Mar 4, 2023
As Nifty declined nearly 3% so far in 2023, brokerage firm ICICI Direct believes any dips should be used to build a long-term portfolio of quality companies that have lean balance sheets, are capital efficient and possess growth longevity. The brokerage is positive on sectors like capital goods, auto, infrastructure and banks.
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"We expect cost savings of Rs 300-350/tonne from the current run rate. The company continues to have a strong balance sheet having debt-free status," ICICI Direct said.
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Multiple strategic initiatives like entry into footwear by acquiring Reebok’s India operations, the launch of premium menswear ethnic brand Tasva and setting up a separate platform to build a portfolio of D2C brands to add value over the medium to long term, said the brokerage.
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"Ports is backed by strong FCF, generating assets with a 15% RoCE. Further, it has a comfortable Debt/Equity ratio close to 1," the brokerage firm said.
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Strong retail execution, steady credit cost and improving efficiency should drive RoE at 10-12% in FY24-25E and thus valuation, said ICICI Direct.
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"We expect advance growth at 18% CAGR in FY24-25E. At current price, the stock is available at 2.4x FY25E ABV which remains attractive," ICICI Direct said.
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"About Rs 55,000 crore worth of contracts are in pipeline as per the management, which are expected in the next 1-1.5 years. HAL looks well placed in terms of rising indigenisation, pick-up in execution and strong visibility of order inflows" the brokerage said.
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Acquisition of technology from Bharat Pumps and Compressors would help KSB to increase its share of services & spares revenue in the coming period, ICICI said.
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With an expansion in capacities in the crane & material handling segment, expanding product portfolio in electric cranes, and increasing focus on exports, we believe that the company stands strong in capturing the growth from a broad uptick in private capex, it said.
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"Company has a healthy balance sheet and a cash balance of Rs 1200 crore. We expect revenue, and EBITDA to grow at a CAGR of 39.8%, and 13.1%, respectively, in FY23-25E, and value TEEC at Rs 500 i.e. 19x PE in FY25E," ICICI Direct said.
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