This week we take a look at five analyst picks that outperformed their industry in the past month:
- Birlasoft: HDFC Securities initiates a ‘Buy’ call on this IT consulting and software company with a target price of Rs 530, indicating an upside of 17.4%. In Q1FY24, the company’s net profit increased by 22.6% QoQ to Rs 137.5 crore, while revenue grew by 4.3% QoQ. The company’s stock price has improved by 27.3% in the past month, outperforming its industry by 23.2%.
Analysts Apurva Prasad, Amit Chandra and Vinesh Vala initiate this call on the back of large client mining and high deal win momentum. Birlasoft’s revenue per client has increased by 70% over the past three years. Based on the brokerage’s mid-tier IT assessment, the analysts say, “Birlasoft features above the peer median in its services portfolio, above the median in financials and valuation, and below the median in execution and growth framework.” Overall they believe it is well-positioned within mid-tier peers. They also remain optimistic due to the strong momentum in Oracle and SAP Cloud services. They expect a revenue CAGR of 10% over FY24-26.
- Hindalco Industries: Axis Direct upgrades this aluminium products manufacturer to a ‘Buy’ with a target price of Rs 515. This indicates an upside of 13.2%. The company’s Q1FY24 net profit fell by 40.4% YoY to Rs 2,454 crore, while its revenue declined by 8.7% YoY. The company has risen by 7.6% in the past month, outperforming its industry by 8.7%. The upgrade comes after the announcement of Q1 results for the company’s arm, Novelis.
Novelis’ shipments have declined by 9% YoY due to destocking, but analyst Aditya Welekar believes that this trend will gradually improve over FY24. The Novelis arm's profit and adjusted EBITDA fell by 49% YoY and 25% respectively, but they were still higher than the brokerage’s estimates.
Welekar remains optimistic about the company on the back of macro headwinds bottoming out as rate hikes near their peak. He says, “We foresee more shipment visibility in the short and long term, and lower raw material costs. The lower Aluminium prices resulting from supply exceeding demand in China and the drop in thermal coal prices create a higher upside for the stock.”
- Star Cement: ICICI Direct keeps its ‘Buy’ rating on this cement manufacturer with a target price of Rs 185, indicating an upside of 13.3%. The stock has risen by 9.8% in the past month, outperforming its industry by 6.9%.
Analysts Cheragh Sidhwa and Raghvendra Goyal are optimistic about the company’s plans to gain market share by doubling its production capacity by FY26. They add, “Post the expansion, the company's overall clinker and cement capacity will increase to 5.8 MT and 9.7 MT, respectively, by FY25.” They believe the firm’s healthy operating cash flows will aid in meeting its capex requirements for capacity expansion, thus keeping its debt levels low.
The analysts note that the firm is well-placed to benefit from the Centre’s initiatives to boost infrastructure development in the North-Eastern region, as it already holds a 25% market share. They expect the company’s net profit to grow at a CAGR of 17.2% over FY23-25.
- L&T Technology Services: Motilal Oswal maintains its ‘Buy’ rating on this IT consulting & software company with a target price of Rs 4,760, implying an upside of 11.3%. The stock has risen by 8.5% over the past month, outperforming its industry by 4.4%. In Q1FY24, its net profit increased by 0.5% QoQ to Rs 311.1 crore and revenue grew by 22.8% QoQ.
Analysts Mukul Garg, Pritesh Thakkar and Raj Prakash Bhanushali highlight the company's unique positioning in the engineering, research and development (ER&D) sector. Unlike its competitors, L&T Technology Services operates across multiple verticals, enabling it to draw opportunities from various industries. They add, “The firm uses its presence in multiple verticals, strong domain knowledge and technology capabilities to provide differentiated offerings across its client base.”
The analysts believe that digitisation is accelerating spending towards ER&D and expect the firm to capitalise on this, given its strong capabilities and market presence. They estimate the company’s revenue to grow at a CAGR of 18.8% over CY23-25.
- Metro Brands: ICICI Securities maintains its 'Buy' rating on this footwear company with a target price of Rs 1,200, implying an upside of 11.9%. The analysts at ICICI Securities hold a positive outlook, supported by the company’s record growth among its peers. It has a retail expansion rate of 27% YoY. In Q1FY24, the company's revenue increased by 14.7% YoY to Rs 582.5 crore, while net profit improved by 35.5% QoQ. The stock has risen by 5.8% over the past month, outperforming its industry by 3%.
The analysts express confidence in the ongoing integration of Metro’s Cravatex brands, projecting a 3% revenue contribution with minimal impact on net profit margins. Additionally, they see a resolution of its inventory issues by the end of FY24. A key highlight is the strong performance of the premium segment ( the Rs 3,000+ price point), which has exhibited a 31% YoY outperformance over the value range. This adds momentum to brand value growth. Outperformance in the women's and kids' wear segments has also sustained.
Despite negative same-store sales growth, the analysts expect momentum to improve from the addition of 27 new stores in Q1FY24 and the potential for further expansion.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
