2 Stocks To Buy Fom ICICI Direct For Good Gains In 12 Months

 

1. Dalmia Bharat Sugar:

Dalmia Bharat Sugar is the only sugar company with presence in both UP and Maharashtra. The company has sugar crushing capacity of 35500 TCD (6 lakh tonnes pa), distillery capacity of 300 KLD (8.5 crore litre pa) & co-generation capacity of 102 MW & wind power of 16.5 MW (total 30 crore units saleable power).

In its Q1FY22 financial results, the company reported muted numbers owing to high base quarter. PAT came in at Rs. 124.4 crore owing to tax reversal, while EBITDA was also down 28% YoY.

Triggers for future price performance of Dalmia Bharat

- The company is fastest in utilising B-heavy, sugarcane juice & grain route to produce ethanol. Distillery volumes are likely to grow 2.5x to 21 crore litre by FY24.

- The company has been aggressive in exporting sugar & utilising higher global white sugar prices. Freight cost is much lower given its proximity to ports.

- With the increasing profitability & reduction in sugar inventories, the sugar company would be generating cumulative free cash flow of Rs. 570 crore in the next two years despite an approximate Rs. 700 crore capex

ICICI Direct continues to maintain its BUY rating on the stock with a target price Rs. 650, ascribing a multiple of 14x FY23 earnings. This implies gains of 37.5% from the stock's last traded price. The brokerage firm expects 2.5 times increase in distillery volumes to boost earnings with CAGR of 18.4% during FY21-24E. Notably the scrip of Dalmia Bharat Sugar has trebled during the last 3 year period from Rs. 160 in August 2016 to Rs. 479 in August 2021.

Last traded price - Rs. 472.65

Price target- Rs. 650

target period - 12 months

	FY2021	FY2022E	FY2023E
EPS	33.41	39.15	46.72
Price to earnings (x)	14.3	12.2	10.3
RoNW%	12.6	15.2	15.7

2. Aditya Birla Fashion and Retail

ICICI Direct has placed a buy on the retail company Aditya Birla Fashion and Retail for a target price of Rs. 265. This is a gain of 19.5% from the stock's last closing price of Rs. 221.7.

Under its retail chain, the firm has leading brands including Allen Solly, Van Heusen, Louis Philippe and Peter England along with Pantaloons' forte of largest value fashion retailer.

The company has worked out ways to become an approximately US$2.8 billion company by FY26E, implying 15% CAGR in FY20-26E, said ICICI Direct report.

Though, Covid has disrupted the second quarter performance of Aditya Birla Fashion, green shoots are visible with 75% recovery in July. Revenue showed recovery of 40% of pre-Covid levels considering the base of Q1Fy20.

Tailwinds for future price performance of Aditya Birla Fashion

Aditya Birla has aggressive expansion plan for FY22E with 60+ Pantaloons stores and 400+ (franchisee) lifestyle brand stores. Smaller town penetration is also eyed. Furthermore, the company plans to launch new Pentaloons site in Q3 and multi-branded app in Q4Fy22.

Aditya Birla Fashion has strengthened its balance sheet through recent equity infusion with net debt declining sharply from Rs. 2500 crore to Rs. 530 crore as on FY20. ICICI Direct remains positive and maintain its BUY rating on the stock. "We value the company at Rs. 265 i.e. 2.5x FY23E EV/Sales", said the brokerage.

Disclaimer:

Stock market investments are risky and one needs to carefully assess one's financial goals as well as risk profile. Investible surplus can be one factor that can be used to determine your risk bearing capacity with such investments.

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