Brokerage firms initiate coverage on 8 stocks; would you buy?
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Century Plyboards is India’s largest and most diversified player in the wood panel industry. Its pan India manufacturing and distribution presence, raw material sourcing, and strong brand identity are key competitive advantages, said brokerage.
"Driven by 9 per cent industry CAGR and shift from unorganised to organised, the company is set to grow EPS at a CAGR of 21 per cent over FY22-26 with average RoE of 22 per cent, we initiate coverage with a buy rating and target price of Rs 770," it added.
Key Risks: Real estate slowdown, raw material availability and cost volatility, increased competitive intensity, and higher MDF and particle board imports.
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Metro Brands’ success lies in its superlative store economics, with 2x store productivity v/s Bata, and healthy profitability. A strong brand appeal, a healthy portfolio of in-house and third-party brands and an efficient demand-pull supply chain model ensures product freshness in stores, Motilal said.It has consistently added new stores at 12 per cent CAGR over the last six years and has a strong balance sheet and management will to continue to grow. "We have factored in 13 per cent footprint CAGR over FY22-25, driving 31 per cent revenue CAGR. Its high RoIC of 20 per cent, led by efficient working capital and store economics, and healthy growth outlook warrants rich valuation," it added, initiating coverage with buy rating and a target price of Rs 1,000.
Key Risks: Rising input cost and GST, modest store additions, and competition from foreign brands.
Founded in 1985, Suprajit Engineering is among the top-three global manufacturers of control cables and halogen bulbs. Emkay has initiated coverage with a buy recommendation and September 23E target price of Rs440, based on DCF methodology which implies a 20x forward P/E.The brokerage forecasts a strong revenue guidance driven by cyclical recovery in the underlying industry; market-share gains, thanks to decentralised plant locations and competitive pricing owing to scale advantages; and growth in content per vehicle (CPV) led by new products.
Key risks: Slower acceptance of new products, faster EV and LED penetration, and adverse commodity or currency price movement.
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It has 3.9 million tonnes (MT) of oilseed crushing & refining capacity with current utilisation of 40 per cent. The company would be able to increase capacity utilisation by leveraging its existing & Patanjali brand to drive volumes. With consolidation of the foods business, overall margins of the company to see an uptick, said ICICI Direct.
Expansion in palm extraction capacities by the company would help in improving margin in the edible oil business in the next three to five years. The combined distribution network has expanded the company’s reach to 1 million retail touch points, it added in its initiation report with a target price of Rs 1,750 on the stock and a buy tag.
Key Risks: Vegetable oil price volatility could impact margins significantly given edible oil is low margin commoditised business and meagre spend on advertisement can impact volume growth
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It has established a market position in manufacturing of super alloys with better operating efficiency. It has a strong track record in signing and executing deals. Sizeable revenue growth and steady operating margin of 27-29 per cent, ensures healthy cash accrual and liquidity and better working capital management despite high inventory, said HDFC Securities.
"Considering the company’s strong financial profile, led by healthy profitability levels and return indicators and a comfortable capital structure, we have a positive view on the stock," the brokerage said with buy call and a target price of Rs 242 (base case) and Rs 260.5 (bull case) over the next 2 quarters.
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The brokerage expects Kalyan to be a key beneficiary of the shift in market share from unorganised to organised segment at the rate of 15 per cent in the FY20-FY25E period. Its franchising strategy and Candere pilot stores have similarities to Titan’s Tanishq and CaratLane, respectively.
"Our estimates of 22 per cent, 28 per cent and 61 per cent CAGR over FY22-24E for revenue, EBITDA and PAT respectively are underpinned by store network expansion, recovery in productivity per store and better absorption of central costs, it said initiating coverage with a buy rating and a target price of Rs 129 on the stock.
Key Risks: Inventory risk and regulatory risk
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Ethos has a 15 per cent market share by value, thanks to its pan-India physical presence and a distinguished online presence. India is at the cusp of exponential growth in luxury watch sales. Ethos has no pan-India rival, and we reckon the company will achieve its targeted 30 per cent market-share leveraging its balance sheet, flagship stores and exclusive brand partnerships.
"We forecast FY22-25E EBITDA CAGR at 47 per cent for Ethos on the back of 30 per cent revenue CAGR in the same period, average annual increase of 110bps in EBITDA margin, buoyed by operating leverage. We expect stable gross margin, as a higher mix of exclusive brands would completely offset the impact of higher CPO mix," it added with a buy rating and Rs 1,400 as target price.
Key Risks: Slower development of luxury malls and failure to manage working capital.
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"We initiate coverage on Stylam Industries with a buy rating with a target price of Rs 1,250 as it is on track to achieve high growth due to revival of domestic demand in the laminates segment, exports growing and the change in the consumer preference towards greater aesthetics in the home decor segment," said the brokerage firm.The company is one of the largest players in the laminates industry with a very strong presence in the exports. Post scaling up their capacity, it is increasing the distribution network and gaining market share. Further leg of growth will be aided by the entry in the solid acrylic sheets which has an import substitution opportunity of Rs 600 crore, it added.
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