PICK OF THE WEEK

Gujarat State Petronet -- Buy

Recommendation by Centrum Broking

 

Given the H1 performance, we have raised our volume assumption to 38/39mmscmd for FY21/22E (36.3/37.3mmscmd earlier) with no changes in tariff assumptions as well. With very strong demand momentum from CGD, Power and other segments, we see growth at comfortable levels for GSPL over FY21-22e. We therefore, raise our EPS estimates to Rs18.5/Rs19.2 for FY21/22E. Additionally, higher value derived from Gujarat Gas of Rs121/sh (at 40% discount to CMP) also provides material support to our target price of Rs260, +39% upside. Maintain BUY

Lupin -- Add

We expect better ramp-up of gPro-air and better flu season to pick-up in 2H. The injectable portfolio launch may also be slightly gradual. In FY21E, bEtanercept launch and gFostair launch to add to earnings in EU. While the consistent higher R&D and higher other expenses we have lowered our estimates by 6%/5% for FY21E/FY22E, respectively. We maintain our ADD rating. At CMP of Rs917 trades at 37x FY21E EPS of Rs26 and 21x FY22E EPS of Rs 44.2

State Bank of India -- Buy
Recommendation by Geojit Financial Services

With Credit-Deposit ratio of 61.27% during such cyclical lows, the bank is well positioned to deploy its excess liquidity into the credit growth. Since the bank is also adequately capitalised, we believe the stock is currently trading at a discount. We therefore reiterate our BUY rating on the stock, with a revised target price of Rs. 294 using the SOTP methodology, valuing the standalone bank at 0.7x FY22E BVPS at Rs.216 and subsidiaries at Rs.97.

Oil India -- Buy

OIL continues its efforts to cap the gas well at Baghjan, with the loss of production from the same at ~1% of overall output. Having said that, this incident, coupled with lockdown related constraints underpins our assumptions of 2.5% yoy production decline in FY21E. Given H1 performance (EBITDA of Rs10.5bn declined 63% yoy, PAT of Rs1.3bn dip 90% yoy, oil realizations dipped 43% yoy and Oil output down 8% yoy), we factor marginally lower O+G production and lower oil & gas realizations, revising EPS down by 14.7/6% for FY21/22E. TP unchanged at Rs95/sh (standalone business at DCF, 4x PER for NRL/BCPL stake, US$1/boe for Vankor/Taas stake). Reiterate ADD

GAIL -- Add

Given the weak H1 performance, we have moderated margins for the petchem/trading segment and lowered the trading volumes from earlier estimates resulting in revision of EPS downwards by 2/0.5% for FY21/22E. While current valuations of 6.6x FY21E EPS are not challenging, we do not see any rerating triggers in the next 12Mth for GAIL with continued uncertain prospects for Gas trading and only a slow ramp up in overall Gas demand to keep EPS growth muted. Reiterate ADD.

Godrej Consumer Products -- Buy
Recommendation by Geojit Financial Services

GCPL posted double digit growth across the regions and performed better-thanexpected during the quarter. We believe growth momentum should continue on scale up in different products categories along with the new products launches and margin expansion on reduced cost. Given current upside potential, we upgrade our rating to BUY on the stock with a revised TP of Rs. 776 based on 41x FY22E P/E.

Maruti Suzuki -- Buy
Recommendation by LKP Securities

MSIL reported margin growth in Q2 at 10.3%, 80 bps up yoy, despite strong headwinds of currency, commodities and adverse product mix. It was driven by >80% utilization rates and lower other expenses (including marketing and advertising expenses). Going forward, with higher volume growth, bigger model launches, increasing capacity utilization levels and BS 6 related price hikes, we expect margins to grow further in H2 and FY 22E.

Birlasoft -- Buy

Despite 2Q revenue miss, Birlasoft could still manage to deliver 3% USD revenue growth for FY21.Birlasoft trades at 13.7x FY22E EPS and valuations are reasonable. Street might wait for 3QFY21 results to gain confidence on revenue trajectory and drive re-rating. Net cash on balance sheet is Rs9170mn (18% of Mcap). While company gave Rs1/sh dividend this quarter, exploring a buyback is a good option in medium term.

Emami Ltd -- Buy

Rapid macro-economic recovery and fast pick-up in rural economic coupled with strong recovery in wholesale channel could lead to a rebound in revenues in our view. Moreover, reduction in promoter's pledge (40%) to zero combined with inexpensive valuation could trigger stock re-rating. Considering success of new launches and faster than expected recovery we increase FY21E/FY22E revenue and PAT estimates by 6.1%/7.7% and 22.3%/20.5%. Moreover, capturing reduction in uncertainty, we decrease WACC by 100bps to 11.5% and retain our Buy rating with DCF-based revised TP of Rs444 (implying 28x FY22E EPS). Key risks - amplification of COVID-19, erratic seasonality and delay in reduction of promoter pledge..

Bharat Electronics -- Buy
Recommendation by LKP Securities

Current valuations assume the negative impact of Covid on defence spending in FY21 but do not price in any major order inflows as an offshoot from the recent geopolitical issues. The government's revived stance on domestic procurement of defense equipments will however have its share of positivity on the stock price. The stock currently looks quite undervalued as it trades at 10.4x P/E FY22E, materially lower than its long term average of 16x. This is after demonstrating its ability to secure orders, ramp up of execution, maintain margins of 19-20% after accounting for 8% of R&D expenses, manage strong free cash flows despite poor finances of the government and achieve ROE's of close to ~18% in the past three years. We maintain BUY rating on the stock and target price of ?132, based on 15x P/E FY22E. We believe BEL's diversified product portfolio, core competence in electronics warfare and strong opportunity pipeline will keep it ahead of its competitors.

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Source: IANS