Muhurat trade is considered to be an event conducive to prosperity and growth, as believed by the Indian market, which opens for about an hour on Diwali (Laxmi Pooja) day.
In this regard, a national brokerage firm ICICI Direct Research has listed at least 7 stocks from various industries, with growth rising 33%. These stocks are selected on the basis of in-depth analysis and overall market growth in 2021 along with the main positive elements that would drive the market.
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The factors for which these actions are selected are: a) a higher rate of vaccination, b) a political action in favor of growth, c) a pipeline of monetization of national assets that will boost the investment cycle, d) a strong recovery in the real estate market which has a multiplier impact on the economy and e) the dynamism of growth in corporate profits.
1) Bank of Baroda: Buy – Target price – Rs 120 / share (up 25%)
ICICI Direct Research estimates that the bank’s credit growth will accelerate with the unlocking and a rapid economic recovery. Transferring the NPAs to a failed bank would reduce the overall number of NPAs and aid in recovery. The second quarter of FY22 could see a recovery in DHFL which could boost expected earnings this month.
In addition, the recent upward revision of Moody’s outlook on the Indian banking system would also have a positive impact on the BoB. Likewise, margins are expected to remain stable despite lower borrowing rates due to low financing costs, lower reversals due to moderation of stress build-up.
BoB is present across India with 8,192 branches, 11,637 ATMs and 24,056 business correspondents. Likewise, it has a significant presence in international operations with its JVs and subsidiaries. In total, about 12.4 percent of total business comes from abroad.
2) Gateway Distriparks: Buy – Target price – Rs 350 / share (33% increase)
Gateway Distriparks Limited (GDL) has actively reduced its gross debt, which peaked at around Rs 740 crore in FY19 (due to the repurchase of Blackstone’s entire stake in the rail segment for Rs 850 crore) to around Rs 480 crore in FY21 (which is expected to drop significantly in FY 23E).
A strong balance sheet combined with a strategically located infrastructure will help GDL capitalize on future growth opportunities and improve its performance ratios. Management expects to reach margins of Rs 10,000 / TeU in the medium term, which could translate into a strong generation of FCF (> 9% return in FY23E).
GDL, one of the leading integrated intermodal logistics enablers in India, operates in various segments of the logistics industry, viz. container freight stations (CFS), container train operations (CTO) and cold chain logistics. The rail segment represents around 70 percent of consolidated revenue.
3) Bata India: Buy – Target price – Rs 2,380 / share (up 22%)
Bata India has stepped up its digital initiatives, with the e-commerce channel contributing 15% in FY21. The focus on omnichannel retail has enabled 60% of the market’s orders to be fulfilled by customers. Bata stores and 100% for its own website. (Delivery to more than 1,200 stores in 1,300 cities)
Bata devised new strategies that would help drive revenue growth and refine the product portfolio in favor of athletic footwear experiencing higher demand. It offers more visibility in stores for younger brands like Hush Puppies, Power and North Star.
The brokerage believes that such strategic initiatives should boost its operational performance on a sustained basis. It expects revenue and earnings growth of 9% and 17%, respectively, in FY20-24E with a 480 basis point improvement in RoCE to 33% in FY24E.
4) TCNS Clothing: Buy – Target price – Rs 860 / share (17% increase)
TCNS Clothing has launched several initiatives to fuel the revenue recovery from FY22 onwards. It is expected to accelerate its expansion plans and is targeting 60 new EBO stores in FY22E. The focus is more on expanding the network into Tier III and IV cities, primarily through a franchise driven model.
The company is also focusing on increasing its LFS touchpoints by adding 200 to 250 touchpoints. TCNS had made a strategic decision to exit certain long-credit cycle customers by rationalizing the MBO outlets (1522 in FY18 to 1011 in FY21) over the past three years.
Given the company’s strong brand franchise and healthy balance sheet (cash reserves worth Rs 140 crore), we are preparing a 30% CAGR in fiscal year 20-24E and, counting Given the capital efficient business model, we expect TCNS to report a healthy ROI of around 30 percent in FY24E.
5) Mahindra Lifespace: Buy – Target price – Rs 325 / share (23% increase)
Mahindra Lifespace has outlined five-year plans in which it aims to achieve a sales value of Rs 2,500 crore by FY25. For the same, he is targeting four land deals each year totaling around Rs 2,000 crore in sales potential.
Going forward, triggers such as PLI schemes, easing interest rates and the availability of credit, lower tax rates for new manufacturing facilities, coupled with the global manufacturing realignment, supply chains will drive IC&IC business.
The brokerage firm points out that the company has targeted an annual rental rate of Rs 500 crore for IC & IC activities by 2025. ICICI Direct as MLD given its strong parentage, management focus on expanding its overall scale of operation and a comfortable balance sheet.
6) Action Construction Equipment: Buy – Target price – Rs 300 / share (up 32 percent)
Action Construction Equipment is confident to achieve 15% CAGR for earthmoving machinery and 25% CAGR for the remaining segments over the next 3-4 years, with total revenue reaching approximately Rs 2,100 crore by FY24.
The brokerage estimates total revenue at Rs 1,750 crore in fiscal year 23E with absolute EBITDA of Rs 221 crore and margins in the range of 11-13%. ACE recently raised 135.52 crore rupees, which will be mainly used for debt repayment and the inorganic growth of the business.
The company has a strong market share of over 60% in the crane market and represents 70% of the activity. This segment will continue to grow within a range of 15% in the medium term given the recovery of infrastructure and the industrial cycle.
7) Vardhman special steel: Buy – Target price – Rs 340 / share (30% increase)
Vardhman Special Steel is focused on improving capital efficiency and targets EBITDA / capital employed of 25 percent by FY25 and plans to increase the share of exports to around 20-25 percent by in FY 25, up from 1 percent in FY 21, according to the brokerage firm. .
In fiscal years 21-23E, we expect VSSL’s revenue to grow at a CAGR of 25%, while EBITDA and PAT are expected to register a CAGR of 35 and 64%, respectively.
Vardhman Special Steel is one of India’s leading producers of steel bars for automotive applications. It offers specialized product offerings, which include steel bars and rods and bright bars of various grades of special and alloy steels.
ICICI Direct sees value emerging across the spectrum of market capitalizations, the key filter being quality, and continues to advise investors to use stocks as a key asset class for long-term wealth generation by investing in quality companies with strong earnings growth, stable cash flow, RoE and ROCE.