By Suhas ReddyThis week, ahead of the upcoming result season, we take a look at analyst picks with significant upsides of over 10%.
- Birla Corporation: Axis Direct maintains a ‘Buy’ call on this cement manufacturer with a target price of Rs 1,305, indicating an upside of 23.9%.
The company commissioned its greenfield capacity of 3.9 million tonne per annum at Mukutban, Maharashtra during FY22. It aims to take its total cement manufacturing capacity to 30 million tonne per annum by 2030. On the commercialization of greenfield capacity, analysts Uttam K Srimal and Shikha Doshi said, “future growth prospects look encouraging.”
The analysts remain positive on Birla Corp on the back of cost optimization initiatives, demand traction emerging from government expenditures on various infrastructure schemes, increasing demand in the central region, new capacity addition, and higher sale of premium products. Srimal and Doshi said that this strategic expansion will drive the future growth of the cement manufacturer. They expect it to register revenue and profit CAGR of 18% and 37%, respectively over FY22-24.
- Coal India: ICICI Securities maintains a ‘Buy’ call on this coal company with a target price of Rs 236. This indicates an upside of 28.1%.
Rahul Modi, Abhijit Mitra and Anshuman Ashit said, “Coal India is facing pressure to increase its production on the back of demand increases and fall in generation by imported coal-based plants. This may result in an increase in the e-auction prices.”
The analysts think that the company is in a better position to absorb cost increases after posting good profit numbers over the past two quarters. They also mention that the inflationary pressures have moderated slightly. Analysts Modi, Mitra and Ashit remain cautiously optimistic on the coal producer and expect the dividend payout to remain high, leading to a 9-10% yield at the current market price, despite heavy capex of Rs 16,500 crore.
- Computer Age Management Services: Motilal Oswal initiates coverage of this financial services company with a ‘Buy’ rating and a target price of Rs 3,000. This indicates an upside of 20.9%.
Analysts Prayesh Jain and Nitin Aggarwal expect the Indian mutual fund (MF) industry’s assets under management (AUM) to grow at a CAGR of 15% over FY22-25. They believe the firm is well placed to benefit from the expected growth in the industry as “CAMS, with a 70% market share (v/s 64% in FY15), is the leader in India’s MF registrar and transfer agent (RTA) industry”.
Along with its strong presence in the Indian MF RTA industry, it has a 50% market share in the alternative investment fund (AIF) and portfolio management services (PMS) RTA segment, added the analysts. Jain and Aggarwal expect the revenue from the non-MF segment to grow at a CAGR of 20% over FY22-25. Overall, the analysts see macroeconomic tailwinds like the rising financialization of savings and expanding presence of asset management companies to benefit the company in the coming years.
- Bank of Baroda: Sharekhan maintains its ‘Buy’ rating on this bank with a target price of Rs 165. This indicates an upside of 16.9%.
Analysts at Sharekhan are optimistic about the company’s future growth prospects as they expect the bank’s margins to improve on the back of robust loan growth and low credit costs. The analysts believe the company’s focus on increasing loan disbursements in high-margin segments like mid-corporate loans, personal loans, and gold loans will lead to improved profitability in the coming quarters. They believe the bank is “entering into a sweet spot, where strong core pre-provision operating profit growth with low credit costs should drive a strong improvement in return ratios over the medium term”.
The analysts believe the bank has emerged stronger from the lows of the pandemic, as its net non-performing assets have fallen to 1.58% led by lower slippages. They think a combination of high-rated loans, lower credit costs, and moderation in slippages will enable the bank to capture opportunities in the growing Indian economy. The brokerage expects the company’s net profit to grow at a CAGR of 26.9% over FY22-24.
- HDFC Bank: Prabhudas Lilladher maintains its ‘Buy’ rating on this bank with a target price of Rs 1,800. This implies an upside of 19.9%.
Gaurav Jani and Palak Shah say that HDFC Bank’s sharp branch focus, higher productivity from existing branches, and targeted branch expansion will drive increasing deposits. The bank has set a target to add 1000-2000 branches per annum. As the majority of branch additions for FY23 will happen in the second half of the year, the analysts believe that opex would remain elevated and may see a growth of 22% CAGR over FY22-25.
The bank has touched an incremental market share in term deposits of 21.5% in FY20, and 26.1% in FY22, and in Q1FY23 it has already added Rs 60,000 crore in term deposits. While speaking about the unsecured loan book the analysts say, “The bank should be cautious while expanding into unsecured, considering that a rising interest rate environment generally witnesses an increase in retail delinquencies.”
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
