The Baseline    
04 Jul 2022
Five stocks beating their industry in analyst sentiment
By Abhiraj Panchal

 

  1. Bharat Electronics: This defense public sector firm has 21 consensus recommendations from analysts of a ‘Strong Buy’, which is better than the industry consensus (which analysts rate as ‘Buy’). Out of 21 analysts, 17 have ‘Strong Buy’ recommendations on Bharat Electronics, as well as one ‘Buy’, ‘Hold’ and ‘Sell’. The company has a Trendlyne Durability score of 70, indicating strong financials. In FY22, the company’s revenue grew 9.6% YoY to Rs 15,599.7 crore and profit by 14.3% to Rs 2,398.9 crore. 

According to Nilesh Soni from Prabhudas Lilladher, Bharat Electronics has a substantial order backlog and tender pipeline, and it is also diversifying into business verticals like EV batteries, medical equipment, etc. He further states, “order pipeline stands strong from the Akash weapon system, QRSAM, LRSAM, Naval equipment like a surveillance system, radars, and navigation systems”. Chirag Shah and Vijay Goel from ICICI Direct are also optimistic about the company’s prospects as it is diversifying into non-defense businesses and focuses on increasing exports. 

  1. Birlasoft: The consensus recommendation from 11 analysts on this IT consultancy services company is a ‘Strong Buy’. 10 analysts have a ‘Strong Buy’ ratings, while one analyst has a ‘Hold’ rating. The consensus recommendation on this company is better than the overall industry rating of ‘Hold’. The company has a Trendlyne Durability score of 75. In FY22, its revenue grew 16.2% YoY to Rs 4,130.3 crore ($523.4 million) and profit grew 44.5% YoY to Rs 463.6 crore.

The company guided for $1 billion revenue in FY25, out of which it expects $800-$850 million to be contributed by organic growth. The remaining $150-$200 million will be contributed by inorganic opportunities. The company expects to meet its FY25 revenue target by winning more large contracts. Sameer Pardikar of ICICI Direct says “revenue growth is expected to be achieved via client mining, cross-selling, multi-year deals, expansion in Europe & APAC and focus on niche verticals”. He also estimates dollar revenue to grow at a 13.7% CAGR and margin to expand by 50 bps to 16% over FY22-24. 

  1. DLF: The consensus recommendation from 19 analysts on this real estate company is a ‘Buy’. Out of these 19, 14 analysts recommended a ‘Strong Buy’, two recommended a ‘Buy’, two a ‘Hold’ rating, and one had a ‘Strong Sell’ rating on this Gurgaon-based real estate developer. The consensus recommendation on this company is better than its industry’s rating (of ‘Buy’) and has a Trendlyne Durability score of 85. In FY22, the company’s revenue rose by 5.6% YoY to Rs 5,717.4 crore and its profit rose by 37.2% YoY to Rs 1,500.9 crore.

The company’s pre-sales in FY22 grew 2.4X YoY to Rs 7,270 crore and beat its presales guidance of Rs 6,000-6,500 crore. The company’s overall sales margin grew by 15 percentage points to 51% in FY22. Brokerages like HDFC Securities and Edelweiss expect the occupancy rates in its office, retail, and residential portfolios to improve in the coming quarters and they both have a positive outlook on the company’s prospects. Amit Agarwal and Manan Shah of Edelweiss say the company “has aggressive launch pipelines to scale up the current portfolio and will be a key beneficiary when the commercial cycle recovers”. The management has guided robust exit rentals of Rs 4,400 - 4,500 crore for FY23, driven by new launches, higher retail yields and an increase in occupancy levels.

  1. Apollo Hospitals Enterprise: This healthcare company, with 21 analyst recommendations, has a consensus call of ‘Strong Buy’, better than the overall industry’s ‘Buy’ rating. 15 analysts have a ‘Stong Buy’ on the business, five have a ‘Buy’ rating, and one ‘Hold’. The company has a Trendlyne Durability score of 85. In FY22, the company reported revenue growth of 39% YoY to Rs 14,740.8 crore and profit growth of 601.9% YoY to Rs 1,055.6 crore. 

Param Desai and Sanketa Kohale from Prabhudas Lialladher say, “Apollo Hospitals pursued aggressive expansion in the past few years, which has created a strong growth platform”. According to the company’s Q4FY22 earnings call,  it expects a total of $3 billion of gross merchandise value from its offline pharmacies ($2 billion), Apollo 24*7 ($500-700 million), and companies partnership with amazon ($500 million) in the next 3-4 years. The company also expects its offline pharmacy to continue to grow at 20% in FY23 due to store expansion for its diagnostic business. It expects the business to grow to Rs 1,000 crore within three years. Apollo 24*7 has earmarked Rs 400 crore marketing expenditure for FY23. 

  1. Tech Mahindra: This IT consulting and software company has a consensus recommendation of ‘Buy’ from 41 analysts, better than the industry consensus rating. Out of the 41 analysts, 25 have a ‘Stong Buy’ call, seven have a ‘Buy’, five a ‘Hold’, and two are at ‘Stong Sell’. The company has a Trendlyne Durability score of 75. In FY22, the company’s revenue grew by 18.4% YoY to Rs 45,758.3 crore and profit grew by 25.7% to Rs 5,566.1 crore. 

According to the Q4FY22 earnings call transcript, the company’s new deal wins have amounted to $1 billion, constituting $366 million from the Enterprise segment, and the rest from communications, media, and entertainment (CME). The company has announced partnerships with Bharti Airtel to set up a joint 5G innovation lab to co-develop and market 5G in India. Tech Mahindra’s other recent collaborations include conversational-AI solutions with Yellow.ai, and collaboration with Cisco, and Celonis, among others, for the advancement in technology. 

Analysts from ICIC Direct, IDBI Capital and Geojit BNP Paribas, among others, believe that Tech Mahindra’s new deal wins and its capabilities in new technology, like 5G, automation and AI could drive its future revenue growth.

1 Comment
16 Jul 2022, 07:52PM
More from The Baseline
Recommended