ICICI Securities Picks These Stocks With Upside Potential Up To 28%

Buy Advanced Enzyme Technologies: ICICI Securities

Advanced Enzyme Technologies (AET) is an Indian enzymes firm with a product portfolio of over 400 patented products derived from 68 indigenous enzymes and probiotics.

According to ICICI Securities, AET had a solid first quarter performance. The results were in line with the I-direct predictions. The company's pricing power and balance sheet strength are reflected in its excellent margins and return ratios. Going forward, management plans to expand its R&D capability for improved facilitation and in-house R&D power, which speaks well in the long run in its quest to increase scalability and a prospective excursion into more complex enzymes.

Why buy shares of Advanced Enzyme Technologies?

"AET's share price has grown by ~1.4x over the past five years (from ~Rs 275 in July 2016 to ~Rs 399 levels in July 2021). We retain our BUY rating on the stock Target Price and Valuation: We value AET at Rs 480 i.e. 26x P/E on FY23E EPS," the brokerage has said.

Key triggers for future price performance:

• AET is a minor player in the global enzymes market, which is estimated to be worth US$10 billion and is expected to develop at a CAGR of 6-7 percent as new applications in various industries combine enzymatic technologies.
• It has demonstrated competence and steady financials as a result of a mix of organic and inorganic growth.
• Management's organic and inorganic growth strategies
• AET intends to expand its R&D capabilities in the future, which bodes well for the future.

Buy Indoco Remedies with target of Rs 575

Indoco develops and distributes branded formulations and APIs for both the domestic and international markets. The company serves a variety of specialties in domestic formulations through its nine marketing divisions. to increase scalability and branch out into more complex enzymes

ICICI Securities believes that after a difficult period in FY18-20, when Indoco encountered challenges on both the internal (structural concerns, pandemic) and export (regulatory setbacks) fronts, the situation is now returning to normal. Indoco is likely to boost its topline in FY22 as domestic sales normalise and grow, presenting prospects coming from the post-Covid snafu.
On the back of a solid pipeline and a visible launch plan, export formulations are likely to expand rapidly.

Why buy the shares of Indoco Remedies?

"Indoco's share price has grown by ~1.4x over the past five years (from ~Rs 307 in July 2016 to ~Rs 449 levels in July 2021). We retain BUY rating on this stock. Target Price and Valuation: We value Indoco at Rs 575 i.e. 24x P/E on FY23E EPS," the brokerage has said.

Key triggers for future price-performance:

• Restructuring for increased MR productivity and therapy calibration is expected to result in profitable growth in Indian formulations.
• The lifting of USFDA warning letters for Goa plants II and III, as well as clearance from the UK-MHRA, is expected to increase operational leverage for export formulations.
• With a robust pipeline and a visible launch plan, Indoco will gain as local sales normalise, while export formulations are set to expand.

Buy Bharat Forge, Says ICICI Securities

Bharat Forge (BFL) is India's major auto component exporter, with significant engineering, forging, and metallurgical capabilities. Its goods find use with a total capacity of 6.83 lakh MT per year.

According to ICICI Securities, Bharat Forge is expected to post a consolidated sales CAGR of 29 percent between FY21 and FY23E, owing to a cyclical rebound in its core commercial vehicle market (both locally and worldwide) and an improved outlook in the industrial segment. Domestic revenues are expected to expand at a CAGR of 22.6 percent in FY21-23E, while export revenues are expected to grow at a CAGR of 45.4 percent in the same timeframe, albeit from a low base.

Why buy the shares of Bharat Forge ?

"BFL's share price has grown at ~12% CAGR over the past five years (from ~Rs 420 levels in August 2016), outperforming Nifty Auto index. We retain BUY rating on strong demand, margin expansion visibility Target Price and Valuation: We value the company at revised target price of Rs 1,000 i.e. 40x P/E on FY23E EPS (earlier target price Rs 875),: the brokerage has said.

Key triggers for future price-performance:

• In India, a cyclical bounce is expected. CV, the resurgence of US Class 8 trucks, a positive prognosis for the PV market across geographies, and an increase in drilling activities with rising oil prices all contribute to a robust 29 percent net sales CAGR for FY21-23E.
• Defense, e-mobility, and aluminium expansion are de-risking CV, oil, and gas.
• The benefits of the auto component PLI scheme are a strong contender.
• Operating leverage and a better mix are helping to boost margins to 21.5 percent (FY23E).

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article.