Pick of the week

1. Jubilant Foodworks Limited : Hold
Recommendation by Geojit Financial Services

JFL recorded a decline in Q1FY21 standalone revenue (-59.5 per cent YoY), as operations were impacted by stringent lockdown restrictions. Like-forlike/Same-store sales growth fell 61.5/61.4 per cent, respectively due to temporary closure of restaurants.

With measures being taken by the government, to boost the economy, we anticipate an increase in demand in the near term which would support operations to mitigate short term challenges. We thereby recommend Hold rating on the stock with a revised target price of Rs 2,445 based on 64x FY22E adj. EPS.

2. Hawkins Cooker: Buy

Recommendation by Angel Broking

Gaining market share with peer, strong demand post Covid-19 and increase in penetration of cooking gas to drive higher growth.

3. VIP Industries: Buy

Recommendation by Angel Broking

Market leader (~50+ per cent share) with strong brand and wide distribution network. Recent correction provides investment opportunity in high quality stock from long term perspective.

4. Essel Propack: Buy

Recommendation by Motilal Oswal Institutional Equities

The increasing health consciousness among people should drive Hand Sanitizer sales across geographies. Cross-selling of Personal care products to existing Oral care customers, coupled with normalization of operations across geographies (post-pandemic) is expected to complement sales in the medium-to-near term.

Despite the recent rally in the stock, we still believe there is room for further upside. The stock currently trades at 24x/20x FY22/FY23 P/E.

Over the last 3 years, ESEL has traded at an average P/E of 19x. We expect revenue/EBITDA/PAT CAGR of 11/15/24 per cent over FY20-23E and value the stock at 26x September 2022 EPS. Our TP of Rs 314 implies 20 per cent upside. Maintain Buy.

5. Coal India: Buy

Recommendation by Motilal Oswal Institutional Equities

Volumes and e-auction realizations have been under pressure on decline in power demand and significant stocks at both mines and power plants. However, power demand is showing signs of improvement and we expect volumes to recover in 2HFY21.

Furthermore, we expect Coal India to tide over the current situation given its large cash position (Net cash: ~Rs 230b). The stock trades attractively at ~1.6x FY22E EV/adj. EBITDA (v/s historical average of 7x), P/E of 5x (v/s average of ~13x) and offers a dividend yield of ~10 per cent. Maintain Buy with a target price of Rs 190/share.

6. NALCO: Buy

Recommendation by Motilal Oswal Institutional Equities

Aluminum LME prices have recovered to pre-Covid levels and turned positive YoY. Alumina prices are also hovering near pre-Covid levels. Accordingly, we have raised our LME aluminum estimate to $1,675/t in FY21 (earlier $1,575/t) and $1,750/t (earlier $1,700/t) in FY22. With integrated operations, NACL is best placed to benefit from recovery in prices.

We expect NACL to benefit from lower coal prices due to improved coal availability in India and lower input commodity costs such as furnace oil, etc. We maintain our positive stance on NACL considering its integrated business model, high cash levels, and attractive dividend yield.

We value the stock at 5.5x FY22E EV/EBITDA to arrive at TP of Rs 42. Buy.

7. Bharat Petroleum Corporation Limited: Buy

Recommendation by Emkay Global Financial Services

Our deep-dive analysis of BPCL is through the lens of a strategic buyer who will give due consideration to 1) significant capital locked in ongoing projects and thus long-term normalized earnings 2) operational autonomy enabling deep sweating of assets and cost optimization and critically 3) financial autonomy driving superior capital allocation.

Operational autonomy of a PSU asset will give significant scope to drive productivity improvements. We expect revenue enhancement tools, outlet rationalization strategies and opex optimization – all put together could add over Rs 10 billion in EBIDTA. Likewise, capex can be more targeted and rationalized, thereby realizing 10 per cent savings.

Private ownership with these levers could generate Rs 240 billion in mid-cycle EBIDTA through FY25. This implies a 30 per cent earnings CAGR vs FY20 and puts BPCL’s FV at Rs 900/sh in FY24 or Rs 640 discounted back.

This is Rs160/sh higher than our existing TP of Rs480 and reflects the strategic premium or management alpha. Reiterate BUY/OW.

8. Hind. Aeronautics: Buy

Recommendation by Angel Broking

Currently the company has an order backlog of ~Rs 52,000 crore which is expected increase substantially over the next few years as the company is likely to get many new orders including orders for 83 LCA Mark 1A worth Rs 39,000 crore which is expected to go for cabinet approval very soon.

9. Inox Leisure: Buy

Recommendation by Angel Broking

Share prices have corrected more than 40 per cent as all theatres are closed down due to Covid-19 issue. Although, long term fundamentals are intact. Covid-19 can lead to further consolidation in the industry.

10. Chalet Hotels: Buy

Recommendation by Angel Broking

Company has posted strong sequential revpar growth in July. Future improvement is expected over next few months led by increased occupancy.

Disclaimer: Views and recommendations given are those of brokerages and analysts and do not represent those of IANS. Users should check with certified experts before taking any investment decision. IANS has no financial liability whatsoever to any user on account of the use of information provided.

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