The benchmark indices continued their record run in the first week of 2021, gaining 2 percent amid positive domestic as well as international cues.
CESC | Rating: Buy | LTP: Rs 623.20 | Target: Rs 825 | Upside: 32 percent. The brokerage house sees scope for gradual re-rating in CESC, led by a recovery in earnings from the standalone business, sustained profitable operations at Dhariwal Infrastructure and potential turnaround of Rajasthan distribution franchisee by FY2022. Moreover, concern of rise in receivable is expected to subside by Q4FY2021 as the company is receiving regulator payment from customers.
State Bank of India | Rating: Buy | LTP: Rs 286 | Target: Rs 320 | Upside: 12 percent. While broking house is cautious on PSU banks, it finds State Bank of India better placed as compared to its PSU peers, with business strengths, with consistent and reasonable margin cushions. Moreover, high coverage and improving business outlook are positive cushions. Its healthy PCR of 88.19% indicates less residual stress from the legacy book.
Petronet LNG | Rating: Buy | LTP: Rs 268.45 | Target: Rs 300 | Upside: 11 percent. The sharp volume recovery provides strong earnings visibility and the company’s RoE/RoCE at ~29% is superior among gas utilities. The company is also believed to have backed out of its proposed deal with Tellurian, which removes the overhang of investment in overseas LNG assets.
Jyothy Labs | Rating: Buy | LTP: Rs 149.40 | Target: Rs 170 | Upside: 14 percent. The company is striving for sustainable revenue and PAT growth over the next two to three years. This will be done through new product launches in the existing category, improving penetration in the rural market, and enhancing distribution reach. Shrekhan expects the company’s revenue and PAT to grow post CAGR of ~12% and 20%, respectively, over FY2020-FY2023E.
Laurus Labs | Rating: Buy | LTP: Rs 353.55 | Target: Rs 410 | Upside: 16 percent. The company's formulations segment is witnessing elevated traction and the management expects to sustain strong growth momentum. The tender business, which accounts for three-fourths of the overall segment revenues, is on a strong footing and would be a key growth driver. Consequently, the performance of the formulations segment in H2FY2021 is expected to be better than that in H1FY2021. In addition, the custom synthesis business is also expected to clock double-digit growth over FY20 – FY23, driven by capacity expansion and a rise in the commencement of commercial supplies of products. The firm's foray into the lucrative biologics/ biotech space through acquisition of a majority stake in RLPL would be a key positive as it would create a new revenue stream for Laurus, though the benefits would accrue over the medium to long term.
Biocon | Rating: Buy | LTP: Rs 466 | Target: Rs 520 | Upside: 11 percent. Biocon is well placed to harness the opportunities emerging in the global biosimilars space. Biocon’s biologics segment offers substantial growth opportunities driven by new launches (such as Semglee), a healthy new product pipeline and increasing share of biosimilars in the overall market. Further, the expansion into other geographies would complement growth. Expected traction in the biosimilars in the US markets could also be a key growth driver. The generics business, too, is expected to grow at a healthy pace backed by improved momentum in existing products and new product launches. Sturdy growth prospects, strong earnings visibility, healthy balance-sheet position and lower debt-equity augur well for the company.
Honeywell Automation India | Rating: Buy | LTP: Rs 40,617.40 | Target: Rs 44,312 | Upside: 9 percent. The company has multiple domestic growth levers like government’s infrastructure investments such as smart cities, upcoming airports over the next five years, RERA, industrial internet of Things (IIoT), Aatmanirbhar Bharat initiatives which would help the company in maintaining its healthy growth trend. An asset-light model (zero debt), strong cash position healthy operating cash flow generation, strong return ratios and a consistent dividend-paying record justify the stock’s premium valuation.