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Stocks to buy: HUL, Cyient, Indiabulls Realty & Escorts Kubota can deliver healthy returns in next 12 months

Stocks to buy: HUL, Cyient, Indiabulls Realty & Escorts Kubota can deliver healthy returns in next 12 months

Cyient hosted its Investor Day 2022 and the key highlights included a focus on strengthening core, expanding on five pillars and accelerating growth towards megatrends

Indiabulls Real Estate reported a strong beat on operational and net profitability for September quarter, aided by booking of Sector 106, Gurugram land parcel (Rs 580 crore) net of costs Indiabulls Real Estate reported a strong beat on operational and net profitability for September quarter, aided by booking of Sector 106, Gurugram land parcel (Rs 580 crore) net of costs

A host of stocks have seen rating updates from domestic brokerages. Four of such stocks namely Hindustan Unilever (HUL), Cyient, Indiabulls Realty and Escorts Kubota have price targets that suggest up to 21 per cent potential upsides for these stocks in the next 12 months.

Escorts Kubota | ICICIdirect | Target Rs 2,365 | Upside potential: 17%

ICICIdirect said it attended Escorts Kubota’s analyst meet in Faridabad wherein the company revealed its mid-term business plan (MTBP). The FY28 targets included aspiration to grow revenues to over 2.5 times of FY22 levels; increase share of exports from 6.4 per cent in FY22 to 15-20 per cent in FY28E; target EBitda margins to mid-teens; RoCE at 25-30 per cent and RoE of over 18 per cent.

"We came impressed with cultural shift, which Escorts is seeing imbibing the best practices at Kubota and leverage opportunities that it sees to cross sell as well as development of Escorts as one of the sourcing hubs for Kubota," it said.

The stock has grown at 24 per cent CAGR in last five years from Rs 700 in November 2017, vastly outperforming Nifty Auto.

ICICIdirect has retained its BUY rating amid wider opportunity at play "with Kubota coming on board as co-promoter and strong financials amid healthy RoCE targets."

Cyient | Nuvama Institutional Equities | Target Rs 964 | Upside potential: 21%

Cyient hosted its Investor Day 2022 and the key highlights included a focus on strengthening core, expanding on five pillars and accelerating growth towards megatrends. The company's plan to divest DLM business is on track. It is targeting $1 billion revenue run-rate by H2FY24 and is focusing on improving capital efficiency through strategic capital allocation policy.

"Cyient is witnessing strong demand environment and acquisition are progressing well despite macro uncertainties. The company is refocusing on sales team for existing and new accounts, on large deal wins and diversifying portfolio to achieve consistent growth," said Nuvama Institutional Equities.

The brokerage said Cyient is realising the full impact of ER&D value by leveraging digital technologies and applying them in product engineering. It argues the ER&D industry in India is going through a structural upcycle, which will drive Cyient’s long-term revenue growth.

Indiabulls Real Estate | Sharekhan | Upside potential: 25%

Sharekhan said Indiabulls Real Estate reported strong a beat on operational and net profitability for September quarter, aided by booking of Sector 106, Gurugram land parcel (Rs 580 crore) net of costs. Consolidated operating profit and net profit were up 4 times and 10 times YoY at Rs 91 crore and Rs 57 crore, respectively.

This is even as net revenues declined 44 per cent YoY to Rs 194 crore. The fall was 11 per cent lower than Sharekhan estimate. The pre-sales at Rs 297 crore (flat QoQ) remained healthy considering 98 per cent of its inventory in key projects already sold out.

Sharekhan believes Indiabulls remained on track reducing leverage and turning net cash aided by funds raised through QIP and land sales. Indiabulls also has cleared books with respect to outstanding customer refunds, it said.

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“We believe the company is moving towards reporting accounting profits and cash profits from this year itself. The company has two major project launches in Worli and Thane during FY2023-FY2024 which is expected to drive pre-sales. Further, it is slated to benefit from its merger with the Embassy Group and a new promoter to be at the helm having experience in managing Embassy Group assets. The merger would catapult the company in the big league of real estate players with a balanced mix of commercial and residential projects," Sharekhan said.

The strong surplus from residential projects with minimal investment and huge land bank at prime locations provide unique value proposition, it said.  "We retain a positive view on the stock and expect a potential upside of 25 per cent," it said.

Hindustan Unilever | Motilal Oswal | Target Rs 2,900 | Upside potential: 17%

Motilal Oswal said Hindustan Unilever (HUL) Annual Investor Meet underlined the moats the company has and the remarkable nimbleness it continues to exhibit despite being much larger than peers. The FMCG firm continues to place the building blocks for future growth and has been able to do so ahead of peers, it said adding that HUL continues to display the dexterity despite its larger size, even as it continues to grow faster against peers.

With its analytics and R&D initiatives (much ahead of its peers) in the recent years, HUL is ensuring that it does not get disrupted in a dynamically changing environment, Motilal said.

"The company’s earnings growth had gained further impetus in recent years (before Covid-19 affected FY21) – it reported a 18 per cent EPS CAGR in the four years ended FY20. This is particularly impressive, given the weak mid-single-digit earnings growth posted by (much smaller) peers in these years," it said.

"There is no material change in our forecasts. In view of near-term challenges for all staples, we bring down HUL target multiples to 55 times from 60 times. We reiterate our Buy rating with a target of Rs 2,900 (55 times September 2024E EPS)," Motilal said.