1 Retail & 1 Pesticide Stock To Buy For Over 30% Upside In 1-Year

Emkay Global has issued a buy recommendation on the shares of Westlife Development with a target price of Rs 700. The brokerage expects the stock to rise 41 percent from its current market price of Rs 495.50 as of 3:30 p.m. IST on February 4th. ICICI Securities, on the other hand, has issued a buy call on PI Industries' shares with a target price of Rs 3375, implying that the stock has a 32 percent upside potential from its current market price of Rs 2,553.00 as of 4 February, 3:30 pm IST.

PI Industries

ICICI Securities has said in a report that "The stock appreciated at 40% CAGR in the last three years. We retain BUY on the back of a better growth outlook of CSM business. We value PI Industries at 40x P/E FY24E EPS to arrive at a revised target price of Rs 3375/share (earlier Rs 3340/share)."

Q3FY22 results of PI Industries according to ICICI Securities

• Topline marginally came in above our estimates while the bottom-line beat was due to lower taxes.
• Reported revenue growth of 17% YoY to Rs 1356.3 crore, led by CSM segment (up 19% YoY).
• Gross margins fell 50 bps YoY to ~46.4% while EBITDA margin contracted 180 bps YoY to 21.9%, due to higher employee (up 16% YoY) and other operating costs (up 29% YoY).
• Earnings before interest, taxes, depreciation and amortisation (EBITDA) were up 8% YoY to Rs 296.5 crore.
• Profit after tax (PAT) increased 14% YoY to Rs 222.6 crore owing to lower taxes (17% vs. 26% in Q3FY21).

Key triggers for future price performance of PI Industries according to ICICI Securities

• A strong order backlog in CSM bodes well for future growth.
• Foray into pharma CDMO expands revenue visibility further and diversifies its revenue stream, to a certain extent.
• Improvement in the operational performance owing to the higher share of the value-added business portfolio to aid return ratios further.

Westlife Development Ltd (WLDL)

Emkay Global has highlighted that "WLDL's Q3 operating performance was 20-50% higher than our/street expectations, led by higher revenues and strong margin expansion, up 200bps. Revenues grew by 46% (~5% 2-Yr CAGR) with EBITDA growth of 67%. The convenience channel was up 55% YoY, while dine-in grew 39%. Margin delivery was strong, with the highest Pre-IndAS EBITDA margin of ~13%. This improves visibility and should build the Street's confidence in WLDL achieving low-mid teen margins in FY23E. Store additions so far have been low at 6/11 additions in Q3/9M but are expected to be stepped up. 12 stores underground break will drive high additions in Q4. WLDL plans 25- 30 openings in FY22 and 40+ in FY23, with plans to add 200+ stores in the next 3-4 years."

The brokerage has claimed that "We forecast healthy sales/EBITDA growth of 11%/20% in FY20-24. The large penetration opportunity, an increased pace of expansion and margin gains keep us optimistic. Valuations at a hefty 40-45% discount to peers make it an attractive long-term bet. Maintain Buy with a revised TP of Rs700 (vs. Rs680 earlier), based on the rollover to Mar'24E EBITDA and a revised multiple of 32x Pre-IndAS EBITDA (vs. 34x earlier)on higher WACC."

Disclaimer

The stocks have been picked from the brokerage report of ICICI Securities and Emkay Global. 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.