Jamna Auto, Go Fashion & Ahluwalia Contracts among 5 stocks seeing brokerage initiation this week

Jamna Auto, Go Fashion, Ahluwalia Contracts, Sterling and Wilson Renewable Energy and Fusion Micro Finance are five stocks which have seen brokerage initiations in the last 2-3 days. Analyst targets on some of these stocks suggest strong returns going ahead. This is what analysts said while initiating coverage on these stocks:

Go Fashion | JM Financial | Target Rs 1,410

JM Financial has initiated coverage on Go Fashion, saying the company is the leader (value market share of 8 per cent) in India’s highly unorganised women’s bottom-wear segment that is pegged at Rs 13,500 crore. Go Fashion is the first company to launch an exclusive branded portfolio in the space, JM Financial said.

"Led by increasing preference for modular clothing and high pace of formalisation, the organised women’s bottom-wear category (pegged at Rs 3100 crore) is estimated to grow at a CAGR of 24.3 per cent (faster than organised women’s wear CAGR of 19 per cent) over FY20-25E. The size of the opportunity apart, on-ground execution is a critical element for success in fashion retail," it said.

While identifying the category rightly was half the job done, Go Fashion decided to exclusively focus on it and aced the execution aspect by providing a well-diversified range of quality products at affordable prices, and building a pan-India EBO-focussed distribution model with impressive store economics, JM Financial said.

"An in-place execution template, lack of formidable competition and the company’s focus on newer growth drivers (online channel and new product extensions) provide assurance on the future runway for growth. We initiate coverage with a DCF-based target price of Rs 1,410. BUY," it said.

Ahluwalia Contracts | IDBI Capital | Buy

IDBI Capital has initiated coverage on Ahluwalia Contracts, as it believes the company would be a beneficiary of infra and industrial capex in India. Ahluwalia Contracts  offers turnkey solutions in the construction of vertical structure (building).

With an experience of five decades and seen multiple capex cycle in India, it has consistently delivered positive operating cash flow, IDBI Capital said.  In its base case, the brokerage has set a target of Rs 650 on the stock, based on 14 times FY25E EPS), offering an potential upside of 50 per cent.

"Order inflow is in cyclical uptrend for Ahluwalia Contracts and we expect it to close FY23E with highest ever annual inflow (YTDFY23 it is Rs 4,000 crore). Order book in H1FY23 at Rs 7,600 crore provides revenue visibility with more than 70 per cent of book is for clients in East and North part of India," it said. 

Jamna Auto Industries | LKP Securities | Target Rs 140

LKP Securities has initiated coverage on Jamna Auto Industries, as it feels the company is a beneficiary of the ongoing positivity in the commercial vehicle (CV) cycle.

Going forward, it expects CV demand to improve on favorable base, momentum in economic activities and government infra initiatives.

In addition to CV recovery, Jamna’s new product additions in the suspension segment, improvement in parabolic springs mix and focus on after-market segment should aid in reporting strong topline CAGR of 27 per cent  over FY22-25E, it said.

The management’s cost reduction measures taken in the last 24 months and utilisation improvement benefit to aid in strong bottom line growth for the company with 34 per cent CAGR over the same period. The company has achieved the earlier set target and is on track to achieve the newly set target across various parameters in the business. At the current market price, the stock is trading at 14.2 times FY25E EPS of Rs 7.70.

"Considering sustained strong Ebitda margins performance, increase in value content per vehicle supported by new product launches in the suspension segment, lean fixed cost structure, anticipated higher share of after-market (which is non-cyclical), and strong balance sheet, we recommend a BUY on the stock with a target price of Rs 140," it said.

Sterling & Wilson | Nuvama | Target Rs 454

Nuvama Institutional Equities has initiated coverage on Sterling and Wilson Renewable Energy with a ‘buy’ rating and a target of Rs 454 that suggests 57 per cent potential upside over Monday's closing of Rs 288.75.

Given its accreditation in 17 international geographies with high entry barriers, Sterling and Wilson is well-positioned to leverage global solar capacity growth in excess of 15 per cent CAGR, Nuvama said.  In addition, Sterling and Wilson enjoys India’s inherent edge of lowest solar EPC cost (half of even China), it said adding that domestic solar capacity is expected to rise 5 times by 2030.

Fusion Micro Finance | Haitong | Target Rs 578

Haitong said Fusion Micro Finance is the second largest and one of the fastest growing NBFC-MFIs, having registered 55 per cent AUM CAGR over the last five years. During the same period, Fusion reported a healthy 32 per cent CAGR in borrowers; whereas its average disbursal ticket size (FY19-22) has grown at a mere 11 per cent CAGR.

The company has a well-diversified presence across regions with no state/district contributing more than 20 per cent/3 per cent of AUMs.

"Further, given its transparent approach, it has access to diversified sources of capital. Along with this, it has a stable and experienced management team along with marquee investors (promoters). With a stringent under-writing processes, its asset quality (restructured book at 0.5%) has been relatively better," Haitong said.

Over FY23-25E, Haitong jas factored in healthy AUM CAGR of 29 per cent and NIMs of 11.8 per cent, driving NII by 36 per cent CAGR.

Further, Haitong said, with improvement asset quality, it expects Fusion to report superior return ratios.

Fusion trades at 1.5 times FY24E ABV, which Haitong believes is attractive, given the potential to deliver strong growth along with healthy return ratios. It also trades at 34 per cent discount to comparable peer. Haitong has initiated coverage on the stock with an outperform rating and target price of Rs 578 implying 2 times December-24E ABV of Rs 288.

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