Brokerage Call: 5 SBI Mutual Fund-Backed Stocks To Buy Next Week

Engineers India, Hindalco Industries, Carborundum Universal, Blue Star and UNO Minda are the 5 stocks that have been given a buy call rating from the top brokerage companies. All these are the stocks where SBI Mutual Funds have equity shareholding in Q2FY24.

For Engineers India, Prabhudas Lilladher has set a target price of Rs166, Hindalco Industries target price has been set at Rs583 by Prabhudas Lilladher, Carborundum Universal share price target is Rs. 1,315 by Sharekhan, Blue Star share price target price is Rs. 1,160 by Sharekhan and UNO Minda share price target is Rs.745 by Geojit.

Engineers India

"We roll forward to Sep-25E and upgrade our rating to 'BUY' from Accumulate (factoring in recent correction in stock price) with revised TP of Rs166 (Rs165 earlier) valuing it at a PE of 16x Sep-25E. Engineers India Ltd (EIL) reported flat revenue YoY with EBITDA margin expanding 668bps YoY to 12.2%, driven by higher gross margin.

A liquidated damages settlement in one Turkey project added Rs449mn & Rs446mn to Q2 revenue and profit respectively. The company is increasing efforts in overseas business in order to bring it to a similar level as the domestic business, with a focus on markets such as Algeria, Nigeria, and South America," said Prabhudas Lilladher.

"EIL is also concentrating on growing its new decarbonization business including green hydrogen, green ammonia, biofuels, etc. The order book and pipeline remain healthy and will drive revenue growth in coming years.

Management has retained its guidance of ~10% revenue and PAT growth for FY24, along with ~3% margin in Turnkey Projects. We believe EIL's long-term growth prospects remain intact given 1) healthy order book, 2) strong project pipeline, 3) diversification into decarbonization business, and 4) lean balance sheet. We estimate Revenue/PAT CAGR of 13.2%/21.6% over FY23-26E. The stock is currently trading at a PE of 18.8x/14.1x/12.5x FY24/25/26E. Upgrade to 'Buy'," added the brokerage note.

During the quarter ended 30th September, SBI Small Cap Fund held fully paid-up equity shares of 67,55,316 or 1.20% stake in the company.

Hindalco Industries (HNDL IN)

"Hindalco Industries (HNDL) 2QFY24 Consolidated revenue grew 2% QoQ to Rs 541bn (PLe Rs 554bn) on stronger Novelis and copper business performance. Novelis' Flat Rolled Products (FRP) volumes grew 6% QoQ to 933kt (-5.2% YoY; PLe 940kt) on stronger North America & European volumes. Consolidated EBITDA declined 2% QoQ to Rs 56.1bn (8% lower Vs PLe Rs61bn) despite lower input costs in India and better Novelis performance," said Prabhudas Lilladher.

"We believe HNDL is best placed amongst the metals space as a) Novelis is expected to witness gradual improvement in per ton EBITDA over next few quarters; b) opening up of captive coal mines to benefit India business post FY26; and c) rising focus on high margin value added products such as FRP expansion would drive volume growth from FY26. Despite business headwinds, Novelis continue to perform well and invest significantly in growth.

We have raised our FY24/25/26E EBITDA by 6%/1%/4% respectively on robust Novelis performance. At CMP, stock is trading at attractive valuations of 5.2x/4.4x EV of FY25E/FY26E EBITDA. Retain 'Buy' rating with revised TP of Rs583 (earlier Rs557) valuing Novlies at 6.5x EV of Sept 2025E EBITDA, as we roll forward," further added the brokerage.
During Q2FY24, SBI Arbitrage Opportunities Fund held 10,35,13,880 shares or 4.61% stake in the company.

Carborundum Universal

"Q2 consolidated results lagged estimates particularly on sales fronts mainly due to weak sales in Ceramics and Electrominerals segment. Total revenues grew by ~2% y-o-y to Rs 1,146 crore. Operating profit grew by ~3% y-o-y to Rs. 168 crore as power and fuel cost declined. Consequently, OPM improved by 16 bps y-o-y to 14.6% (versus our estimates of 14.5%).

PAT grew by 14.5% y-o-y to Rs 102 crore and was below our estimate mainly due to lower-than-expected revenue growth. Among segments, abrasives & ceramics registered y-o-y sales growth of ~6% & 4% respectively, while electrominerals segment registered a y-o-y decline of 8% as dumping by Chinese producers led to decline in product prices price of product in this segment. EBIT margin in electrominerals segment declined by 59bps y-o-y to 16.3% but improved considerably on a q-o-q basis, while ceramics and abrasives margin improved by 245bps and 149bps y-o-y to 27.8% and 7.3%, respectively," said the brokerage firm Sharekhan.

"We expect growth momentum to sustain, driven by sustainable demand across segments in the long term. CUMI stands to benefit from multiple factors such as an uptick in capex in its end-user industries, China +1 strategy, strong government initiatives to support domestic manufacturing, and increasing demand prospects for specialty products driven by clean energy initiatives. Moreover, all segments are witnessing healthy profitability. The stock trades at ~29xFY26E EPS and the rich valuations are justified given strong earnings growth outlook and a healthy balance sheet and improving return ratios. Therefore, we retain Buy on CUMI with an unchanged price target (PT) of Rs. 1,315," further stated the brokerage.

During Q2FY24, SBI Retirement Benefit Fund - Aggressive Plan held fully paid up equity shares of 1,84,80,471 or 9.72% stake in the company.

Blue Star

"Blue Star reported strong operational beat for Q2FY2024, led by Unitary Products' performance. Consolidated revenues were up 19.9% y-o-y at Rs. 1890 crore, led by 39% y-o-y growth in Unitary products revenues (industry growth estimated at 30% y-o-y) while EMP segment reported 12% y-o-y revenue growth. Consolidated OPM at 6.5% (up 106 bps y-o-y) surprised positively by Unitary products (EBIT margins up 227 bps y-o-y at 8.4% led by scale, product realignments, and lower ad spends).

Overall, consolidated operating profit/net profit was up 43% y-o-y/66% y-o-y at Rs. 123 crore/Rs. 71 crore (much higher than our estimates). The company's recent Rs. 1000 crore fundraise through QIP would help fund manufacturing capacities expansion (Sri city phase 2 to double cooling products capacity to 1.2 mn units, venture into sub 300 litre deep freezers and other new products). Overall capacity building and a healthy demand environment would entail a high growth trajectory for the company," said the brokerage firm Sharekhan.

"Blue Star is well placed to leverage on the opportunities in the domestic RAC and commercial cooling and the refrigeration industry. The company also plans to explore exports opportunities in countries like USA and Europe. The long-term growth momentum would continue, given sectoral tailwinds regarding soaring temperatures across India and changing consumer lifestyles.

The EMPS segment's growth prospects are brighter, given robust order book and continued traction in order inflows in domestic and international markets. We introduce our FY2026E earnings in this note. We expect revenue/adjusted PAT to post a CAGR of ~17%/~32% over FY2023-2026E.

At the CMP, the stock trades at 39x/31xx its FY2025E/FY2026E EPS, which we believe provides further room for upside. Hence, we upgrade the stock to Buy with a revised price target (PT) of Rs. 1160, rolling forward our valuation multiple to September 2025E earnings and increasing valuation multiple considering strong earnings growth trajectory over the next 2-3 years," stated Sharekhan.

During Q2FY24, SBI Small Cap fund held fully-paid up equity shares of 1,63,92,123 or 7.97% stake in the company.

UNO Minda

"Despite the near-term pressure due to a reduction in the underlying volume and macroeconomic headwinds, we believe stability in commodity prices and chip supplies augurs well. The company is actively increasing its kit value across all segments and outpacing the industry's growth.

UML's strong balance sheet and quick ramp-up reflect higher revenue visibility on a medium- to long-term basis. The stock has always traded at a premium due to its diversified product portfolio and new product offerings according to changing trends. We value UML at 35x FY25E EPS, arrive at a target price of Rs.745, and maintain our Buy rating," brokerage firm Geojit said in a note.

During Q2FY24, SBI Large & Midcap Fund held 95,90,415 fully paid-up equity shares or 1.67% stake in the company.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.