PICK OF THE WEEK

Hindustan Unilever Limited--Buy

Recommendation by Geojit Financial Services

Hindustan Unilever (HUL), a subsidiary of Unilever PLC, is India's leading FMCG Company. It has over 35 brands spanning across 20 distinct categories, such as soaps, detergents, shampoos and skin care.

Company is set to benefit from winter portfolio demand which usually picks up by September. Also, we expect non-staple demand to recover and production and supply-chain disruptions to subside post-lifting of lockdowns. Hence, we upgrade our rating to a BUY on the stock with a revised target price of Rs. 2,440 based on 57x FY22E adj. EPS.

Ultratech Cement -Buy
Recommendation by Centrum Broking

UTCEM will stay focused on cost reduction (logistic cost key focus area) and will be watchful of any non-systemic price escalation. Further aggressive repayment of debt (Rs25bn in 2Q versus Rs22bn in 1QFY21) underscores company's focus on improving the balance sheet health. Pan-India presence and leadership position will further aide UTCEM's performance. Factoring the same we have upgraded earnings estimates to Rs137.6/166.9 (earlier Rs103.9/Rs140.8) and now assign 14.4x EV/EBITDA multiple on revised FY22e earnings (earlier 12.5x).

We upgrade UTCEM to BUY (earlier ADD) rating with a revised price target of Rs5,179 (earlier Rs4,106/sh). At our target price the stock trades at the replacement cost of Rs13.8bn/mn tonne FY22e capacities.

Asian Paints--Buy
Recommendation by Centrum Broking

We believe APNT to emerge as complete home solution company based on core strategy (1) drive volumes through upgrade to emulsions (2) expand rural footprint (3) gain volume market share and (4) market development for waterproofing business. Given this we believe it is a structural growth story capturing demand across improvement.

We reckon return of normalcy in metros and festive season ahead coupled with rural thrust, could result in continued growth ahead. Further, management narrated its plan to strengthen Home D?cor play with introduction of offerings in Lightings/ Furnishings and Furniture.

Considering fast recovery in 1HFY21 and tailwinds from input costs we have increased FY21E/22E revenue and PAT estimates by 5.2%/11.9% and 15.4%/13.8%. We retained Buy rating with DCF-based revised target price of Rs2,393 (Implied 59.7x FY22 EPS). Key risks to our call include weak demand conditions due to a slowing economy, rise in crude oil prices and currency depreciation.

HDFC Asset Management Company--Buy
Recommendation by Centrum Broking

We lower AUM growth estimates for FY21/FY22 by 5.0% and 2.2% respectively while accounting for lower other expenses and rebound in equity markets in FY22. This might result in lower PAT by 5.2%/7.8% for FY21/FY22E vs previous estimates. Maintain our P/E multiple at 36.0x to arrive at a revised TP of Rs2,741 (vs Rs2,974 earlier) and recommendation at BUY. Risks: lower AUM growth, regulatory challenges.

Colgate Palmolive (India) Ltd--Sell
Recommendation by Centrum Broking

We remain optimistic on the company's strategy counting on innovation, invest behind brands and direct distribution, however, remain cautious until we see lower competitive intensity and company sustainably gains market share in the naturals' portfolio.

Considering initial signs of category traction and improved margin profile in Q2 we increase FY21E/FY22E revenue and earnings estimate by 3.3%/4.3% and 9.2%/9.6% respectively and retain Sell rating with DCF-based revised Target price of Rs1,276, implying 37.2x FY22E EPS. Risks to our call include significant volume uptick with improved offtake, lower input cost inflation and lower competition.

Kajaria Ceramics--Add
Recommendation by Centrum Broking

Kajaria Ceramics (KJC) recovered strongly from the pandemic challenge as revenues reversed to Rs7.13bn flat YoY after dipping 60% in 1QFY21. The highlight of 2QFY21 was while domestic tile industry contracted (Rs180bn from Rs230bn in FY20 as indicated by management) KJC's market share gained (flat volume YoY).

We have assigned P/E multiple of ~ 30x FY22e earnings (revised from 24.3x earlier). We expect little deviation from KJC's strong focus on earnings, prudent capital allocation and maintaining healthy balance sheet. This will help KJC to consolidate further its leadership position by grabbing additional market share.

Healthy cash chest of Rs3.5bn will facilitate expansion (to be announced shortly) in newer geographies and incrementally outreaching its competition (from unorganised segment in Morbi) cost effectively. Collectively this will help KJC to handle the challenging situation (if continued longer than expected) and maintain its leadership position in the long term. Despite the challenges in the shorter term (uncertain business environment) we feel all the above mentioned factors will strengthen KJC in the longer term.

We have maintained our earnings unchanged at Rs10.9x/Rs19.6 FY21e/FY22e respectively. At the current valuations though there is limited upside for the stock. We revise our rating to ADD from BUY earlier.

Britannia Industries Ltd--Buy
Recommendation by Centrum Broking

We believe amid improving operating performance and strong execution capabilities provide healthy returns to long-term investors. Moreover, ICD exposure to group company (GoAir) is behind us now. Considering H1FY21 performance and demand outlook we maintain our estimates and retain Buy rating with DCF-based Target Rs.4,273 (implying 51x FY22E EPS). Risks to our call include rising input costs, abrupt competition and unsecured loans to promoter group companies.

ACC--Add
Recommendation by Centrum Broking

Cost savings from logistics are expected to continue following the MSA agreement between Ambuja Cement and ACC. The current capacities and addition in CY22-end (effective contribution from CY23) will largely take care in maintaining the market share for ACC. However, ACC has not been able to prudently weigh the benefits of external purchases of traded goods

We will keenly watch the cost savings sustainability that is currently driving the performance. We have introduced our CY22 earnings estimates with EBITDA expectations of Rs30.6bn and EPS of Rs86/share. WE also revise our CY20E earnings to Rs62.4 (earlier Rs52.2) and CY21e to Rs76.6 (earlier Rs72.7) to factor ACC's 9MCY20 healthy performance. We have valued ACC rolling over to CY22 at an EV/EBITDA multiple of 8x (CY22 earnings) and revised our target prices to Rs1,616 At our TP the stock trades at Rs6.1bn/mt replacement costs based on CY22 capacities. Retain ADD rating on the stock.

Granules India--Buy
Recommendation by Centrum Broking

GIL has 13 pending ANDA approvals and expects 7-8 filings during the fiscal along with 5-6 launches. The company will focus its efforts on inventory control and cash-to-cash cycle to sustain EBITDA margins over coming quarters levels. EBITDA margins have been replicating the benefit of improving product mix and operating efficiencies with better capacity utilization. At CMP of Rs391, GIL is trading at 16x FY21E EPS of Rs24.4 and 11.8x FY22E EPS of 32.9 Key Risk - 1) Product concentration and 2)Any risk to the raw material prices and sourcing remain the key risk to the stock.

JSW Steel--Buy
Recommendation by HDFC Securities

JSW Steel Group is one of the top global steel companies with an annual crude steel capacity of 18 million tonnes per annum (MTPA).

The company has won multiple iron ore mining rights in recent auctions which would further benefit company to save raw material costs.

The expansion of crude steel capacity of Dolvi works from 5 MTPA to 10 MTPA along with the captive power plant and coke oven Phase 2 is likely to get commissioned in the second half of FY21.

(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