PICK OF THE WEEK (Jan 3)

Birla Corporation — Buy
Recommendation by Anand Rathi Share and Stock Brokers

With 15.5m-ton cement capacity across north, central and east India, Birla Corp is aiming at 25m-ton cement capacity by FY25. The ongoing expansion will keep leverage high; we believe, however, that its net debt would be in check with greater profitability on various cost-optimisation steps and higher volume growth on the ramping up of capacities. A judicious geographic — and product-mix aimed at raising the shares of blended and premium cement in its portfolio are positives. We retain our Buy rating, with an unchanged target of Rs 900.

Dhanuka Agritech — Buy

Recommendation by Emkay Global Financial Services

We upgrade our earnings estimates for DAGRI and retain Buy as we expect the company to continue to outperform the industry and generate robust cash flow. Accordingly, we raise the TP by 25 per cent to Rs 890 (March 22), based on 19x FY23E EPS, from Rs715 (June 21).

Jindal Stainless — Buy

Recommendation by Emkay Global Financial Services

Jindal Stainless (JSL) announced merger with Jindal Stainless (Hisar) Ltd (JSHL) to join the league of top 10 stainless steel companies globally. In our view, JSL may even enter the top 5 in the next three years as cash flow from JSHL will aid growth at the Jajpur plant.

We upgrade JSL to Buy with a TP of Rs 95 for the combined entity, given the growth potential of JSL combined with the financial strength of JSHL balance sheet. Elimination of ICL and equity holding of JSHL in JSL should also boost valuation of the merged entity.

Bharat Electronics Limited — Buy

Recommendation by Geojit Financial Services

New defence acquisition policy 2020, is expected to benefit domestic manufactures given higher indigenous content requirement in various categories, restrictions of imports and stricter timelines for execution. The current order backlog is Rs 52,700cr (4.3x FY20 sales), which provides strong earning visibility for the next three years. Order inflow for H1FY21 was Rs 5,000cr, while order pipeline is expected to improve. Given higher indigenous content in BEL’s products EBITDA margin is expected to be in the range 20 per cent. We continue to remain constructive on BEL in the long term given its niche technological and execution capabilities and government focus on indigenisation. Given strong order book visibility and stable order inflow, we maintain “Buy” rating on the stock. We value BEL at 15x as we roll forward to FY23E with a target price of Rs138.

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Petronet LNG Limited–Buy

Recommendation by Geojit Financial Services

Q2FY21 sales were down 33.4 per cent YoY to Rs 6,236 crore. The company registered an adjusted PAT decline of 20.8% YoY, reaching Rs 919 crore EBITDA margin, improved by 950bps YoY to 21.9 per cent, primarily due to reduction in operating cost and effective commercial planning. Petronet LNG’s volume demand reaching pre-Covid levels, improvement in operational efficiency, and commissioning of the Kochi-Mangalore pipeline will boost performance in upcoming quarters. Hence, we reiterate our BUY rating on the stock with a revised target price of Rs 327 based on 15.0x FY22E adj. EPS.

M M Forgings–Buy

Recommendation by ICICI Direct

MMF has come out of a heavy capex cycle (480 crore spent in FY18-20), spent on augmenting tonnage and overall capacity. Expected benefits from demand revival in key markets alongside gradual return to erstwhile margin trajectory makes us turn positive on MMF. Accordingly, we value the company at 15x FY23E EPS of 35.3/share to arrive at a target price of 530 (revised from 330 earlier). We upgrade the stock from HOLD to BUY.

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Indoco Remedies–Buy
Recommendation by ICICI Direct

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. We maintain BUY rating and arrive at a revised target price of 380 based on 18x FY23 EPS of 21.

NOCIL Ltd–Buy
Recommendation by Axis Securities
On FY23E EPS, the stock trades at 9.8x P/E which is attractive in our view. Maintain BUY with unchanged TP of Rs 176/share as we value the stock at 12x FY23E EPS. Key risk to our call — concerns on Covids second wave; sluggish demand from Auto OEMs thereby impacting tyre demand.

Relaxo Footwears–Buy
Recommendation by Sharekhan
We maintain a Buy on Relaxo Footwears Limited (Relaxo) with a revised PT of Rs 930; it remains one of our top picks in the consumer discretionary space with value-for-money offerings; strong profitability and a lean balance sheet.

Whirlpool India–Buy
Recommendation by Angel Broking
Going forward, we expect healthy profitability on the back of a strong brand, wide distribution network, capacity expansion & strengthening product portfolio.

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.

–IANS
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