- Indian Oil Corp: ICICI Securities maintains its ‘Buy’ rating on this oil marketing and distribution company with a target price of Rs 115, implying an upside of 29.2%. The company’s net profit for Q4FY23 has increased by 54.8% YoY to Rs 10,289.82 crore, while operating revenue rose by 16.3% YoY. It beat Trendlyne Forecaster’s profit estimates by 87.8%. Analysts Probal Sen and Hardik Solanki say that IOC has shown an overall improvement in operational metrics.
The analysts estimate a 21% YoY improvement in gross margins. They believe that the continued growth in volumes and considerably higher retail margins to date in Q1FY24 will boost earnings growth over the next two years. They forecast retail margins to increase to Rs 2.5-3 per litre for both FY24 and FY25. They also expect earnings per share to increase by 14% in FY25 due to stronger marketing margins and normalised gross refining margins.
The analysts consider Indian Oil Corporation to be trading at attractive valuations, with a forecasted dividend yield of 7.4% in FY24/FY25. The support from Chennai Petroleum Corp earnings makes the risk-reward here favourable.
- APL Apollo Tubes: IDBI Capital maintains its ‘Buy’ rating on this iron & steel products manufacturer and raises the target price to Rs 1,491. This implies an upside of 29.3%. In Q4FY23, the firm’s net profit rose 23.8% YoY to Rs 201.8 crore and revenue grew by 5.1%. It beat Trendlyne Forecaster’s profit estimates by 0.6%.
Analyst Bhavesh Chauhan believes that the company’s healthy performance in Q4 has been driven by rising sales volume, led by robust demand across product categories. But he adds that margins are relatively weak despite volume growth, with EBITDA/tonne growing by only 3% YoY due to a weaker product mix. Nevertheless, he expects the EBITDA/tonne to cross Rs 5,000 in the medium-to-long term.
Chauhan is optimistic about margin improvement given the company’s capacity expansion initiatives. “The company targets 400 kt (kilo-tonnes) of volumes from the Raipur plant in FY24, which should aid margin improvement. It targets a sales volume of 3 million tonnes in FY24 and 4 million tonnes in FY25,” he says. The analyst expects the firm’s revenue to grow at a CAGR of 18.3% over FY23-25.
- Bank of Baroda: Motilal Oswal keeps its ‘Buy’ rating on this bank with a target price of Rs 240, implying an upside of 30.9%. In Q4FY23, the company’s standalone net profit jumped 168.5% YoY to Rs 4,775.3 crore, and revenue grew by 42.3% YoY. It beat Trendlyne Forecaster’s net profit estimates by 18.9%.
Analysts Nitin Aggarwal and Yash Agarwal attribute the bank’s robust growth in profitability to lower provisions, higher other income, and healthy growth in loan disbursements across segments. They also see margin expansion and an improvement in the CASA mix as key positives.
The analysts point out that the bank’s asset quality has improved on the back of controlled slippages and healthy recoveries. They add, “The bank’s slippages were limited at Rs 2,740 crore, which coupled with healthy recoveries led to a 74 bps and 10 bps QoQ improvement in Gross NPA and Net NPA to 3.8% and 0.9% respectively.” They expect the bank’s net profit to grow at a CAGR of 18.2% over FY23-25.
- Granules India: ICICI Direct maintains a ‘Buy’ call on this pharmaceutical company with a target price of Rs 360, indicating an upside of 30.5%. In Q4FY23, the company’s net profit grew by 7.8% YoY to Rs 119.6 crore, while the revenue increased by 15.9% YoY. It has missed Trendlyne Forecaster’s profit estimates by 14.6%. Analysts Siddhant Khandekar, Kushal Shah and Utkarsh Jain say, “The overall growth is primarily from improved performance in the US and European geographies.”
The analysts believe that Granules’ plan to extend its core products via additional strength forms in the US, and launches in other geographies, will provide better operating leverage. They also remain positive on the company due to its geographical expansion, change in product mix, and a compelling risk-reward matrix.
The company’s progress in improving margins and executing its aggressive capex of Rs 700 crore will be key.
- Cipla: KR Choksey maintains its ‘Buy’ call on this pharmaceutical company but revises the target price down to Rs 1,167 from Rs 1,289 earlier. This indicates an upside of 25.4%. In Q4FY23, the company’s profit increased by 44% YoY to Rs 521.5 crore, while its revenue increased by 10.3% YoY. It has missed Trendlyne Forecaster’s profit estimates by 32%. According to analyst Abhishek Agarwal, the revenue has been driven by good traction in the US markets. He, however, notes that the quarterly margins shrank due to the high inflationary environment and rise in R&D spend.
Despite his cautious stance, Agarwal is optimistic about new product launches. During FY23, Cipla launched over 50 new products in the Indian trade generics market. He adds, “Cipla has a strong product launch pipeline for the US and emerging markets, which is expected to boost the revenues as well as the profitability of the company.”
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
