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Budget 2021

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Moneycontrol

Budget 2021

Associate Partners:

  • SMCSamsungVolvo
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ZEE, Gujarat Gas and Divis Labs among 11 stocks brokerages are betting on for up to 29% upside

Huhtamaki India, South Indian Bank, Gujarat Gas and Dalmia Bharat among 11 stocks, which could give upto 29 percent upside.

January 13, 2021 / 11:08 AM IST
Sensex
Benchmark indices rallied 0.5 percent and ended near the day's high level supported by the auto and banking stocks. The BSE Sensex was up 247.79 points or 0.50% at 49,517.11, and the Nifty was up 78.70 points or 0.54% at 14,563.50. Here are the stocks that brokerages are betting on:
Kalpataru Power Transmission | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 437 | Upside: percent. Broking house believe continuous focus on operational efficiencies, cost optimisation and prudent working capital management has helped the company improve performance across all segments. Further, subsidiaries have witnessed rise in utilization and execution levels and believe receipts of monetisation proceeds of three BOOT transmission assets during FY21E worth Rs10bn+ would strengthen the balance sheet further. Prabhudas Lilladher believe worst is over and remain optimistic owing to positive outlook on T&D and emerging segments like Railways/Oil & Gas.
Kalpataru Power Transmission | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 337.85 | Target: Rs 437 | Upside: 29 percent. Broking house believes continuous focus on operational efficiencies, cost optimisation and prudent working capital management has helped the company improve performance across all segments. Further, subsidiaries have witnessed rise in utilization and execution levels and believes receipts of monetisation proceeds of three BOOT transmission assets during FY21E worth Rs10bn+ would strengthen the balance sheet further. Prabhudas Lilladher believes worst is over and remain optimistic owing to positive outlook on T&D and emerging segments like Railways/Oil & Gas.
Zee Entertainment Enterprises | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 290 | Upside: percent. We initiate coverage on Zee Entertainment Enterprises (ZEEL) with a buy rating amid 1) concrete steps taken to strengthen governance and enhance disclosure levels 2) consistent improvement in viewership share (increased from 11.6% in CY11 to 18.4% in CY19) and 3) likely emergence of ZEE5 as future growth engine in the changing global content consumption paradigm. We expect revenue CAGR of 4.1% over FY20-23E backed by increasing viewership share, launch of 4 regional channels (Zee Punjabi, Zee Thirai, Zee Picchar and Zee Bispoke), increasing viewership of HD channels (16 channels, 35% HD penetration) and selective price hikes. Adjusted EBITDA/PAT CAGR is expected to be at 3.5%/0.5% over FY20-23E on higher content cost related to new channels and ZEE5.
Zee Entertainment Enterprises | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 226.15 | Target: Rs 290 | Upside: 28 percent. We initiate coverage on Zee Entertainment Enterprises (ZEEL) with a buy rating amid 1) concrete steps taken to strengthen governance and enhance disclosure levels 2) consistent improvement in viewership share (increased from 11.6% in CY11 to 18.4% in CY19) and 3) likely emergence of ZEE5 as future growth engine in the changing global content consumption paradigm. We expect revenue CAGR of 4.1% over FY20-23E backed by increasing viewership share, launch of 4 regional channels (Zee Punjabi, Zee Thirai, Zee Picchar and Zee Bispoke), increasing viewership of HD channels (16 channels, 35% HD penetration) and selective price hikes. Adjusted EBITDA/PAT CAGR is expected to be at 3.5%/0.5% over FY20-23E on higher content cost related to new channels and ZEE5.
Dalmia Bharat | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 1,480 | Upside: percent. Broking house initiate coverage on Dalmia Bharat (DALBHARA) with buy rating, underpinned by strong earnings growth and compelling valuations post mutual fund fiasco. DALBHARA is India’s 4th largest cement producer with capacity of 29.6mnt, spread over East, South and West region. In South (40% volume share), more than 75% volumes come from profitable states of Tamil Nadu, Karnataka and Kerala while volatile and oversupply prone states of AP & Telangana constitute only 25% of volumes. In East (50% of volumes), the company enjoys logistics edge over peers with integrated operations in Odisha. Led by strong market positioning and competitive cost structure, DALBHARA’s margins rank in top quartile of the sector.
Dalmia Bharat | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 1,185.45 | Target: Rs 1,480 | Upside: 25 percent. Broking house initiate coverage on Dalmia Bharat (DALBHARA) with buy rating, underpinned by strong earnings growth and compelling valuations post mutual fund fiasco. DALBHARA is India’s 4th largest cement producer with capacity of 29.6mnt, spread over East, South and West region. In South (40% volume share), more than 75% volumes come from profitable states of Tamil Nadu, Karnataka and Kerala while volatile and oversupply prone states of AP & Telangana constitute only 25% of volumes. In East (50% of volumes), the company enjoys logistics edge over peers with integrated operations in Odisha. Led by strong market positioning and competitive cost structure, DALBHARA’s margins rank in top quartile of the sector.
Phillips Carbon Black | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 210 | Upside: percent. Company has a healthy B/S (limited leverage), capital efficient business model ( RoCE>15%) and generates robust cash flow from operations (CFO yield >15%). Conservatively, as of now, ICICIdirect has not built in any volumes from greenfield capex under implementation as the company awaits regulatory approvals.
Phillips Carbon Black | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 175.60 | Target: Rs 210 | Upside: 19 percent. Company has a healthy B/S (limited leverage), capital efficient business model ( RoCE>15%) and generates robust cash flow from operations (CFO yield >15%). Conservatively, as of now, ICICIdirect has not built in any volumes from greenfield capex under implementation as the company awaits regulatory approvals.
Gujarat Gas
Gujarat Gas | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 384.30 | Target: Rs 452 | Upside: 17 percent. Sharekhan fine-tuned its FY2021 earnings estimate to factor higher volume growth, partially offset by lower margin assumption and have increased FY2022-FY2023 earnings estimate to reflect higher volume growth. Given high exposure to industrial PNG (80% of overall gas sales volume), it believe company is best placed in the oil and gas space to benefit from India’s robust gas demand outlook supported by regulatory push to curb pollution.
Aditya Birla Fashion and Retail | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 191 | Upside: percent. Improvement in consumer sentiments and a recovery in footfalls would aid the company clock strong performance in FY2022. A fall in debt will also substantially reduce interest costs in the coming years, which will ease pressure on the bottom-line. Focus on deleveraging balance sheet and improving the growth of prospects of core businesses augurs well for the company from nearterm perspective.
Aditya Birla Fashion and Retail | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 174.55 | Target: Rs 191 | Upside: 9 percent. Improvement in consumer sentiments and a recovery in footfalls would aid the company clock strong performance in FY2022. A fall in debt will also substantially reduce interest costs in the coming years, which will ease pressure on the bottom-line. Focus on deleveraging balance sheet and improving the growth of prospects of core businesses augurs well for the company from near-term perspective.
Divis Laboratories | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 4,425 | Upside: percent. More than strong half-yearly performance (the management stresses that in a business like this can be lumpy) important narrative for Divis is unprecedented capex to further augment capacities besides preparing for growing opportunities arising due to China plus one factor. Divis remains a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess.
Divis Laboratories | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 3,767.50 | Target: Rs 4,425 | Upside: 17 percent. More than strong half-yearly performance (the management stresses that in a business like this can be lumpy) important narrative for Divis is unprecedented capex to further augment capacities besides preparing for growing opportunities arising due to China plus one factor. Divis remains a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess.
Indoco Remedies | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 380 | Upside: percent. H1 growth was led by strong growth in export markets (albeit on lower base), strong gross margins and lower travel & promotional spends. The management has guided for significant export growth and margin improvement for FY21. After going through rough patches in FY18-19, where Indoco faced headwinds on the domestic front (structural issues) and exports front (regulatory setbacks), the situation is returning to normalcy. While FY21 growth in the domestic market is likely to be subdued due to Covid-19, exports are likely to deliver robust growth on the back of strong pipeline and visible launch schedule as reflected in the upbeat management guidance. Normalisation of exports dispatches is likely to improve operating leverage as well. With better visibility, we expect the company to maintain consistency and generate strong FCF.
Indoco Remedies | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 318 | Target: Rs 380 | Upside: 19 percent. H1 growth was led by strong growth in export markets (albeit on lower base), strong gross margins and lower travel & promotional spends. The management has guided for significant export growth and margin improvement for FY21. After going through rough patches in FY18-19, where Indoco faced headwinds on the domestic front (structural issues) and exports front (regulatory setbacks), the situation is returning to normalcy. While FY21 growth in the domestic market is likely to be subdued due to Covid-19, exports are likely to deliver robust growth on the back of strong pipeline and visible launch schedule as reflected in the upbeat management guidance. Normalisation of exports dispatches is likely to improve operating leverage as well. With better visibility, we expect the company to maintain consistency and generate strong FCF.
Amber Enterprises India | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 2,830 | Upside: percent. Broking house believe China+1 strategy by key clients coupled with market leadership position in the domestic RAC OEM/ODM industry creates a significant growth opportunity for Amber, going forward. Despite capital intensive business, the D/E remained low at 0.3x supported by efficient working capital management (~12% sales) and RoE & RoCE of ~15% each.
Amber Enterprises India | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 2,577.40 | Target: Rs 2,830 | Upside: 9 percent. Broking house believe China+1 strategy by key clients coupled with market leadership position in the domestic RAC OEM/ODM industry creates a significant growth opportunity for Amber, going forward. Despite capital intensive business, the D/E remained low at 0.3x supported by efficient working capital management (~12% sales) and RoE & RoCE of ~15% each.
South Indian Bank | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 11 | Upside: percent. The company has been delivering muted performance, with higher provisions and opex impacting earnings, while its margin profile remains modest. Business growth remains tepid, impacted by a challenging environment. The focus has been on improving the granularity of the loan book and bank has been consciously increasing the mix of Retail, Agri, and MSME loans. Asset quality trends have been stable, supported by the SC’s dispensation however, we remain watchful of slippages/restructuring in coming quarters.
South Indian Bank | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 9.55 | Target: Rs 11 | Upside: 15 percent. The company has been delivering muted performance, with higher provisions and opex impacting earnings, while its margin profile remains modest. Business growth remains tepid, impacted by a challenging environment. The focus has been on improving the granularity of the loan book and bank has been consciously increasing the mix of Retail, Agri, and MSME loans. Asset quality trends have been stable, supported by the SC’s dispensation however, we remain watchful of slippages/restructuring in coming quarters.
Huhtamaki India | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 313.55 | Target: Rs 375 | Upside: 19 percent. A leadership position in the domestic flexible packaging industry, strong client base and focus on launching innovating products will be key drivers of revenue & PAT growth in CY20E-22E. Healthy balance sheet and backing of a strong promoter strengthen our belief on Huhtamaki India to command higher valuation.
Huhtamaki India | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 313.55 | Target: Rs 375 | Upside: 19 percent. A leadership position in the domestic flexible packaging industry, strong client base and focus on launching innovating products will be key drivers of revenue & PAT growth in CY20E-22E. Healthy balance sheet and backing of a strong promoter strengthen our belief on Huhtamaki India to command higher valuation.
Rakesh Patil
first published: Jan 13, 2021 11:08 am

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