- Aptus Value Housing Finance India: LKP Securities gives a ‘Buy’ rating to Aptus Value Housing Finance India (Aptus) with a target price of Rs 477 - a potential upside of 33.58%. LKP Securities says Aptus consistently delivered a return on assets (ROA) of more than 6% since FY16. It also has a high capital base and lower leverage, which keeps the return on equity (ROE) above 12%. LKP Securities estimates an ROA and ROE of 7% and 15%, respectively, for FY22. The company’s collection efficiency improved to pre-Covid levels and stood at 99.7% in the quarter ended September 2021 compared to 95% for the quarter ended June 2021. The collection efficiency remained robust despite the pandemic, and asset quality was steady. “A lower stress is likely to keep the credit cost in check, which may translate into better profitability in coming years,” says LKP Securities. LKP Securities expects strong growth in assets under management, stable net interest margin of 10.6%, and operating expense ratio or opex of 2.2% to help to deliver strong profit growth of 27% CAGR over FY21-FY24.
- Coforge: Based on record deals won by this company, Axis Securities maintained its ‘Buy’ rating on Coforge with a target price of Rs 6,870 and an upside of 21.22%. Coforge bagged deals worth $781 million in FY21, a growth of 11% YoY. Revenue growth in FY21 stood at 11.4% with operating margins at 18%, an expansion of 80 basis points over the previous year. Margin expansion was aided by higher offshoring, higher utilization, lower attrition, and a favorable currency mix during FY21. Due to the pandemic, Coforge witnessed a robust digital demand wave, and this is expected to continue. Coforge also continues to invest in human capital to build strong capabilities to fulfill client requirements. Axis Securities believes the company is likely to have better revenue growth and operating margin expansion prospects in the near future as the management has guided for double-digit growth in FY22 by factoring in robust deal wins in the recent past.
- Coal India: ICICI Securities gives a ‘Buy’ rating to Coal India (CIL) with a target price of Rs 234 and an upside of 47.36%. CIL recorded an all-time high production during the nine months ended FY22 at 413.6 million tonnes. Key factors behind the surge in production volumes are higher power demand, low coal stocks at most power plants, unprecedented power prices on exchanges in October 2021, and global elevated coal prices. Coal prices are expected to rise again as Indonesia bans exports amid increasing demand for coal. Further, demand for coal is higher in most major coal importing countries. “This is likely to make CIL a preferred coal supplier for domestic consumers in the medium term as it remains at a 50% discount to international prices,” says ICICI Securities, which expects a good dividend payout from CIL in FY22.
- KPR Mill: Analysts at Edelweiss Wealth Research are enthused at KRP Mill’s prospects based on two themes – fashion and its ethanol business. It has a ‘Buy’ rating on the stock with a target price of Rs 860, with an upside of 18.78%. The garment segment has provided a steady balance to the company’s growth, as this grew at a CAGR of 16% over the past nine years. Due to government policies that boosted demand for ethanol, the company increased its ethanol capacity to 130 kilo litres per day (KLPD), which will be enhanced to 360 KLPD by Q4FY22. Edelweiss Wealth Research forecasts that the sugar/ethanol segment will generate revenue of Rs 1,400 crore by FY24. It also expects KPR Mill’s EBITDA to grow at a 24% CAGR translating into a margin expansion of 340bps. This could translate into a net profit growth of 29% CAGR with healthy return on capital employed (ROCE) of 28%and RoE of 25% by FY24.
- SBI Cards and Payment Services: HDFC Securities initiates coverage on SBI Cards and Payment Services with a ‘Buy’ rating and a target price of Rs 1,100 with an upside of 21.4%. SBI Cards and Payment has emerged as a formidable, high-quality, high-growth franchise that is poised for sustained earnings growth of 45% EPS CAGR and high profitability of RoA of 5.2% over FY21-FY24, says the analysts. SBI Cards’ strategy of maintaining a balanced mix of Open Market and Banca customers “bodes well for superior profitability and credit risk management”. HDFC Securities expects SBI Cards to deliver 6.2% RoE and 28% RoA by FY24 led by strong growth in CIF/spends and steady unit economics.
