This week we take a look at five analyst picks with high upsides

1. Piramal Pharma: Edelweiss initiates a ‘Buy’ call on this pharma company with a target price of Rs 130, indicating an upside of 29.9%. The brokerage recommends the company as a long-term investment. Analysts Thakur Ranvir Singh and Harsh Shah say, “Piramal Pharma recorded a revenue CAGR of 15% over the past 10 years, with multiple acquisitions and spin-offs. However, the past few quarters were challenging.” But the analysts expect a strong recovery in the overall business in the coming years. 

Singh and Shah are positive about the company due to a strong product pipeline and increased order inflows as the manufacturing base returns to normal after facing higher attrition during the pandemic. According to analysts, Piramal Pharma faced multiple headwinds over the past couple of years, which hit its valuation. But with the improving performance, they expect the valuation to gradually catch up. 

The analysts expect the macro-environment to improve over the next year and,a significant recovery in Piramal Pharma’s return ratios as the company executes major capex projects. 

2. Kajaria Ceramics: ICICI Direct maintains a ‘Buy’ call on this ceramic and tiles manufacturer with a target price of Rs 1,680, indicating an upside of 24.1%. Analyst Bhupendra Tiwary says that “Kajaria, with a net cash balance sheet and superior brand, is well positioned in the tiles sector with expanding reach to tier-2 and 3 cities.” The management has guided for a 13-15% YoY volume growth in the tiles segment during FY24, driven by increased demand, capacity utilization, and an enhanced distribution network. They expect exports to grow by 25% in FY24. 

The analyst is also optimistic about the company due to the significant decline in gas prices over the past two quarters. With lower fuel costs, he expects the company to achieve net gains of Rs 130-140 crore in power and fuel expenses in FY24, and pass on net benefits of Rs 50 crore to dealers through trade discounts. Tiwary remains positive as Kajaria is a net cash company (Rs 236 crore in FY23) with a healthy balance sheet.  

3. Federal Bank: Sharekhan maintains its ‘Buy’ rating on this bank with a target price of Rs 170, implying an upside of 26%. In Q1FY24, its standalone net profit rose 42.1% YoY to Rs 853.7 crore and revenue grew by 38.5% YoY. 

Analysts at Sharekhan maintain their positive outlook due to its sustained loan growth momentum and healthy core fee income. They believe the company will maintain its healthy return ratios despite margin headwinds, thanks to its asset quality and lower credit costs. 

Although the bank’s net interest margin fell in Q1, the analysts are confident that the NIM will rise from H2FY24, supported by higher incremental yields. They added, “We believe the bank still has potential for positive surprises, led by operating leverage and higher core fee income.” The analysts expect the company’s net profit to grow at a CAGR of 17.5% over FY23-25. 

4. Lemon Tree Hotels: Motilal Oswal keeps its ‘Buy’ rating on this hotel chain with a target price of Rs 115, implying an upside of 25.3%. Analysts Suman Kumar, Meet Jain and Omkar Shintre believe the addition of Aurika MIAL (its largest hotel with 699 rooms) through a management contract will be a game changer for the company. “The addition will improve average room rates (ARR), brand mix and margins at the consolidated level, paving the way for management contracts and exponential growth of management fees,” the analysts add.

They also believe that the company’s restructuring plan will accelerate its debt repayment process. They expect the growth momentum from FY23 to continue in FY24. The analysts anticipate the firm’s revenue to grow at a CAGR of 28.2% over FY23-25. 

5. Central Depository Services (India) (CDSL): HDFC Securities upgrades its rating on this investment company to 'Buy', with a target price of Rs 1,470, indicating a 22% upside. Analysts Amit Chandra and Vivek Sethia express optimism and expect a recovery akin to the company’s robust performance one year ago in FY21-22.
   
   Despite a slump in growth in FY23 due to decreased market-linked revenues such as transaction, IPO, and KYC fees, a 30% YoY increase in annuity streams offset this decline.

Chandra and Sethia predict a rebound in FY24, driven by increased Beneficiary Owner (BO) account additions, higher transaction revenues due to delivery volume growth, and a continuous surge in annuity revenue streams. With the company adding 20 lakh accounts monthly, they anticipate CDSL to dominate the BO account market with a 73% share and an 85% incremental share. Currently, only 2% of policies are in demat form. The analysts foresee a recurring opportunity of Rs 152 crore for repositories. Assuming CDSL's 25% market share, they predict an additional income of Rs 38 crore, representing 7% of FY23's revenue.

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

(You can find all analyst picks here)