This week we take a look at stocks with high upside from analysts post Q1 results.
1. Godrej Industries:
ICICI Securities maintains a 'Buy' rating on this holding company of the Godrej Group, with a target price of Rs 764, indicating an upside of 53.6%. In Q1FY24, the company's revenue increased by 12% YoY to Rs 4,505.7 crore, while net profit decreased by 30.9% YoY. This profit decrease was attributed to revenue declines in the chemical business due to strong headwinds in the industry.
Despite the fall in profit, analysts Aniruddha Joshi and Nilesh Patil remain optimistic as the company continues to generate considerable value from its listed subsidiaries, namely Godrej Properties and Godrej Agrovet (profit rose 174.3% YoY and 27.3% YoY, respectively).
The analysts estimate the company's value to be trading at a discount of 66% by considering the target prices for its subsidiaries along with a 50% holding discount. The company also operates Godrej International and has initiated its housing finance business under Godrej Capital. They believe that the listed subsidiaries will gain from the economic revival and the ongoing migration of value from unorganised to organised sectors.
2. Crompton Greaves Consumer Electricals:
HDFC Securities maintains its ‘Buy’ rating on this household appliances manufacturer with a target price of Rs 400, implying an upside of 34.2%. In Q1FY24, the company’s net profit fell by 2.2% YoY to Rs 118.3 crore and revenue grew by 0.8% YoY.
Analysts Naveen Trivedi, Paarth Gala and Riddhi Shah see the firm’s Q1FY24 performance as a mixed bag. While its revenue growth beat their expectations by 4.4%, margins fell short. They attribute the margin decline to increased advertising expenses, delayed price hikes, and higher research & development expenses. They add, “These costs are upfront in nature, thereby impacting operating margin.”
Although the analysts expect margin pressure to persist in the near term, they foresee gradual revenue growth. They project the company’s revenue to grow at a CAGR of 12.4% over FY23-26.
3. Dilip Buildcon:
Geojit BNP Paribas maintains its ‘Buy’ call on this construction company with a target price of Rs 367, indicating an upside of 19.5%. In Q1FY24, the company reported an EBITDA margin expansion of 500 bps YoY to 12.8%, despite a marginal rise of 1.3% in revenue. Analyst Antu Eapen Thomas says that the margin expansion was led by a fall in input costs and better absorption of overheads. The company’s management expects execution to pick up pace and guides a revenue growth of 8-10% with an EBITDA margin of 13% in FY24.
Thomas believes that Dilip Buildcon has strong growth visibility for the next two years, with its order book in Q1 reaching Rs 24,051 crore, which is 2.4x the trailing twelve-month revenue. He expects a recovery in execution starting from H2FY23 on account of improvements in inflows and the completion of legacy projects. He concludes, “We maintain our stance due to expected improvements in execution and margins.”
4. KNR Constructions:
Axis Direct keeps its ‘Buy’ rating on this construction company but lowers the target price to Rs 305 from Rs 325. This implies an upside of 12.8%. In Q1FY24, the firm’s net profit surged by 53% YoY to Rs 137.1 crore and revenue grew by 0.1% YoY.
Analysts Uttam K Srimal and Shikha Doshi believe that the company is well-placed to capitalise on the Centre’s increased infrastructure spending, given its presence in diverse segments like roads, railways, metro and urban infrastructure. They add, “With newer opportunities emerging in various infra-related sectors, the diversification strategy augurs well for the company.”
The analysts believe the firm’s order book stands strong despite a slowdown in order inflows. They expect the order inflow to pick up in the coming quarters, led by road projects. Srimal and Doshi estimate the firm’s revenue to grow at a 12% CAGR over FY23-25.
5. Vinati Organics:
Motilal Oswal reiterates its ‘Buy’ call on this specialty chemicals company but reduces the target price to Rs 2150. This indicates an upside of 18.7%. In Q1FY24, the company’s revenue stood at Rs 446.4 crore (down 15% YoY), which is 9% below the brokerage’s estimate. Analysts Aman Chowdhary and Rohit Thorat say, “About 90% of the revenue decline was due to reduced volumes.” However, they expect demand to recover in H2FY24.
The analysts are cautious on the back of lower offtakes and underperformance of ATBS (40% of total revenue) in Q1. The delay in the plan to expand ATBS capacity by 50% until the end of FY24 also contributes to their expectation. The management sees a muted performance in FY24.
The analysts maintain optimism as Vinati Organics’ arm Veeral Organics is set to commence production of guaiacol, anisole and iso-amylene by the end of FY24, which they believe will drive the company into the next leg of growth. They forecast a revenue CAGR of 17% over FY24-25, translating into an EBITDA CAGR of 19%.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
