1 Infra & 1 Pharma Stock To Buy For Good Potential Upside In 1 Year

PNC Infratech Ltd

According to the brokerage "PNC Infratech Limited (PNC) announced that it is the lowest bidder (L1) for six hybrid-annuity (HAM) projects having a total bid project cost of Rs. 6,871 crore during February and March 2022 till date. All six HAM projects are in Uttar Pradesh with an operational period of 15 years post the construction period (of 24-30 months). Strong order inflows expected from the six HAM projects is in line with the management's guidance of Rs. 4,000-5,000 crore order intake before FY2022-end. Project wins comes at a time where industry order awards have been remained muted till February (project awards fell 10.5% in FY2022 till February 2022 at 7618 km), while the company itself had bagged Rs. 2,700 crore order inflows till mid-February 2022."

"New HAM projects would provide strong revenue visibility over next 2-3 years as its order book including L1 at the end of Q3FY2022 stood at Rs. 14,390 crore, 2.4x TTM standalone revenues. The company expects FY2022 to see minimum 20% y-o-y revenue growth, while it expects 15% y-o-y revenue growth for FY2023. On the asset monetisation front, the company is evaluating divestment of five HAM and one annuity project which would aid in freeing up equity capital and de-leverage the balance sheet," said Sharekhan.

The brokerage has claimed "We believe PNC is one of the best picks in the road development sector on account of its strong execution capabilities, healthy balance sheet, robust order book, and prudent capital management. The strong order intake expected from its recent L1 positions in six HAM projects resolves muted order intake concern during FY2022 till midFebruary. Further, the company has strong opportunities in bagging Jal Jeevan Mission projects in Uttar Pradesh. Additionally, the fructification of asset divestment would further aid in strengthening its healthy balance sheet. We retain our Buy rating on the stock with an unchanged price target (PT) of Rs. 380."

Laurus Labs Ltd

Sharekhan has highlighted that "We recently had an interaction with Laurus Lab's (Laurus) management to get an update on the business. The commentary was encouraging and pointed at strong levers in place that could drive the growth ahead. Transient issues such as channel de-stocking for the ARV API's are gradually easing out pointing towards likely normalcy in Q1FY23. Cost headwinds such as higher solvent and freight cost are likely to be offset partly by efforts to diversify vendor base geographically, increasing backward integration levels, thereby reducing import dependence. The growth outlook for FD (Finished dosages) and synthesis segment stays healthy, while API's are expected to stage a gradual improvement."

The brokerage has noted "Transient issues in ARV-API sales are likely to normalize by Q1FY23 with a possible sequential improvement. Doubling tablet capacity to 10 bn tablets per year could drive FDF segments sales with a marked improvement likely from FY23E onwards. The Synthesis segment, backed by a growth in demand from existing customers, and ongoing client additions, is set to stage a strong double-digit growth. Due to an expected sequential improvement in the ARV-API's the Q4FY22 performance is expected to be better as compared to Q3FY22. At the CMP, the stock trades at 33.5x/22.8x/17.4x its FY22E/FY23E/FY24E EPS. Given multiple growth levers pointing towards strengthening growth prospects, we reiterate our Buy recommendation on the stock with an unchanged PT of Rs. 735."

Disclaimer

The stocks have been picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.