NMDC, Granules India, Jyothy Labs, Can Fin Homes & Radico Khaitan: What analysts said on these 5 stocks

Three domestic brokerages have come out with updates on a total five stocks. These stocks are NMDC, Granules India, Jyothy Labs, Can Fin Homes and Radico Khaitan. Granules India's rating has been upgraded by Sharekhan on strong sale prospects of Paracetamol. NMDC is a ‘buy’ for Motilal Oswal Securities, thanks to strong free cash flow and attractive dividend yields. Radico Khaitan has received 'Hold' rating by Anand Rathi amid continued high cost. Here's what these brokerages said on the five stocks:

Granules India | Sharekhan | Buy | Target Rs 400

Sharekhan has upgraded its rating on Granules India to 'Buy' from 'Hold' but maintained its price target (PT) on the stock at Rs 400. Sharekhan believes Granules India is well-poised to benefit from diversified supply of its Paracetamol API secured away from China in the recent quarters.

The company management believes that Paracetamol sales will continue at stable levels over short term as they have a set of marquee customers for the same in the US to whom it is trying to convert to formulations supplies from API as well. The company is gaining market share also from other suppliers for Paracetamol. Additionally, the company has launched Paracetamol in Europe in Q3FY23 and expects it to ramp up from Q4FY23E, Sharekhan said.

The management, Sharekhan said, believes that the China-led price rise in APIs should not affect it as it has diversified its supplies of PAP away from China by engaging with alternate set of sources over the last 2 quarters.

"The recent price changes taken up by NPPA in Paracetamol and Metformin in India should not cause concerns, as Granules India does not deal in these formulations in the Indian market. The company has announced setting up a green chemical plant soon, whose details are awaited," Sharekhan said.

NMDC | Motilal Oswal Securities | Buy | Target Rs 138

Motilal Oswal Securities said NMDC shares are trading at 4 times FY24 EV/Ebitda. With no more capex-intensive programs, the company is likely to generate a strong cash flow, Motilal said, even as the brokerage is factoring a lower iron ore price regime.

"With China re-opening and rushing to finish real estate projects, we expect demand for iron ore to remain strong in the near term. In addition, we expect with winter in China, focus shall again be on importing more pellets from India, which should drive demand for iron ore in India. The government waiving off pellet export duty is an added advantage," Motilal Oswal said.

The brokerage expects NMDC to continue with volume CAGR of 11.5 per cent from FY21-25 on the back of higher volumes in both Chhattisgarh and Karnataka. It expects NMDC to clock a record 51 mt in FY25. It is building  a dividend per share of Rs 12 for FY24 and Rs 10 for FY25, implying a payout of 59-61 per cent and an attractive dividend yield of 9.5 per cent/7.9 per cent for FY24/25, respectively.

Radico Khaitan | Anand Rathi |  Hold | Target Rs 1,045

Anand Rathi said its interaction with various industry players suggests continuing high costs for alcoholic beverage companies. Demand, it said, is expected to be  steady, aided by premiumisation. The brokerage has reduced our FY23-25 EPS estimates for the company by 4-7 per cent to  factor in the high costs, against the earlier anticipated better H2 FY23 margins. Anand Rathi still is optimistic regarding the constant premiumisation  (strong Rampur and Jaisalmer volumes from FY24), benefit of backward  integration of the new manufacturing unit accruing in FY24 and, thereby, better margins.

"Rich valuations keep us awaiting a better  entry price. We maintain our Hold recommendation on the stock, with a  higher TP of Rs 1,045, 35 times September 2024e (earlier Rs.1,035, 33x Sep’24e)," it said.

Jyothy Labs | Sharekhan | Buy | Target Rs 240

Sharekhan said Jyothy Labs has posted eight consecutive quarters of double-digit revenue growth, driven by a mix of volume and value. The company has been consistently delivering mid-single digit volume growth of 4-5 per cent for the past three quarters. Most of the categories are performing well except for the decline in the household insecticide (HI) category, it noted. The brokerage is expecting the double-digit revenue growth momentum to sustain in the quarters ahead.

"However, with the expected pick-up in rural demand, the volume growth trajectory should improve in the next one to two quarters. We expect OPM to stand at around 12 per cent in Q3 and improve to 13-14 per cent in Q4 if palm oil and crude oil prices remain at the current level. The recovery to historical OPM of 16-17 per cent, howeve, will take time as the company will also incur ad-spends and promotional activities to gain better volumes in the long run," Sharekhan said.

Can Fin Homes | Motilal Oswal Securities| Buy | Rs 630

Motilal Oswal Securities said while there could be near-term transitory compression in margins because of the delay in transmitting higher borrowing costs to the customers, we believe Can Fin Homes  can sustain net interest margin (NIM) of 3.3-3.4 per cent in the medium term. It has modelled a loan book CAGR of 17 per cent and PAT CAGR of 19 per cent over FY22-FY25E. Can Fin Homes is a franchise with moats on the liability side and has always exhibited superior asset quality, Motilal Oswal said.

"For a RoA/RoE of 1.9 per cent/17 per cent in FY24E and triggers for valuation re-rating if the new management team (of MD&CEO/CFO/CRO) can gain investor confidence, we reiterate our BUY rating with a target of Rs 630 premised on 1.8 times Sep’24 P/BV," the brokerage said.

Key downside risks, it said, included the NBFC's inability to attract good talent for senior leadership positions and change in parentage (if at all), which could pose a risk to its credit rating and ability to borrow at such low interest rates.

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