PICK OF THE WEEK (Nov 22)

Source :IANS
Author :IANS
Last Updated: Sun, Nov 22nd, 2020, 12:48:09hrs

Due to the new restructuring guidelines we have lowered FY21E provisions while raised the same for FY22E. This would impact FY21/22 PAT by 16.8%/-0.6%. We remain positive on LICHF due to visible funding cost benefits given its sovereign franchise and its focus on salaried. Maintain multiple at 1.4x FY22 ABV and TP of Rs 500. Retain BUY. Risks: higher stress.

Shree Cement-Sell

We have revised our FY21e/FY22e EBITDA estimates to Rs 36.2bn/43bn (earlier Rs 32.8bn/Rs 38.2bn). We have assigned 15.8x multiple to arrive at a fair value of Rs 20,492/sh. At our TP the stock trades at a replacement cost Rs 14.5bn/mn tonne. We feel SRCM current valuations factors in the upwards revised earnings. Hence despite healthy fundamentals at the current valuations of -- 20x FY22e we fell SRCM continue to trade at a premium. We maintain our SELL rating on the stock. Any faster recovery, strong volume growth or further cost savings remain key risk to our ratings call, we will be watchful of the same and update accordingly.

HG Infra Engineering-Buy

HG's order backlog is robust at Rs 64.4bn (76 per cent currently under execution). With receipt of AD for remaining two big ticket projects in Q3, complete OB will be executable leading to ramp-up in execution in H2. Margins have remained steady and leverage should continue to remain low at 0.4x Net Debt/EBITDA (1.1x after including mobilization advances as debt). Valuations at 7.4x/5.9x FY21/22E EPS are inexpensive and protect downside. We value HG's EPC business at 9x FY22 EPS and value equity invested in road assets at Rs39/share on 0.7x P/B basis. Maintain Buy with PT of Rs320.

Petronet LNG Limited-Buy

Recommendation by Geojit Financial Services

From Q2FY21 the demand from refining, fertilizers, and other segments has started increasing, gradually reaching pre-Covid levels. GAIL completed Kochi-Mangalore pipeline, which will boost the company's utilization rate and operational efficiency. Moreover, Dahej terminal has also now started operations at full capacity. Hence, we reiterate our BUY rating on the stock with a target price of Rs 327, based on 15.0x FY22E adj. EPS.

Minda Industries-Accumulate

Recommendation by Geojit Financial Services

The demand scenario in the 2W and cars is expected for an early revival in H2FY21 supported by festive demand and lower base. MIL's strong balance sheet and Quick ramp up(80 per cent plant utilization) reflects higher revenue visibility on a medium to long term basis. We rollover our valuation and factoring the potential merger with Haritha Seating , we value MIL at 25x on FY23E EPS. And, arrive at a target price of Rs 407 and recommend Accumulate rating at CMP owing to recent run up in the price.

Ahluwalia Contracts-Buy

On the back of a disrupted FY21, we expect sharp earnings recovery (up 92% yoy) in FY22 led by improved conversion of ACIL's robust OB. Our revenue est for FY22 factors execution rate of 28% of FY21 closing OB vs. historical average of 40%, leaving ample room for revenue upgrade. ACIL's balance sheet, meanwhile, remains robust (Sept-20 net cash position: Rs 1.8bn) with continued operating cash flow generation. Stock trades at 9.9x FY22 earnings and offers potential to re-rate led by improved execution and margins. We value ACIL at 13x FY22E EPS and have a price target of Rs300. Maintain Buy.

Ujjivan Small Finance Bank-Hold

Recommendation by Geojit Financial Services

Better operating performance due to increase in Net Interest Income augers well for the bank. Given there are some green shoots visible in comparison with our last update, like encouraging collections with enhanced digital capabilities. So we factor in a PAT CAGR of 22% for FY21E-FY22E. However, we expect asset quality risk and lower disbursement in FY21E to limit the valuation upside for the stock in the near to medium term. We revise our rating to Hold from Reduce on the stock with a revised upward target price of Rs 38 based on 1.6x FY22E Adj. BVPS.

Bharat Forge-Buy

Recommendation by Geojit Financial Services

BFL's strategy to shift to new technological products and ramp-up in Aluminium forging in the US & India for new product development will bring value migration per vehicle in the long run. Near term auto outlook looks challenging, but we believe that the company is well placed with new products in non auto sector. Amid crisis, we believe on a two-year forward basis the demand visibility looks attractive and expect margin expansion owing to the growth coming from the defence sector and sustained recovery in the auto space. We value BFL at 15x EV/ EBITDA on FY23E and recommend buy rating.

KNR Construction-Buy

KNR has a demonstrated track record of strong execution capabilities while sustaining its profitability levels. Walayar sale has further strengthened the balance sheet and unwinding of irrigation receivables will improve operating cash flow. With a clear focus on adding more road projects, order backlog is likely to get more balanced. Stock trades at 11.9x FY22E EPS (not adjusted for value of assets of Rs 36/share). Maintain Buy rating with an SOTP based revised PT of Rs 314.

Gujarat Pipavav Port-Buy

GPPL is well placed for cargo recovery with efficient operations and good rail connectivity to the Northern hinterland (to be enhanced further by DFC connectivity in early 2021). GPPL expects a written comfort/clarity on concession period extension in the very near future post which it will also crystalize its expansion plans. We expect 10.8% EPS CAGR over FY20-22E for GPPL and have a DCF based price target of Rs 100. Our estimates consider an extension of 20 years in the concession, 6.6% cargo CAGR and 1.6% CAGR in realizations over FY22-28. Stock trades at 15x FY22E earnings and 6.3x EV/EBITDA. Maintain Buy.

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--IANS
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