A couple of brokerages have come out with updates on a few tracked stocks. They include Orient Electric, Gujarat Gas, Adani Wilmar and Titan company. While Electric and Titan Company are 'ADD' calls, Gujarat Gas and Adani Wilmar have received 'Buy' ratings from brokerages. This is what brokerages said on the four stocks:
ICICI Securities said Orient Electric is facing multiple transitory issues such as introduction of BEE norms in fans, steep volatility in raw material prices and restructuring of distribution network.
Orient's gross margin has corrected 500 basis points over FY20-23.
The brokerage believes that differentiated launches and distribution expansion may result in strong volume growth over FY23-25. It is expecting Orient to report revenue and PAT CAGRs of 13.1 per cent and 14.8 per cent over FY22-25E.
Motilal Oswal said the onset of Russia-Ukraine conflict brewed an unavoidable storm for Gujarat Gas with spot LNG price spiralling to $34.5 per mmBtu in H1FY23 from $23.4/mmBtu in FY22. Brent also surged to $107 per barrel in H1FY23, thereby escalating costs for Gujarat Gas' long-term, crude-linked contracts. The storm intensified further as Morbi’s ceramic cluster was shut down for a month in Q2FY23, thus severely impacting industrial volumes, the brokerage said.
"As a result, PNG price rose to Rs 63/scm by May, before dipping to Rs 46/scm at present. Higher prices forced consumers, especially at Morbi, to switch to cheaper alternatives such as propane and LPG. However, the storm now seems to be running out of steam with spot LNG prices declining 48 per cent from its peak. Addition of 18.1mmt of effective liquefaction capacity globally in CY23 (v/s 11mmt addition in CY22), could push gas prices further down, thereby making PNG lucrative than alternate fuels," it said.
The brokerage has maintained its 'BUY' rating on the stock with a target of Rs 679 (based on 28 times December 2024 EPS). A slower-than-expected pick-up in volume or high gas prices adversely impacting both volume as well as margin can pose a key risk to our recommendation, it said.
Adani Wilmar | Nuvama | Buy | Target Rs 708
Nuvama Institutional Equities said the Q3FY23 business update of Adani Wilmar augurs a sequential improvement in performance. It expects Q3FY23 revenue to grow 7 per cent YoY and Ebitda to dip 11 per cent (Q2 revenue rose 4.4 per cent YoY, but Ebitda fell 40 per cent YoY) versus its initial expectation of 10 per cent revenue growth and a 7 per cent dip in Ebitda, respectively.
"We expect edible oils to grow by 3 per cent, Food/FMCG by 47 per cent and industry essentials by 19 per cent YoY," it said.
Nuvama said while Adani Wilmar competes in an extremely competitive business, it has consistently delivered strong volume growth across segments. Moreover, its commitment to expand the foods basket would help moderate its excessive dependence on the edible oils basket, it said.
The brokerage noted that FY23 was an abnormal year for oil players due to high volatility in oil prices, which affected Adani Wilmar's margins.
"That said, following a significant correction in palm oil from its peak, Adani Wilmar's margin profile would be better in FY24. Even so, keeping in mind rural slowdown and likely higher competition (entry of Reliance), we are cutting FY23/FY24E EPS by 23.1 per cent/7.3 per cent. All in all, we are upgrading the stock from ‘HOLD’ to ‘BUY’ with a revised SoTP-based TP of Rs 708 (earlier Rs 736)," Nuvama said.
Titan Company | ICICI Securities | Add | Rs 2,800
ICICI Securities said Titan's brand Tanishq has effectively fine-tuned the success template in Chennai / Tamil Nadu, which we is a replicable template on other southern states.
Tanishq has been able to meaningfully sharpen its competitive edge by becoming aggressive on price and inventory offering compared to top regional competition, it said adding that this has helped it improve business (customer footfalls/revenue) by 1.5 times.
South has always been a competitive market for Tanishq due to highly competitive dominant organised jewellers and relatively weak regional offerings by Tanishq, ICICI Securities said.
However, its fine-tuned strategy of matching gold rate with competition, offering 100 per cent exchange value to customers on 22kt and above gold bought from any jeweller, benchmarking making charges with top regional competitors, regionalisation of store inventory and roping in Nayanthara (moviestar) as a brand ambassador, appears to be a successful recipe, ICICI Securities said.
"Our optimism stays intact. This is one company where the capabilities to translate the opportunity to earnings is high, in our view. Key risks: Sustained weakness or worsening of macro environment can lead to some slowdown, which has not been factored," ICICI Securities said.
Copyright©2023 Living Media India Limited. For reprint rights: Syndications Today