This week, for analyst picks, we take a look at companies from the utilities, cement & construction sectors with revenue and profit YoY growth above 10%.
- Mahanagar Gas: ICICI Securities maintains its ‘Buy’ rating on this city gas distribution company and increases the target price to Rs 1,050, implying an upside of 12.3%. In Q3FY23, the firm’s net profit jumped over 3X YoY to Rs 172.1 crore and revenue rose 55.2% YoY to Rs 1,582.3 crore.
Analysts Probal Sen and Hardik Solanki write that the firm’s volumes have fallen on a YoY basis, but its profitability is better than expected. They attribute this to aggressive price hikes the company took. Going forward, analysts expect volumes to rise as gas costs will likely reduce due to the Kirit Parikh Committee recommended price implementation. They expect “volumes and margins to see an improvement over FY24-25”.
Sen and Hardik are optimistic about the company’s prospects for the next 12-18 months. They expect the company’s net profit to grow at a CAGR of 19% over FY23-25.
-
Praj Industries: Axis Direct maintains its ‘Buy’ rating on this construction & engineering company with a target price of Rs 500. This indicates an upside of 37.3%. In Q3FY23, the company’s net profit grew 68.2% YoY to Rs 62.3 crore and revenue increased 55.4% YoY to Rs 910 crore.
Analyst Prathamesh Sawant says that the company’s EBITDA margin and net profit beat his estimates due to the moderation in sleet prices. He adds that the completion of the old fixed cost order in Q3 has helped boost margins.
Sawant notes, “Praj Industries is the pure equity play on India Ethanol Revolution and now marching its footprints globally”. As the company has begun to expand its engineering services across growth industries like compressed bio-gas, green hydrogen, ethanol production, and others, the analyst believes its growth prospects will improve. He anticipates the firm’s net profit to grow at a CAGR of 29.2% over FY23-25.
-
Dalmia Bharat: Motilal Oswal maintains its ‘Buy’ rating on this cement & cement products manufacturer with a target price of Rs 2,120. This implies an upside of 10.5%. In Q3FY23, the company’s net profit jumped 98.1% YoY to Rs 204 crore and revenue rose 22.9% YoY to Rs 3,355 crore.
Analysts Sanjiv Kumar Singh and Mudit Agarwal are upbeat about the firm’s Q3 performance as it beat their net profit estimates by a healthy margin. They attribute the improvement in profitability to pricing recovery in eastern India and better cost controls. They add that the company is trading at an attractive valuation.
Kumar and Singh believe that Dalmia Bharat has good long-term prospects due to its diversified capacity expansion plan, dominant presence in the high-growth market of east India and its focus on sustainability. According to them, “The company maintains its target of delivering 1.5x demand growth than the industry average in FY23.” The analysts expect the company’s revenue to grow at a CAGR of 10.6% over FY23-25.
-
Tata Power: ICICI Securities maintains a ‘Buy’ call on this utilities company with a target price of Rs 262, indicating an upside of 28.8%. In Q3FY23, Tata Power’s net profit increased by 121.9% YoY to Rs 945 crore, while its revenue increased by 30.7% YoY to Rs 14,402 crore. Analysts Rahul Modi and Anshuman Ashit say, “Tata Power’s strong quarterly results continued in Q3FY23 as well, sustained by higher profits from the coal and Mundra businesses, and robust performance of distribution businesses.”
The company had planned a capex of Rs 8,000-10,000 crore, of which Rs 3,000 crore was incurred in H1FY23. The analysts believe that the utilities company has a strong long-term potential, especially its renewables and distribution businesses which can outperform. They also believe that Tata Power is among the best-placed private players in the power sector, with businesses across the value chain and backward integration.
-
Star Cement: Bob Capital Market maintains a ‘Buy’ call on this small-cap cement manufacturer with a target price of Rs 138. This indicates an upside of 25.4%. In Q3FY23, the company’s net profit grew 20.7% YoY to Rs 52.9 crore, while its revenue increased 12.3% YoY to Rs 631.3 crore.
Analysts Milind Raginwar and Yash Thakur state that the revenue growth is backed by higher realisations (up 8% YoY to Rs 6,823 per tonne) and volumes (up 5% YoY to 0.9 metric tonnes), indicating healthy demand in key markets. They further add that the cement manufacturer had hiked price in mid-December and its full impact will be reflected in Q4FY23.
The analysts “like Star Cement for its strong presence in the remunerative northeast market, plans to de-risk revenue, and light debt burden despite capex”.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
