- Steel Authority of India (SAIL): Axis Securities initiates coverage on SAIL with a ‘Buy’ recommendation and a target price of Rs 150, implying an upside of 38.95%. SAIL’s modernisation and expansion plan is near completion and the company’s total saleable steel capacity will increase to 20.2 million tonnes per annum post-expansion, according to analyst Aditya Welekar. “We expect steel margins to come under pressure in H2FY22 as lower steel prices will coincide with higher coal price,” Welekar writes. But margins may recover post that as coal prices ease out and steel prices find support with lower demand in China getting balanced by lower production in CY22. Driven by higher profits, Axis Securities expects SAIL to maintain its dividend payout ratio of 28% from FY22 to FY24, which translates into a high dividend yield of 6-8% at current market price. Axis Securities values the company at 4.0x FY24 EBITDA.
- Infosys: HDFC Securities maintains a ‘Buy’ rating on Infosys but increased its target price to Rs 2,220 from Rs 1,995 with an upside of 14.10%. Infosys reported robust revenue growth of 7% QoQ and 21.5% YoY in Q3FY22. Amit Chandra writes, “Its (TCS’) growth trajectory will remain robust supported by a strong deal pipeline and wins, broad-based momentum across verticals, and operational pivots of offshoring and utilization.” These factors will mitigate the near-term impact of higher subcontracting. Chandra remains positive on Infosys and expects 17% EPS CAGR over FY21 to FY24. Chandra is factoring in a YoY dollar revenue growth of 20.1% in FY22, 15.4% in FY23, and 10.5% in FY24. For Q4FY22, the analyst expects 4.1% QoQ growth in dollar revenues.
- Tata Consultancy Services (TCS): Motilal Oswal’s analysts Mukul Garg and Raj Bhanushali have a ‘Buy’ rating on TCS with a target price of Rs 4,250, implying an upside of 6.65%. TCS topline grew 16.3% YoY to Rs 48,885 crore in Q3FY22 in a seasonally weaker quarter. The analysts expect this performance to alleviate concerns about its growth potential and the likely drag from the growing share of smaller deals in the market. They also feel IT Services has entered into a technology upcycle, with cloud migration and digital transformation-led deals coming into the market. “Given TCS’ size, capabilities, and portfolio stretch, it is rightly positioned to leverage the anticipated industry growth,” Garg and Bhanushali write. The duo stay positive on TCS factoring in revenue growth of 15% YoY in FY23.
- Gujarat Gas: Prabhudas Lilladhar’s analyst Avishek Datta has a ‘Buy’ rating on Gujarat Gas with a target price of Rs 764, indicating an upside of nearly 9.42%. “We expect Gujarat Gas’s margins to bottom in Q3 at Rs 2.5 per standard cubic metre and improve in Q4, due to pricing intervention,” Datta writes. Domestic ceramic demand in the residential segment picked up post-pandemic led by home improvements and work-from-home trends. Indian ceramic capacity expanded to 1,320 million square metres in CY20, up 8%YoY, and will likely expand more. Further, a gas price increase of 10-15% is also expected shortly, due to continued high spot prices and any improvement in the geopolitical environment in Ukraine will improve Gujarat Gas profitability. Datta expects a 15.8% CAGR volume growth over FY 23-24.
- CRISIL: Monarch Networth Capital gives CRISIL a ‘Buy’ rating with a target price of Rs 3,700, indicating an upside of 24.92%. “Buoyancy in the capital market will aid strong traction in the domestic research revenues for CRISIL,” Monarch Networth says. “This, in addition to a seasonally strong quarter for the global benchmarking business, will aid superior earnings growth in the research division.” The brokerage sees traction across segments for the company. CRISIL’s strong parentage, superior margin profile, healthy return ratios - Return on Equity (ROE) at 30% and dividend payout ratio provides comfort. Monarch Networth factors in 15% CAGR growth in CRISIL’s research revenue and a CAGR of 8.5% in its revenue estimate. Monarch Networth also estimates 13% CAGR growth in revenue and 15% growth in earnings over CY 20-23 while expecting ROE to be at 30-31%.
