Five analyst picks this week with high upside
This week, we take a look at analyst picks with high upsides in target price.
1. Jindal Steel & Power:
ICICI Securities maintains a ‘Buy’ call on this steel products manufacturer with a target price of Rs 795, indicating an upside of 26.2%. In Q2FY24, the company announced a nearly sevenfold YoY rise in net profit to Rs 1,387.8 crore, while its revenue fell by 9.2% YoY. “The performance missed our estimates but was in line with the consensus,” say analysts Amit Dixit, Mohit Lohia and Pritish Urumkar.
The analysts believe that opportunistic export sales drove the sales volume. Despite earnings not reaching the anticipated levels, they remain optimistic about the long-term prospects of the company due to the expansion of its Angul-II capex plan to Rs 31,000 crore with a delayed commissioning in Q4FY25. The analysts say, “Our belief is premised in the company’s India-centric focus and steel-focused growth plan, both without pushing leverage higher.” The analysts expect EBITDA of Rs 11,049.3 crore for FY24, growing to Rs 14,507.8 crore in FY25.
2. Aether Industries:
HDFC Securities retains its ‘Buy’ call on this specialty chemicals manufacturer with a target price of Rs 1,200. This indicates an upside of 35.6%. In Q2FY24, the company’s net profit grew by 34.4% YoY to Rs 36.7 crore, while its revenue grew by 21.7% YoY to Rs 178.3 crore. Analysts Nilesh Ghuge, Harshad Katkar and Akshay Mane say, “EBITDA and profit exceeded our estimates by 14% and 19%, respectively, mainly due to lower raw material costs and higher other income.”
The analysts believe that the demand slowdown in the agrochemical industry was due to inventory destocking at the customer end and reduced realisations across products. They add that Chinese companies flooding the Indian market with aggressively priced products has adversely impacted the performance of domestic players.
Despite these challenges, the analysts remain optimistic about the company, on the back of capex-led growth, advanced research and development capabilities, technocratic management, market-leading position in most of its products, strong product pipeline, and marquee customer base.
3. Carborundum Universal:
Prabhudas Lilladher maintains its ‘Buy’ rating on this other industrial products manufacturer but lowers its target price to Rs 1,408 from Rs 1,482. This implies a still high upside of 31.8%. In Q2FY24, the company’s net profit rose by 14.5% YoY to Rs 101.9 crore and revenue increased by 1.7% YoY. Analysts Amit Anwani and Nilesh Soni attribute the slowdown in revenue growth to “a softening of demand in Europe, Chinese companies dumping products, and the forex impact”. While the ceramics and abrasive segments saw healthy growth, the electrominerals segment dragged due to negative forex movement.
Even though the management lowered its revenue guidance for FY24 to 5% from 10%, the analysts remain positive on the firm’s prospects. Anwani and Soni believe that the company will see healthy growth in the long term on the back of its new product launches, better market reach, strong exports, and improvement in its recently acquired subsidiaries. The analysts expect the company’s revenue to grow at a CAGR of 11.8% over FY23-26.
4. Bharti Airtel:
Axis Direct maintains its ‘Buy’ rating on this telecom services provider and raises its target price to Rs 1,155 from Rs 1,025. This indicates an upside of 23.3%. Analyst Omkar Tanksale remains optimistic about the stock despite its Q2FY24 net profit and revenue missing the brokerage’s estimates by 46% and 4% respectively. The company’s net profit has declined by 37.5% YoY and revenue grew by 7.3% YoY. Its bottom line was affected by a one-time charge of Rs 1,570 crore, as it paid interest on an additional tax provision related to the Supreme Court’s new ruling on variable license fees. While revenue was impacted “by the devaluation of Nigeria's Naira and other currencies during the period,” Tanksale added.
However, the analyst adds that the company’s EBITDA margins beat his expectations, thanks to an increase in 4G conversions and a better service mix.
Tanksale remains optimistic about the telecom giant due to robust growth in its 4G and 5G customer base. He believes that the company will continue to gain market share in the long term, driven by its deep rural penetration, strong subscriber growth, and increasing average revenue per user. He expects the firm’s profit to grow at a CAGR of 13.1% over FY23-25.
5. Mahanagar Gas:
Motilal Oswal maintains its 'Buy' rating on this non-electrical utilities company with a target price of Rs 1,310, indicating an upside of 24.3%. Analysts Abhishek Santosh Nigam, Aman Chowdhary, and Rohit Thorat are optimistic, with growth set to accelerate in the industrial and commercial piped natural gas segment over the next two years, primarily because CNG is now 50% cheaper than petrol and 20% cheaper than diesel. In Q2FY24, the company’s net profit grew by 106.4% YoY to Rs 338.5 crore, while its revenue grew by 10.6% YoY.
Nigam, Chowdhary, and Thorat believe that the total volumes met their estimates. They foresee rapid growth in the gas segment over the next two years. The company has implemented consumer-friendly measures, such as removing the take-or-pay clause and offering a discount guarantee to new, heavy-usage customers. The analysts believe that the company is encouraging CNG volume growth in the commercial vehicle segments through incentives like free fuel cards with new vehicle purchases, based on gross vehicle weight.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
