Five analyst picks this week

Geojit BNP Paribas keeps its ‘Buy’ rating on this pharmaceutical firm and raises the target price to Rs 1,420 from Rs 1,120. This implies an upside of 14.2%. In Q1FY24, the company’s net profit grew by 45.1% YoY to Rs 995.7 crore and revenue rose by 17.7% YoY.

Analyst Vinod TP attributes this healthy performance to robust growth in both the US and Indian markets. Along with growth, the firm has gained market share in key product segments. He expects Cipla’s focus on India and the US to drive growth in the near term. “The company has a strong product launch pipeline for the US, India, and emerging markets, which is expected to boost the sales and profitability,” he adds.

In addition to Cipla’s planned new launches, Vinod is positive about the management’s modernisation and capacity expansion plans. He expects the company’s revenue to grow at a CAGR of 13.1% over FY23-25.

2. Devyani International:

Sharekhan maintains its ‘Buy’ rating on this quick service restaurant (QSR) with a target price of Rs 252, indicating an upside of 20.1%. The analysts at Sharekhan remain optimistic about the company’s long-term growth prospects, despite a recent slowdown in the domestic market. They say this weakening of demand is temporary and caused by high inflation, which prompted consumers to seek cheaper options. However, the analysts expect demand to improve in the coming quarters. “Softening of consumer inflation, easing dairy prices, good traction in multiplexes and a long festive season will aid good recovery in the QSR space in H2FY24,” they add.

They also expect gross margins to improve in H2 due to declining prices of chicken, vegetable oil and cheese. The management’s focus on expanding its store count and entering new markets is a key positive. The brokerage anticipates the company’s net profit to grow at a CAGR of 31.7% over FY23-25.

3. Craftsman Automation:

ICICI Securities initiates a ‘Buy’ call on this auto ancillary company with a target price of Rs 5,557, indicating an upside of 19.7%. Analysts Basudeb Banerjee and Vishakha Maliwal say, “Craftsman Automation is undergoing diversification to reduce commercial vehicle exposure and improve RoCE, by doing casting/machining of engine cylinder blocks/heads for SUV makers like Hyundai, Kia and Mahindra & Mahindra.”

Beyond a 12% CAGR in organic free cash flow from FY26 to FY36, the analysts believe that Craftsman Automation has the financial bandwidth to make acquisitions of around Rs 1,500-1,800 crore in the next couple of years, contributing to its growth prospects.

They expect the company to deliver a 22% revenue CAGR over FY24-26, led by a combination of acquisitions, continued growth in the private vehicle market, revival in two-wheeler production, and rising focus on industrial/farm equipment segments. However, the analysts remain cautious as a higher mix of the aluminium segment could impact the overall EBITDA margin. But they expect it to remain steady at 20-21% over FY24-26.

4. Titan:

Motilal Oswal maintains a 'Buy' rating on this gems and jewellery company with a target price of Rs 3,570, indicating an upside of 12%. Analysts Pratik Bipinchandra Prajapati and Tanu Jindal express a positive outlook, citing the company's robust performance across all business segments. This growth is driven by strategic investments in supply chain, digital infrastructure, strong channel capabilities, retail networks, and international market penetration.

Prajapati and Jindal emphasize Titan's utilisation of technology to uphold its leadership in the organised retail jewelry sector. The analysts highlight the company's substantial market share in the watches and wearables segment in India, particularly in the premium brand segment, where it continues to achieve double-digit growth.

Prajapati and Jindal add that the company's mobile point-of-sale software seamlessly integrates online and in-store retail experiences. Despite the recent surge in gold prices affecting demand, they expect Titan to maintain its historical resilience and perform well in the market.

5. Sobha:

HDFC Securities maintains a ‘Buy’ call on this realty company with a target price of Rs 1,024. This indicates an upside of 56.8%. Analysts Parikshit D Kandpal, Manoj Rawat and Nikhil Kanodia say that Sobha had lagged behind its peers in terms of presales. However, they note, “With the regulatory overhang largely behind, the robust financial health of the parent company, and a strong demand undercurrent in the Bengaluru market, Sobha has hit the reset-restart button.” The company has strengthened its balance sheet by reducing its net debt by Rs 1,500 crore.

The analysts remain optimistic as Sobha enjoys high client loyalty, differentiated architecture in premium offerings, in-house construction, the novelty factor and 15-25% brand premium. They believe these factors will help the company retain its pricing premium. “Valuation comfort, robust free cash flow generation, and likely deleveraging are key near-term triggers for rerating,” they note.

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

(You can find all analyst picks here)