Brokerage Radar: Timken India, Glenmark, Titagarh Wagons, NMDC & Exide Industries

Analysts have assigned 'Neutral' and 'Buy' ratings to a couple of stocks of late. Timken has earned a 'Buy' rating after announcing a capex plan while Exide Industries has earned a similar rating on  attractive valuations. Analysts are 'Neutral' on Glenmark Pharma post its Investor Day while they find NMDC as a re-rating candidate.   

Timken India | Nuvama | Buy Target Rs 3,750

Timken India announced an Rs 600 crore capex towards SRB/CRB import substitution. Nuvama Institutional Equities said this is a major positive as it: imparts significant long-term revenue visibility beyond FY25 with the potential to double its existing revenues. Besides, it will likely to aid margins and provide a 200-300bp cushion by substituting low margin traded goods (25-30 per cent of revenue mix); and validates thesis of a strong demand environment and solid parentage support.

"The long gestation period for the capex limits us from calibrating its benefits in our FY24/25 estimates, but we reflect this with a higher P/E multiple of 55 times (earlier 50x) led by robust visibility. Retain ‘BUY’ with a revised target of Rs 3,750 from Rs 3,425 earlier and top pick status," Nuvama said.

Glenmark | Motilal Oswal | Neutral | Target Rs 420

Motilal Oswal said it attended Glenmark's investor day to understand the management strategies across major business segments over the next four-to-five years. The drug maker aims to boost RoCE (EBIT/capital employed) to 22 per cent by FY27 (from 17 per cent in FY22), with an increased share of the branded generics business, controlled R&D spends towards the NCE portfolio, and sustained improvement in operating leverage. It also aims to have zero net debt by FY26.

Motilal values the stock at 10 times 12-month forward earnings to arrive at a target of Rs 420.

"We remain Neutral on the stock, given its 5 per cent earnings CAGR over FY18-22. We expect earnings CAGR to be moderate over FY22-24 (9 per cent). The benefit from complex product filings is expected from FY25,subject to timely approval. Asset utilization at Monroe for the US market is also subject to successful resolution of regulatory issues," Motilal said.

Exide Industries | Nomura | Buy | Target Rs 221

Nomura finds Exide Industries' valuations attractive. It has raised FY23 revenue estimates by 10 per cent to factor in the higher H1FY23 run- rate. It continues to believe auto replacement volume growth should normalise to 8 per cent over FY24-25F and industrial segment volumes to record 7-8 per cent growth for the same period.

"Current lead prices are up 12 per cent vs 2QFY23 levels, which would keep margins lower than in the past levels. Exide's Li-ion cell facilities will be one of the earliest to be set up within the industry, which will be an advantage to tie up OEMs. However, cell profitability will depend on EV demand and competitive scenario which is more difficult to predict for cell business than the lead acid business. Hence, we conservatively value Li-ion cell capex at 0.5 times BV," it said..

NMDC | Kotak Institutional Equities | Buy | Target Rs 130

Nomura India said  NMDC has announced a sharp 9 per cent price cut for iron ore in its attempt to revive volumes in H2FY23. Both domestic and seaborne iron ore prices have bottomed and have upside over the next 6-12 months, it said.

Notwithstanding near term margin headwinds, it sees a strong re-rating potential for NMDC after the steel plant demerger with improved capital allocation, higher FCF as the core mining business is not capital intensive and increase in the payout due to higher cash generation.

"We see a strong re-rate case for NMDC after the steel plant demerger with improved capital allocation, higher FCF and a likely higher dividend payout. Upgrade to BUY with an unchanged Fair Value of Rs 130," it said.

Titagarh Wagons | Nuvama | Buy | Target Rs 206

Nuvama said Titagarh Wagons (TWL) reported a 76 per cent YoY jump in Q2FY23 revenue to Rs 600 crore, it’s highest-ever. While Ebitda margin decreased 220 bps YoY to 9.1 per cent, higher other income lifted adjusted PAT 67​ per cent YoY. The company ended Q2FY23 with an order book of Rs 10,000 crore (flat QoQ). The company expects execution on Indian Railways’ (IR) wagon order to improve going ahead while the Pune Metro order is expected to see completion by March or June quarter.

"Improving execution trajectory forces our hand to revise up TWL’s FY23E/24E EPS by 9 per cent/6 per cent. We maintain ‘BUY’ with a revised target of Rs 206 (earlier Rs 191). Order accretion remains the key variable to monitor," Nuvama said.

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