Nesco, Equitas Small Finance Bank, Star Health and Allied Insurance Company, Fusion Mirco Finance, Supreme Petrochem, Sundram Fastners and Action Construction Equipements have found a 'buy' rating from various brokerage firms, who have initiated their coverage on that particular company.
Brokerages including Anand Rathi, HDFC Securities, SMIFS, Monarch Networth and ICICI Securities have launched their maiden reported in select stocks and see up to 54 per cent rise in these counters. Here's what is making these brokerages positive on them:
SMIFS on Supreme Petrochem
| Target Price: Rs 561 | Upside Potential: 54% |
Supreme Petrochem has very strong business model in Polystyrene (PS) & Expandable Polystyrene (EPS) along with its downstream derivatives like XPS & SPC. The company is expanding its capacity in all business segments viewing the growth opportunities available post closure of business of its nearest competitor in India, increasing demand growth & strong balance sheet to fund capital expenditure, said SMIFS.
The business also has a strong moat because it requires handling of volatile raw materials like styrene and setting up a polystyrene business requires huge capital investment; government approvals are very difficult to crack & getting required customer approvals are lengthy & difficult which makes it impossible to dislocate any existing player in PS business, it said with a target price of Rs 561 per share.
ICICI Securities on Fusion Micro Finance
| Target Price: Rs 600 | Upside Potential: 46% |
Fusion Micro Finance is a leading NBFC-MFI with asset under management of Rs 8,000 crore and borrower base of 3 million, implying average outstanding per borrower of Rs 25,000 as on September 22. Pristine asset quality during its decadelong journey and standard restructured book, highlights its quality underwriting, proactive risk management and deep understanding of demographics in states where it operates, said ICICI Securities.
The management has built the organization with diversified operations, calibrated growth led by new customer acquisition, stable management team along with second line, high weightage on corporate governance and conservative provision policy, it said in its initiating coverage report with 'buy' rating and a target price of Rs 600.
Anand Rathi on Star Health and Allied Insurance Company
| Target Price: Rs 723 | Upside Potential: 40% |
Star health is a largest private health insurance company in India with leadership in the retail health segment. They have the largest and well spread distribution networks in the health insurance industry and integrated ecosystem. The company has a focus on innovative and specialized products, said Anand Rathi in its maiden report on the stock.
"We remain optimistic about the overall prospects of Star Health and expect overall gross premiums to grow a healthy CAGR over FY 22-24, led by Retail Health. We expect the claims ratios to normalize. This should enable it to return to profitability over FY23-24E. We remain extremely positive on the business model," it added with a 'buy' tag and target of Rs 723.
Monarch Networth Capital on Equitas Small Finance Bank
| Target Price: Rs 73 | Upside Potential: 32% |
Equitas Small Finance Bank’s loan book diversification strategy, well ahead of MFI-SFB peers, as well as the unique model of different asset and liability branches, have played out visibly in its performance in the past two years. Strong cyclical tailwinds in its key focus segments bode well for loan book growth in the coming years, said Monarch with a buy call and Rs 73 as target.
"We draw comfort in its proven record of building a robust liability franchise, best amongst peer SFBs. The overhang relating to the successor to the CEO’s office is finally done away with incumbent CEO’s continuation. With the reverse merger likely to conclude in Q4FY23, we believe that Equitas is poised for a re-rating as improving financial performance," it said.
Anand Rathi on Nesco
| Target Price: Rs 740 | Upside Potential: 24% |
Nesco is a zero-debt company despite its asset heavy real estate business. In Q2FY23 revenues were up 76.9 per cent YoY at Rs 142.9 crore. The exhibition revenues at Rs 53.1 crore were up by 25 times YoY on a depressed base, led by full-fledged resumption of exhibition, said Anand Rathi.
"Nesco’s other two segments - Hospitality and Capital Goods arm Integrator are expected to see a steady uptick in their own business verticals. We expect a complete comeback to pre-covid levels in the exhibition business following a washout of 2.5 years, We initiate our coverage on Nesco with a 'buy' rating and a target price of Rs 740," it said.
Monarch Networth Capital on Sundram Fasteners
| Target Price: Rs 1,220 | Upside Potential: 24% |
Sundram Fastners (SFL) is a leader in the fastener industry with a 40 per cent market share and is slated to grow faster than the last business cycle due to strong growth in domestic auto OEM sales, rising demand for heavy vehicles in North America, ramp up of EV portfolio and planned addition of new products, said Monarch.
A process that started sometime back and continuing momentum, SFL is also reducing auto cyclicality risk by diversifying into non-auto segments. Further, margin expansion due to price hikes and over 20 per cent return ratios will drive re-rating for SFL, it added with a 'buy' rating and a target price of Rs 1,220.
HDFC Securities on Action Construction Equipments
| Target Price: Rs 403.4 | Upside Potential: 20% |
Action Construction Equipements (ACE) is also expanding its business by carrying out more Capex. By way of both organic and inorganic expansion, revenues are expected to grow significantly. The company is expanding its capacities in crane as well as material handling segment. ACE has strong financial position with no long-term debt and strong revenue generation capabilities, said HDFC Securities.
"On account of its healthy order book, strong revenue forecasts and market share in cranes segment, improvement in EBITDA margins, we are positive on the stock. ACE has strong long‐term outlook and revenue growth in the upcoming years on account of capex and expansion," it added with a buy and target price of Rs 403.4 for the stock.
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