Pick of the week

Infosys -- Buy

Recommendation by HDFC Securities

 

We maintain BUY on Infosys (INFY), based on strong growth visibility for FY22 (despite the 4Q revenue miss on offshore impact). INFY's net-new large deal wins of USD 9.3bn (vs. total large deal wins of USD 9bn in FY20) provide high probability to achieve (and outdo) the guided 12-14 per cent CC growth for FY22.

Tata Consultancy Services -- Buy

Recommendation by Geojit Financial Services

We remain positive on the stock as a large deal wins and a strong order book continues to support the company's outlook. Additionally, operational efficiency and a strong cash conversion cycle remain the key catalysts

We reiterate our BUY rating on the stock with a revised target price of Rs 3,773 based on 31x FY23E adj. EPS.

Wipro -- Neutral

Recommendation by Motilal Oswal Financial Services

We downgrade our FY22E EPS estimate by 6 per cent due to margin headwinds from the Capco acquisition, partially compensated by the lower share count. Our FY23 estimate largely remains unchanged. We maintain our Neutral stance as we view current valuation as fair. Our TP implies 19x FY23E EPS.

Varun Beverages -- Buy

Recommendation by Motilal Oswal Financial Services

We expect a CY20-22E revenue/EBITDA CAGR of 27 per cent/35 per cent. Based on future growth potential (namely acquisition of new territories in South and West India) and the return ration profile, we value the stock at 31x (in-line with its three year average P/E of 32x) CY22E EPS of INR 36.7 to arrive at our target price of INR 1,140, implying an upside of 15 per cent. Maintain Buy.

Indian Hotels -- Buy

Recommendation by Anand Rathi Share and Stock Brokers

After Covid subsides, we expect Indian Hotels to outclass others, driven by its dominance in the Indian hotel sector, strong brand equity, well-diversified portfolio across business segments and price points. We reckon that complete revival in demand will be from Q1 FY23 subject to the speed of vaccination. In our view, the company has enough liquidity to tide as earnings will take time to recover; particularly cross-border travel led and is discounted in the price. We introduce our FY23e and retain our Buy on the stock with a new TP of Rs130, earlier Rs 100 (sum-of-parts).

Bandhan Bank -- Buy

Recommendation by Emkay Global Financial Services

We like Bandhan's strategy to diversify the asset portfolio away from MFI (product as well as geography-wise) in the wake of rising adverse asset quality events while creating strong provisioning/capital buffers. After the recent correction, the stock is trading at reasonable valuations of 2x FY23 ABV. Currently, we have a Buy rating on the stock.

Coforge --Hold

Recommendation by Emkay Global Financial Services

We believe that the acquisition of SLK global will strengthen Coforge's capabilities in BFSI (~46 per cent of revenues in FY20) and significantly enhance its offerings in the BPM (~3 per cent of revenues in FY20). The acquisition will also add Fifth Third Bank as one of its Top-5 customers.

We have a Hold rating on Coforge with a TP of Rs 2,740 at 23x FY23E EPS.

Ipca Labs -- Buy

Recommendation by Motilal Oswal Financial Services

Adjusted for one-time business in FY21, we expect IPCA to deliver a 16 per cent earnings CAGR over FY21-- 23 on a) better-than-industry growth in DF, b) recovery in the Branded business, c) increased prospects in the UK business, d) increased business opportunity in the Institutional segment, and e) a capacity enhancement exercise in the API segment.

We value IPCA on a 24x 12M forward earnings basis to arrive at Target Price of INR 2,480. Reiterate Buy

Lumax Industries -- Buy

At CMP, Lumax trades at 16.1x FY23E EPS. We feel that investors' can buy the stock at LTP of Rs 1,570 add more on dips to Rs 1,418 for base case fair value of Rs 1,708 (17.5x FY23E EPS) and bull case fair value of Rs 1,855 (19x FY23E EPS) over the next two quarters.

Dr Reddy's Lab -- Neutral

Recommendation by Motilal Oswal Financial Services

We have raised our EPS estimates for FY22/FY23E by 5 per cent/2 per cent, accounting for an upside from the Sputnik V vaccine distribution contract. We expect an 18 per cent earnings CAGR over FY21-- 23E, led by a sales CAGR of 11 per cent/27 per cent/21 per cent in North America / Domestic Formulation / Pharmaceutical Services and Ingredients (PSAI), supported by a 360bp margin expansion. n We continue to value DRRD at 25x 12M forward earnings and arrive at TP of INR 5,410. We maintain Neutral on a limited upside from current levels.

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Source: IANS