Five analyst picks with profit growth in Q2
This week, we take a look at five analyst picks with YoY profit and revenue growth in Q2FY24.
1. ACC:
Axis Direct maintains its ‘Buy’ call on this cement manufacturer with a target price of Rs 2,460. This indicates an upside of 29.7%, with analyst optimism driven by strong Q2 results. In Q2FY24, the company reported a net profit of Rs 387.9 crore, against a loss of 87.3 crore in Q2FY23. Its revenue has grown by 14.5% YoY to Rs 4,644.8 crore. Analysts Uttam K Srimal and Shikha Doshi attribute ACC’s 18% volume growth to an increase in blended cement and improvements in efficiency parameters.
The analysts say, “The recent commercialization of the Ametha integrated unit in the demand-accretive central region will support volume growth moving forward.” They expect a 13% CAGR in volume growth over FY24-FY25 for the company.
Srimal and Doshi are positive about ACC’s various cost optimization drives, which have led to a 17% YoY reduction in overall costs per tonne. Consequently, this has increased the EBITDA margins to 12.4% in Q2FY24 from 0.4% in Q2FY23. They expect the company’s ongoing business initiatives to further bring down operating costs. They say that initiatives such as reducing the clinker factor and logistics costs, increasing sales of premium products, a higher share of green energy, and the recent hike in cement prices will expand the company’s EBITDA margins.
2. Sona BLW Precision Forgings:
ICICI Securities upgrades its rating on this auto parts and equipment manufacturer to ‘Buy’ from ‘Add’, but lowers its target price to Rs 598 from Rs 630. This implies an upside of 10%. In Q2FY24, the company’s net profit rose by 33.8% YoY to Rs 123.8 crore and revenue increased by 20.3% YoY to Rs 790.8 crore.
Analysts Basudeb Banerjee and Vishakha Maliwal attribute the revenue growth to the battery electric vehicles (BEV) segment, a focus for Sona BLW. Segment revenue surged by 58% YoY, contributing 27% to the total revenue in Q2. They add that the firm’s profitability has improved on the back of a favourable product mix and normalising raw material prices.
The analysts expect Sona BLW to maintain its EBITDA margin at 28% in FY24 and FY25. They note that the management aims to keep margins at healthy levels with the help of “the production linked incentive (PLI) scheme, product breakthroughs with better pricing power and enhanced operating leverage”. Banerjee and Maliwal expect the firm’s net profit to grow at a CAGR of 42.1% over FY23-25.
3. Dixon Technologies (India):
BOB Capital Markets upgrades its rating on this consumer electronics company to 'Buy' with a target price of Rs 6,000, implying an upside of 22.5%. Analysts Vinod Chari, Arshia Khosla, and Swati Jhunjhunwala are optimistic about the company due to its remarkable revenue growth of 28% YoY, driven by the mobiles segment, which accounts for 50% of the revenue. In Q2FY24, the company reported a net profit of Rs 107.32 crore, an increase of 38.9% YoY.
The analysts note that the company, which operates under various production-linked incentive (PLI) schemes, is in discussions with global brands for production under the IT hardware PLI scheme. They anticipate that new customers, such as Xiaomi onboarded in Q1FY24, Voltas Beko, and Itel in H2FY23, will act as growth catalysts. They also expect Dixon Technologies to start designing its own products, which will contribute to improved margins.
Chari, Khosla, and Jhunjhunwala believe that the company is exploring product categories with high margins, including electric vehicles, defense, drones, medical electronics, and telecom infrastructure, which are expected to enhance profitability.
4. Chalet Hotels:
Prabhudas Lilladher keeps its ‘Buy’ rating on this hotel chain but lowers its target price to Rs 650 from Rs 656, implying an upside of 17.1%. In Q2FY24, the firm’s net profit surged by 131.6% YoY to Rs 36.4 crore and revenue increased by 26.9% YoY to Rs 314.5 crore.
Analysts Jinesh Joshi and Stuti Beria credit the company’s revenue and profit growth to a 24.5% YoY increase in revenue per available room (RevPAR) and a 21.2% YoY hike in the average room rate (ARR).
The analysts expect “H2FY24 to be much better, aided by the ongoing Cricket World Cup and the revival in foreign tourist arrivals”. Joshi and Beria note that the addition of 168 rooms in Hyderabad and 88 in Pune during Q2, along with a significant portion of the company’s leasing portfolio in Bengaluru and Mumbai, set to be handed over from Q3FY24, bodes well for future growth. They expect the hotel’s revenue to grow at a CAGR of 21% over FY23-26, driven by robust RevPAR growth and the operationalisation of its hospitality and commercial assets.
5. Shriram Finance:
IDBI Capital maintains a 'Buy' rating on this non-banking financial company with a target price of Rs 2,230, implying an upside of 18.6%. Analyst Bunty Chawla holds an optimistic outlook on the company, citing a rise in net interest margins to 8.9% and strong growth guidance in Assets under Management (AUM). In Q2FY24, the company reported revenue growth of 66% YoY and net profit increase of 67% YoY to Rs 1,786.1 crore.
Chawla foresees robust AUM growth, with management revising its guidance upward to 18-20% from the previous 15% for FY24, thanks to the expansion in the passenger vehicle and MSME segments. The company has also reported a 14% QoQ increase in disbursements to Rs 34,600 crore. Stable costs of funds, improved liquidity utilization, and enhanced product mix are expected to boost yields.
Chawla also notes an improvement in asset quality, as GS3 stands at 5.8% compared to the previous 6.0%, largely due to increased write-offs. He expects credit costs to remain within 1.5-2% for FY24, contributing to better yields.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
