Pick of the week

1. Endurance Technologies: BUY

Recommendation by Angel Broking

 

Endurance Technologies is one of India's leading automotive component manufacturers with operations in India and Europe. It mainly caters to two and three-wheeler OEMs in India and supplies aluminum casting products to four-wheeler OEMs in Europe.

Post Covid-19, evolving consumer preference for lower ticket priced means of private transport amid pressurized incomes & awareness around social distancing are expected to act as tailwinds for domestic 2-Ws in India, 4-Ws across developed nations. Going ahead, given the company's ability to gain new businesses & market share across categories; we recommend a buy for Endurance.

1. Radico Khaitan: BUY

   Radico Khaitan Ltd (RKL) is a leading manufacturer of Indian Made Foreign Liquor (IMFL). Going forward, we expect RKL to report healthy profitability mainly due to strong sales growth in premium product segment (brand extension and launches in new states) and reduction in interest cost.

2. KEI Industries: BUY

   KEI Industries Ltd (KEI) is engaged in manufacturing and supply of power and other industrial cables. The company is also engaged in Engineering, Procurement and Construction (EPC) business. Going forward, we expect KEI Industries to report healthy top-line & bottom-line growth mainly due to (a) higher order book (Rs 3,500 cr) execution in the EPC segment; (b) growth in EHV business and (d) higher exports.

3. Page Industries Ltd: Hold

   Recommendation by Emkay Global Financial Services

   The company's recovery has been faster than other apparel players but much slower than its smaller innerwear competitors (10-20 per cent decline). Management attributed this to its higher salience in top towns which were more affected by the pandemic in Q1.

   Factoring in the weak Q1 print, we reduce FY21E EPS by ~13 per cent but largely maintain FY22/23 estimates. Valuations at 47x FY22E EPS are not attractive. We maintain Hold, with a revised TP of Rs 17,800 (Rs 17,500 earlier), rolling forward to 40x Dec-22E EPS.

4. Vinati Organics Limited: BUY

   Recommendation by Emkay Global Financial Services

   VO has announced capex of Rs 1.5 billion to produce four new specialty chemical products for Agrochemicals, Dyes and Plastic additives industries and expand its Para-Tertiary-Butyl Benzoic Acid (PTBBA) capacity. Management expects revenue contribution of Rs 2.4 billion (1.6x asset t/o) at its peak level. Capex is expected to complete by FY21-end.

   All four products are directed to the export market as there is no demand in the domestic market. The strategy of introducing new products looks encouraging in the current scenario where VO's key product ATBS (60 per cent of FY20 revenue) is struggling to find demand.

   We expect benefits of the ramp-up in BP and incremental revenue from new products to result in a 20 per cent sales CAGR in FY20-23. We raise FY22/23E EPS by 2.7/7.7 per cent on capex plans. We roll forward valuations to Sept'22 with a TP of Rs 1,206 (28x Sept'22E EPS) and upgrade to Buy from Hold, with EW in EAP.

5. Can Fin Homes Ltd: Accumulate

   Recommendation by Geojit Financial Services Ltd.

   Can Fin's loan book grew to Rs 20,843 crore in Q4 FY20 registering a 10 per cent YoY and 0.7 per cent QoQ growth. The company's Interest Income recorded a growth of 8.3 per cent YoY and -0.6 per cent QoQ. Net Interest Income grew by 25 per cent YoY and 2.7 per cent QoQ. Net Interest Margin increased by 18bps to 3.7 per cent as yield declined in tandem with costs. GNPA/NNPA improved to 0.75/0.50 per cent from 0.76/0.54 per cent in Q4 FY20.

   Company with its growing clientele base, increasing branches and stable asset quality has huge upside potential for growth in the tier 3 cities. However, keeping in mind the current slowdown, we value the stock at 2x FY22E Adj BVPS with a target price of Rs 440, and recommend Accumulate.

6. JK Cement: Hold

   Recommendation by Emkay Global Financial Services

   New capacities in the North region are driving volume growth for JKCE with Jul/Aug'20 volumes up 20 per cent yoy. Grinding unit of 0.7mt at Balasinor, Gujarat, will be commissioned in Q3. Putty capacity expansion (0.3mt) will be completed in Oct'20. Kiln modernization at Nimbahera, Rajasthan, will be completed in Q2FY22.

   We raise FY21/22/23E Ebitda by 16.1/14.4/10 per cent on high volumes. Cost-saving strategies have yielded results and JKCE is working on improving operational efficiencies at the North plant. We maintain the Hold rating as we await better entry points

7. Jubilant FoodWorks Ltd-Buy

   Recommendation by Emkay Global Financial Services

   JUBI has the best financial metrics amongst QSR and with competition facing liquidity issues, its stronger profitability and balance sheet make it well-placed to gain share and boost its growth momentum.

   Strong growth and margin expansion lead to a ~20 per cent increase in our FY22-23 estimates and justify a higher target multiple. We maintain Buy with a revised TP of Rs 2,400, based on 50x Dec'21E EPS.

8. ICICI Bank: Buy

   Recommendation by Axis Securities

   We expect higher provisioning over FY21/22E cushioned by stable NIM, low cost of funds and healthy capital adequacy. Proposed capital raising plans are to strengthening capital positioning and competitive landscape. We believe valuations are undemanding for the stock given strong liability franchise and leveraging opportunities across group products. We remain positive on the stock and maintain BUY with SOTP of Rs 480 (1.8x Core ABV FY22E and Subsidiaries value at 134/-)

9. Mannapuram Finance: Buy

   Recommendation by Axis Securities

   Given the Q1FY21 performance, we have further increased credit costs on asset quality concerns for the non gold business. We expect cost optimization to aid profitability. Balance sheet liquidity remains comfortable with no funding challenges. While cautious on the non gold business, we believe gold business (70 per cent of AUM) will support overall performance in uncertain macro conditions. We expect MGFL to maintain ROAE of ~24 per cent over FY21/FY22. Gold lending is a high moat business and we believe specialists like MGFL will continue to benefit. We remain positive on the stock and maintain BUY with target price of Rs 205 (2x FY22E ABV).

   Disclaimer: Views and recommendations given are those of brokerages and analysts and do not represent those of IANS. Users should check with certified experts before taking any investment decision. IANS has no financial liability whatsoever to any user on account of the use of information provided.

Source: IANS