2 Stocks To Buy By Leading Brokerages For Long Term With Upside Potential Of Over 33%

 

ICICI Direct in its research report dated July 26, 2021 for a target period of 12-18 months has suggested a price target of 405. The scrip last traded at a price of Rs. 305 per share on the NSE.

TECEEC

Financials: EPC Business: Contributed ~89% to FY21 revenue, generated excellent RoCE of 50-75% over the past five years

PPP projects business: It is present in BOOT/ BOOM transmission projects in PPP mode. It owned three assets in PPP mode Wind Power: TEEC owns ~130 MW of wind power generation capacity.

Continuous efforts to maintain market leading position in EPC a tailwind for the company:

Long term plan to foray into data centre market and become significant EPC player over the next three to four years. Initially setting up a data centre with 30 MW IT load and 50 MW total load in Chennai, which will help achieve twin objectives of power offtake from wind assets and improve overall return ratios of the company EPC segment revenue to grow at ~33% CAGR in FY21E-23E on the back of entry into high growth areas like FGD, AMI and data centres. The company has guided for order inflows of more than Rs. 2000-2500 crore for FY22E (with book to bill ratio of 2.4x) driven by high growth new business verticals providing much needed diversification

Confident of maintaining industry superior margins of ~15-16% for core business over the next couple of years owing to efficient engineering and execution capabilities creating niche for itself Net debt free b/s, double-digit return ratios & strong cash generation and cash balance of ~Rs. 795 crore provide tremendous balance sheet strength.

ICICI Direct considering strong cash generation, balance sheet initiates coverage on the scrip under stock tales format and gives a 'Buy' call' and values TEEC at Rs. 405 on SoTP basis, implying an upside of 33%.

2. Tata Motors

Motillal Oswal in its report dated July 27, 2021 has maintained a buy call on the scrip of Tata Motors and raised its target price to Rs. 400, implying an upside of 38.5% from the LTP of Rs. 288.75.

Reasonable performance in a tough quarter

The firm hails the view that even though the auto major faced double whammy of closure of India business and chip shortage in its JLR business, the long term view by the brokerage on the scrip remains intact.

The firm in view of good traction in  traction in the JLR
and India businesses has cut its FY22E EPS estimate by 77%, accounting for sales loss due to
the ongoing semiconductor shortage, while we maintain our FY23E EPS estimate. Maintain Buy, with TP of INR400 (Mar'23E SoTP based).

Q1FY22 financial results:
 1QFY22 consol revenue/EBITDA grew ~108%/727% YoY toINR664.1b/INR53b (v/s est. INR555b/INR36b). Adj. loss stood at INR44.5b (v/s est INR27.4b), against loss of INR84b in 1QFY21 and profit of INR57.4b in 4QFY21. Net loss was higher than estimated due to the non-recognition
of deferred tax assets in JLR. Consolidated automotive FCF outflow stood at INR182b due to working capital
outflow of INR165b, resulting in higher net debt to INR613b (v/s INR409bas of Mar'21). Working capital would neutralize as demand recovers.

With softening of headwinds , TTMT would see the triple benefit of a) macro recovery, b) company-specific volume/margin drivers, and c) sharp
improvement in FCF and leverage in the JLR and India businesses. The stock trades at 4.8x/2.9x EV/EBITDA of FY22/FY23E. Maintain Buy, with TP of ~INR400 (Mar'23E SoTP based).

Disclaimer:

Markets are trading at high and entry at such high levels may not be feasible for all, so do consider all such parameters as your long and short term financial goals, risk appetite before making a bet in stocks. Also, these stock picks are taken from  various brokerage reports and need not be construed as investment advice.

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