- Sheela Foam: ICICI Direct maintains its ‘Buy’ rating on this foam manufacturer with a target price of Rs 1,650. This indicates an upside of 27.4%. Analysts Sanjay Manyal, Hitesh Taunk and Ashwi Bhansali expect the Indian mattresses industry to grow at a CAGR of 12% over FY22-26. They see organised firms like Sheela Foam “gaining market share through new product launches and strong balance sheet conditions”. The analysts are also positive about the company’s plan to capitalise on the China Plus One strategy to increase its exports to US markets.
Manyal, Taunk and Bhansali believe the recent order win to supply foam to Indian Railways and the revival in demand for automobiles bode well for the firm’s foam business vertical. The company has planned a capex of Rs 350 crore for the next two years to expand manufacturing capacity by 23%. The analysts anticipate that Sheela Foam’s net profit will grow at a CAGR of 22% over FY22-24.
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NOCIL: Motilal Oswal keeps its ‘Buy’ rating on this specialty chemicals company with a target price of Rs 283, implying an upside of 22.5%. Analysts Swarnendu Bhushan and Rohit Rajendra Thorat believe the company will gain market share in the coming quarters on the back of new product launches and debottlenecking. “NOCIL currently has 5-6% of the global market share in the rubber chemicals space and looks to grow this to a double-digit figure,” they added. The analysts think the company will likely benefit from the China Plus One and Europe Plus One strategies.
Bhushan and Thorat write that the management expects the export market to improve, as latex demand has bottomed out. They also expect an improvement in margins on the back of declining commodity costs. The analysts estimate NOCIL’s revenue to grow at a CAGR of 16.2% over FY22-24.
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Dr. Reddy's Laboratories: Sharekhan maintains its ‘Buy’ rating on this pharmaceutical giant with a target price of Rs 5,460, indicating an upside of 28.5%. Analysts at Sharekhan are positive about the company’s prospects due to robust growth in its US market segment after the launch of gRevlimid in limited quantities. They also write that “the launch will continue to help it grow profitably strong over the next two quarters and continue to gain from the sales of gRevlimid in a limited quantity until FY26''. The firm also launched six new products in the US, they added.
The analysts believe Dr. Reddy’s strong product pipeline gives them healthy revenue growth visibility over FY23-25. They add that the company is also banking on the Indian market to drive growth as they plan to launch 15-20 new products. The analysts expect the firm’s revenue to grow at a CAGR of 14.4% over FY22-25.
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Narayana Hrudayalaya: Prabhudas Lilladher maintains a ‘Buy’ call on this multi-speciality hospitals chain with a target price of Rs 920, indicating an upside of 21.5%. Analysts Param Desai and Sanketa Kohale say, “Narayana Hrudayalaya’s profitability across India and Cayman was strong in H1FY23 (up 44% YoY) and we expect this growth momentum to sustain.”
Desai and Kohale believe “faster ramp up in the new Cayman unit will be key”. After reopening tourism, Cayman’s business has shown strong growth, and volumes continue to remain healthy. The company’s management is confident of the sustainability of current profitability, and analysts also expect the current quarterly run-rate of $10-12 million EBITDA to sustain.
The management has guided a capex of Rs 1,000 crore annually in FY23 and FY24. Meanwhile, the analysts say that “the capex spend would be towards its core and high performing regions such as Bangalore, Kolkata and Cayman”, which they say will enhance growth visibility. Desai and Kohale expect an EBITDA CAGR of 22% over FY22-25.
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Hindalco Industries: Axis Direct recommends a ‘Buy’ call on this aluminium manufacturer with a target price of Rs 502. This indicates an upside of 13.3%. The production cost of aluminium increased by 20% QoQ in Q2FY23 due to higher energy costs but the management expects ease in coal prices and supply to guide a 2-5% decrease in Q3FY23. The analysts at Axis Direct expect Hindalco’s arm Novelis’ EBITDA per tonne to inch up to $525 by the end of FY23 from $514 in Q2FY23.
The management stated that they will pace the growth capex with cash flows to keep net debt/EBITDA within 2.5x at Novelis. The analysts write, “Hindalco is a defensive play backed by stable cash flows and lower operational and financial leverage”. They conclude, “Aluminium is expected to find support from peaking of the US dollar and China easing its Zero Covid policy.”
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
