Pick of the week

1. Cochin Shipyard-BUY

Recommendation by Geojit Financial Service

 

Cochin Shipyard Ltd (CSL) is the largest public sector shipyard in India deriving major revenue from Navy. The main sources of revenue are ship building for Navy, Coast guard, commercial and ship repair.

We remain constructive on CSL over long term, given capacity expansion, improvement in order visibility and GoI focus on indigenous procurement.

We value CSL at a P/E multiple of 10x on FY22E and maintain our Buy rating with a target price of Rs 445.

1. Bharti Airtel-BUY

   Recommendation by Angel Broking

   Telecom operators have increased tariffs by ~35 per cent in Nov'19. There is a possibility of another round of tariff hikes by telecom companies in FY21 given that tariffs are still very low . If Vodafone Idea goes out of business, Bharti would benefit significantly from addition of subscribers.

2. Alembic Pharma-BUY

   Recommendation by Angel Broking

   Expected to gain market share from the current market share of 1.5 per cent of Indian Pharmaceutical market (IPM). We expect Apll Ltd to grow its top line by 15-17 per cent in the upcoming years. Company has incurred large capex in infrastructure in the last couple of years.

3. Aurobindo Pharma-BUY

   Recommendation by Centrum Broking

   We maintain our positive outlook given the steady US pricing and planned 50 launches in US also more capacity in injectable coming from Q4. The upcoming niche and differentiated product launches. Established base business with consistently improving cash flows and regular debt reduction would mean Net-cash by end FY21E. We maintain Buy rating and increase the multiple in-line with peers to 17.5x FY22E, target price of Rs 1,190. Multiple upgrade has been focused on free cash generation, debt repayments and better earnings profile.

4. Petronet LNG-ADD

   Recommendation by Centrum Broking

   Prospects remain solid for PLNG with steady demand trajectory coupled with 2.5mt expansion at Dahej/Kochi ramp up post Kochi Mangalore pipeline. We have revised Earnings by -1.3/+1.1 per cent for FY21/22E to factor changes in opex/ interest costs. Higher competition from new terminals and record low spot LNG prices to create pressure on utilization for PLNG unless renegotiation with RasGas succeeds. With the renewed uncertainty on tellurian investment amount, we see limited triggers from here despite comfortable dividend yield of ~5 per cent. ADD.

5. India Cements-Maintain Sell

   Recommendation by Centrum Broking

   Weak operating efficiencies, moderation of realization gains as normalcy restores and higher debt will continue to weigh on the ICEM's earnings. Hence we maintain our EBITDA estimates for FY21e/FY22e while earnings are revised for FY21 to Rs 1.1 (earlier Rs0.7) due to lower working capital stress (due to weak demand) leading to interest cost savings but maintain FY22e (at Rs 4.9). Weighing the pressure on margins and balance sheet we assign a higher discount of 50% to the replacement cost (Rs7.5bn/mt) to arrive at ICEM's fair value of Rs69 (unchanged). At our TP, the stock trades at an EV/EBITDA of 7.8x.

   We retain our 'Sell' rating on the stock. The stock price at the current rich valuations (9.6x EV/EBTIDA, FY22e) is due to key investor R K Damani hiking stake in ICEM to ~ 20 per cent (4 per cent earlier). We believe this will continue to keep the divergence in our target price (based on weak fundamentals) and the market price of the stock. The stock price will converge with fundamentals in the medium term.

6. Deccan Cements-Retain Buy

   Recommendation by Anand Rathi Share and Stock Brokers

   With no major capex announced, the company is expected to be net cash and its net D/E reach -0.2x in FY22 (vs. -0.1x in FY20). On the better operating performance, we raise our FY21e and FY22e EBITDA respectively 36 per cent and 29 per cent and, consequently, our PAT. We maintain a Buy rating, at a higher target of 458 based on FY22e EV/EBITDA of 5x.

   Risks: Extension of the lockdown; rise in input costs.

7. PI Industries--BUY

   Recommendation by Angel Broking

   Market leader in fast growing custom manufacturing space catering to lading agrochemical companies globally.

8. Britannia Industries-Accumulate

   Recommendation by Angel Broking

   BRIT has an overall distribution reach of 5.5 million outlets. BRIT has narrowed the gap with the No. 1 player. The gap with the largest distributed brand is now just 0.8 million outlets which it expects to bridge soon and thereby become the largest player over the medium to long term

9. Zee Enterprises-Upgrade to Neutral

   Recommendation by J P Morgan

   We close our UW rating on Zee and upgrade to Neutral. Incremental disclosures on balance sheet/ZEE5 coupled with management commitment towards improving FCF and further strengthening of the Board are steps in the right direction, implying downside protection from the current depressed levels (share price halved over the past year).

   Further we believe the stock can re-rate significantly (trading at 10x F22E P/E vs past 1yr median of 15x if management delivers on the stated commitments. We will wait to see evidence of sustainable improvement even if we miss the first leg of stock upmove. Zee guided for positive advertising revenue growth in 2H and 50 per cent+ PAT conversion to FCF from F22, noting further significant increase in inventory and receivables is unlikely.

   Disclaimer: Views and recommendations given are those of brokerages and analysts and do not represent those of IANS. Users should check with certified experts before taking any investment decision. IANS has no financial liability whatsoever to any user on account of the use of information provided.

Source: IANS