-19 remains under control, with total restructuring at 0.5% of loans and proforma slippages at Rs 49 b (for 3QFY21).
File image: Larsen & Toubro office
Larsen and Toubro | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,361.45 | Target: Rs 1,625 | Upside: 19 percent. Over the past one-year, L&T has underperformed the Nifty by ~15%. Adjusted for the valuation of listed subsidiaries, the core business has underperformed Nifty by 30% and is valued ~ 40% below the last peak hit during the interim Budget in Jul’19 after May’19 elections. The stock itself is down 15% from its peak, whereas its subsidiaries have witnessed an over 50% jump. We attribute the underperformance to the COVID-induced impact on economic growth and fiscal concerns towards infrastructure spending in the country. With a recovery in sight, we see room for its core business to see a meaningful re-rating.
Coromandel International | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 1,090 | Upside: percent. The structural story remains intact with regard to increasing farmers’ awareness about having balanced nutrients in crops. This is likely to aid the shift from urea to complex fertilizers, and CRIN thus stands to be a key beneficiary. However, the key monitorable in the near future shall be RM prices. We expect a revenue/EBITDA/PAT CAGR of 10%/14%/19% over FY20–23E.
Coromandel International | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 839 | Target: Rs 1,090 | Upside: 30 percent. The structural story remains intact with regard to increasing farmers’ awareness about having balanced nutrients in crops. This is likely to aid the shift from urea to complex fertilizers, and CRIN thus stands to be a key beneficiary. However, the key monitorable in the near future shall be RM prices. We expect a revenue/EBITDA/PAT CAGR of 10%/14%/19% over FY20–23E.
UltraTech Cement | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 5,363.25 | Target: Rs 6,300 | Upside: 17 percent. UltraTech has showed its capability to successfully integrate the acquired assets and protect its B/S in tough time as well. Given the positive outlook, the newly announced capex targeting central and east region would address the issue of capacity constraint post FY24E. With a target to become net debt free by FY23E and 23% earnings CAGR in FY20-23E, we believe, Ultratech will remain a preferred play in the cement space. We maintain buy rating with a revised target price of Rs 6300/share (i.e. 13.5x FY23E EV/EBITDA).
UltraTech Cement | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 5,363.25 | Target: Rs 6,300 | Upside: 17 percent. UltraTech has showed its capability to successfully integrate the acquired assets and protect its B/S in tough time as well. Given the positive outlook, the newly announced capex targeting central and east region would address the issue of capacity constraint post FY24E. With a target to become net debt free by FY23E and 23% earnings CAGR in FY20-23E, we believe, UltraTech will remain a preferred play in the cement space. We maintain buy rating with a revised target price of Rs 6300/share (i.e. 13.5x FY23E EV/EBITDA).
Rakesh Patil
first published: Jan 27, 2021 12:16 pm

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