Analysts are making some of their final picks ahead of Q2 results, which will start being released early October. Footwear, banking and health stocks are among the favorites. 

1. Campus Activewear: Motilal Oswal initiates a ‘Buy’ coverage on this footwear retailer with a target price of Rs 640. This indicates an upside of 10.1%. Aliasgar Shakir, Harsh Gokalgandhi, and Tanmay Gupta say that the Indian footwear market is witnessing an increase in demand due to younger people aspiring for more fashionable footwear. 

The analysts think that with a vertically integrated manufacturing ecosystem and superior product quality footwear, the company has created an edge over the Indian sportswear market. They believe its effective cost management, quick time to market, and premiumization push are benefiting it in the shift towards sportswear. Shakir, Gokalgandhi, and Gupta add, “Campus’ tenable earnings growth, strong returns profile and self-sustainable growth model warrants rich valuation.” The analysts expect revenue and profit CAGR of 29% and 42% over FY22-25, respectively. 

2. City Union Bank: IDBI Capital initiates a ‘Buy’ call on this banking company with a target price of Rs 230, indicating an upside of 32.5%. “City Union Bank’s asset quality got impacted due to Covid-19 with GNPA at 5.6% in Q1FY22 as against 3% in FY19 (pre-Covid-19). GNPA declined to 4.7% by the end of FY22 backed by higher recoveries/upgrades (including write-offs) against fresh slippages,” write Bunty Chawla and Debesh Agarwala. 

The analysts note that the bank reported the most consistent performance in terms of return ratios and expect the return on assets ratio to improve to pre-covid levels of 1.5% backed by 15% CAGR in FY23-24 and a decline in credit cost to 1.2% in FY23 against 2.2% FY21. They initiate coverage on City Union Bank on the back of improving asset quality, credit growth being in the high teens, and the restructured assets’ trajectory.

3. Eicher Motors: Axis Direct upgrades this automobile company to a ‘Buy’ call from a ‘Hold’ with a target price of Rs 4,125. This indicates an upside of 14.4%. According to Aditya Welekar and Shridhar Kallani, Royal Enfield (RE) domestic sales contracted over FY19-22 due to Covid-19, higher vehicle prices, weak consumer sentiments, and supply-chain constraints. However, the analysts say, “both demand and supply constraints are easing now, and lowering commodity prices coupled with vehicle prices that are expected to remain stable should drive an uptick in sales moving forward.” 

RE’s total wholesales stood at 70,112 in August, up 53% YoY. “After channel checks on the pan-India level, most dealers are projecting higher demand this festive season with a few even suggesting overall volumes will cross pre-Covid levels,” say the analysts. Welekar and Kallani expect the volume growth to drive higher operating leverage, which along with the correction in commodity prices, should lead to EBITDA margin expansion over FY22-25.

4. Krishna Institute of Medical Sciences: ICICI Securities initiates coverage of this healthcare facilities company with a ‘Buy’ rating and a target price of Rs 1,565. This implies an upside of 17.7%. Analysts Vinay Bafna and Rohan John are positive on the company’s long-term growth prospects given its strong brand recall in Andhra Pradesh and Telangana, expansion into newer markets, and healthy margins. Another key advantage of this healthcare services provider is that “it follows an affordable pricing strategy whereby its services are priced lower vs key competitors”, add the analysts. 

Bafna and John believe the firm’s plans to expand into Maharashtra, Bangalore, Chennai, and central India will drive its next phase of growth in the coming years. According to the analysts, it intends to enter these new markets through a series of strategic partnerships and acquisitions to increase its scale of operations. The analysts expect the company’s revenue to grow at a CAGR of 26.7% over FY22-24.

5. Kennametal India: Edelweiss assigns a ‘Buy’ rating on this metal products manufacturer with a target price of Rs 3,384, indicating an upside of 27.3%. Analyst Tushar Chaudhari expects the company to benefit from the rising manufacturing activity in India, especially the rising capacity utilisation across the automobile sector. He adds that “the company is one of the major beneficiaries of the impending revival in the automobile sector as it is one of the biggest consumers of its hard metal products”. He believes the firm can capitalize on this recovery given its strong balance sheet.

Chaudhari also expects Kennametal’s margins to expand as raw material prices are softening. The main raw materials used by this company are Tungsten Carbide and Cobalt, whose prices have significantly fallen since March 2022. The analyst also says that the focus on indigenization and import reduction will bode well for the business in the long term. He expects the company’s net profit to grow at a CAGR of 22.8% over FY22-25.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)