scorecardresearch
Advanced Enzyme, Cummins India, TCI & KEC International: Here's what analysts say

Advanced Enzyme, Cummins India, TCI & KEC International: Here's what analysts say

Cummins may alter its defensive stance on pricing after seeing the gross margin improvement and positive outlook on margin from its key peer in Kirloskar Oil Engines, said Kotak Institutional Equities

Advanced Enzyme, Cummins India, Transport Corporation of India (TCI) and KEC International have seen rating updates by domestic brokerages Advanced Enzyme, Cummins India, Transport Corporation of India (TCI) and KEC International have seen rating updates by domestic brokerages

A couple of stocks namely Advanced Enzyme, Cummins India, Transport Corporation of India (TCI) and KEC International have seen rating updates by domestic brokerages. Except for Cummins India, three others have received 'Buy' ratings by brokerages. ICICIdirect has upgraded Cummins to 'Hold' from 'Reduce' rating earlier.

Transport Corporation of India | Motilal Oswal | Buy | Target  Rs 810

Motilal Oswal said it has maintain its positive stance on TCI, saying the company may benefit from strong automotive demand, coupled with the addition of new clientele, driving 3PL growth. Motilal Oswal sees sustained thrust on demand for coastal shipping, traction in multimodal Logistics and increasing contribution of less-than-truckload (LTL) in the Freight segment, which will be margin-accretive.

It is estimating TCI revenues to grow at 18 per cent, Ebitda at 13 per cent and profit at of 13 per cent compounded annually over FY22-24.

"Transport Corporation has established presence across the multimodal Logistics value chain (Road, Rail, 3PL, and Water logistics) enables it to offer efficient end-to-end Logistics solutions, cater to a larger addressable market, and makes it the preferred choice for customers looking for complete solutions. These offerings have allowed it to sail through some challenging times. We believe TRPC is very well placed to capitalize on the growth opportunity," it said.

KEC International | Nirmal Bang Institutional Equities| Buy | Target Rs 480

Nirmal Bang Institutional Equities hosted KEC International management to gain insights into the current business environment, ordering outlook, commodity costs and supply chain headwinds, besides the company’s outlook going ahead. The management, it said, highlighted that the ordering outlook remains strong with tenders under evaluation and in the pipeline standing at Rs 1.1 lakh crore. Final legacy projects in Brazil have been completed and the management expects commissioning of the same in the December quarter itself, Nirmal Bang said.

The management also expects revival in SAE performance from March quarter onwards.

"KEC’s margins were affected mainly by elevated commodity & logistics costs and SAE Brazil’s performance. However, with exposure to the legacy projects largely reduced (5 per cent of orderbook), we believe that margins are likely to improve 3QFY23 onwards as KEC starts executing projects booked under the current commodity prices. With the recent correction in the stock price, KEC offers an attractive upside from the current level and hence we  upgrade it to BUY (from Accumulate) with an unchanged target price of Rs 480, valuing it at 14 times Sept’24E earnings," Nirmal Bang said.

Cummins India | Kotak Institutional Equities | Buy | Target Rs 1,560

Kotak Institutional Equities said capital goods player Cummins India may alter its defensive stance on pricing after seeing the gross margin improvement and positive outlook on margin from its key peer in Kirloskar Oil Engines. It has factored in quick pricing moves and a 60 bps higher Ebitda margin in its revised fair value of Rs 1,560 for the stock. Kotak said the company's gross margin is still 200 bps lower than the guidance of complete normalisation. Margin levers beyond pricing that Cummins is banking on and are not factored by Kotak include reducing cost of production, improving engineering processes and product management.

"We factor in 16.5 per cent margin in FY2025 and are 10 per cent higher on our standalone EPS estimates versus consensus. We take comfort on margin from recent related party disclosures for 1HFY23, suggesting marked uptick in exports to Cummins UK and yoy reduction in royalty payout in spite of growing sales. We note that we are still 200 bps short of the 400 bps improvement targeted by Cummins India as it aims to fully normalize gross margin to historical levels," Kotak said.

Advanced Enzymes | ICICIdirect | Hold | Target Rs 300

ICICIdirect said Advanced Enzymes' Q2 sales beat its estimates, but margins was a miss. Revenues grew 14.1 per cent sequentially to Rs 139 crore, it said while profit was up 45.8 per cent sequentially to Rs 26.10 crore. The sock has jumped 1.6 times over the past three years from Rs 169 in November 2019 to Rs 273 levels in November 2022. ICICIdirect upgraded the stock to 'Hold' from 'Reduce' with a neutral stance,  as it seeks consistency in core businesses and improvement in margin profile.

Key triggers for the stock going ahead would include easing of input cost inflation, logistical challenges and demand for enzymes and probiotics in key geographies.  Introducing more products (20 in the pipeline) in the domestic and international markets along with expansion of sales and marketing team in the US, MENA and Asian market may also support the stock, ICICIdirect said.

Also Read: Inox Green Energy makes poor market debut, lists at 7% discount to issue price

Also Read: Adani Enterprises shares rise as board mulls raising funds. Key details