Buy These 3 Stocks For Robust Returns, Says Sharekhan

Buy Castrol India, says Sharekhan

The brokerage is optimistic on the stock of lubricant major Castrol. The firm has set a price target of Rs 172 on the stock, as against the current market price of Rs 140.

According to Sharekhan, the alliance with Jio-BP will help gain market share and focus on new revenue streams (focus to launch vehicle care products in collaboration with 3M) and drive long term volume growth is good.

"Volumes started recovering in June 2021 and further gained traction in July 2021. Castrol has gained 200 basis points market share in the Bazaar segment. Calibrated price actions (taken three price hikes since Jan'21) to protect margin from high base oil price," the brokerage has said.

"Valuation of 14.7 times its CY2022E EPS is attractive (41% discount to historical level) despite strong earnings growth outlook, FCF/dividend yield of 8%, 5%, and Return on Equity of 55%. We retain Buy on Castrol India with a revised target price of Rs. 172," the brokerage has said.

 

Buy Kajaria Ceramics for an upside of Rs 1,202

Sharekhan likes the stock of tiles company Kajaria Ceramics and has suggested a buy on the stock for a target price of Rs 1,202.

According to the brokerage firm, the management is confident of achieving 20% y-o-y revenue growth in tiles led by 15-16% y-o-y volume growth for FY2022. However, operating profit margin guidance was reserved due to higher gas prices.

"Brownfield capex plan of Rs 250 crore is on track. Strong net cash position and healthy free cash flow generation to aid in capital expenditure plans without leveraging balance sheet," the brokerage has said.

The company also sees retained strong net cash position as a big positive. "We introduce FY2024E earnings in this note. We expect revenue/operating profit/net profit to rise at a 17%, 20% and 26% CAGR over FY2021- FY2024E. We retain our Buy rating on the stock with a revised price target target price of Rs 1,202," the brokerage has said.

Vinati Organics

The last of the stock picks from the recent reports of Sharekhan is the stock of Vinati Organics. The brokerage says that the likely higher ATBS margin (tight demand-supply situation) and ramp-up of butyl phenol capacities to drive a 29% PAT CAGR over FY2021-FY2024E, while potential incremental earnings contribution from integration of Vinati Organics would further aid earnings growth. The management has guided for 40-45% y-o-y revenue growth and margin of 30-35% for FY2022E.

"We upgrade our rating on Vinati Organics to Buy with a revised target price of Rs. 2,350 given our expectation of strong earnings recovery across segments supported by dominant market share in ATBS and ramp-up capacities while return profile remains strong with RoE/RoCE of 23%/30%," the brokerage has said.

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are near record highs.