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1 Retail And 1 IT Stock To Buy Post Q3FY22 Results For Up To 27% Gains

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Markets after the extraordinary year 2021 have entered into the correction mode with Nifty below 17,650 points. Now as besides the global cues, Covid 19 situation, earnings will continue to drive stock specific action, here below are ICICI Direct picks for 12 months time considering the latest earnings report card:

 

Shoppers Stop: Buy for a target of Rs. 480
 

Shoppers Stop: Buy for a target of Rs. 480


ICICI Direct, the leading research backed brokerage firm has given a target price of Rs. 480 for the retail stock. Recommended as a 'Buy' for 12 months, Shoppers Stop given the current price of Rs. 378.05 can yield potential gains to the tune of 26.97%.

StockCurrent priceTarget in 12 months
Shoppers StopRs. 378.05Rs. 480

Q3FY22 Results: A spur in demand owing to festivities and wedding led the company to scale to pre-Covid levels in the just ended quarter of close to 96% of Q3Fy20.

Revenue at the company inched higher by 34% YoY to Rs. 951.2 crore

The company during the period realized operational cost savings to the tune of Rs. 42 crores. Owing to positive operating leverage, EBITDA grew 2x YoY to Rs. 183 crore.

PBT was placed at Rs. 66 crore vs. loss of Rs. 28 crore in Q3FY21

Liquidity position remains fairly stable with cash & investments worth Rs. 207 crore and debt worth Rs.194 crore (net surplus Rs. 13 crore, D/E: 0.3x)

Brokerage's advice on Shoppers Stop:

"The stock price has underperformed the broader indices over the last five years on account of weak SSSG, muted store addition pace and lower share of private label brands. With the new management team in place, we expect the company to revive its revenue trajectory and margin profile. Reasonable valuations prompt us to remain positive on the stock and maintain BUY", notes the brokerage.

Target Price and Valuation: Brokerage values Shoppers Stop at Rs. 480 i.e. 8.5x FY24E EV/EBITDA

Key triggers that will drive stock's future performance:

The new MD (former Westside CEO) is expected to bring in his expertise in the private label brands domain and focus on improving the share of high margin private label brands ( around 14% of revenues).

It has embarked on healthy store addition plans with the opening of five stores in Q4FY22 and 12 in FY23E. Majority of the store addition in Tier II/III cities. The capex for the same is expected to be Rs. 100 crore, to be funded mainly through internal accruals

The management expects steady SSSG growth of 9-11% in the near term.

Key thrust on accelerating investments in omni-channel with long term target of channel contributing 20% of sales from current appx. 8%.

Higher focus on beauty segment through scale up of its own private brand Arcelia (75+ SKUS to be launched in Q4)

About the company:

The company is among the country's top departmental stores that has over the period undergone several structural changes to lay its thrust on augmenting its share of private label brands and beauty segment.

Alternate Stock Idea: "Apart from Shoppers Stop, in our retail coverage we also like ABFRL. ABFRL has charted out a growth strategy to become an around US$2.8 billion entity by FY26E, translating into 15% CAGR in FY20-26E. BUY with a target price of Rs. 360", suggests ICICI Direct.

 

L&T Infotech: Buy for a target of Rs. 8050

L&T Infotech: Buy for a target of Rs. 8050

The 'Buy' on the IT services stock has been given for 12 months time for a target of Rs. 8050, which given the current price of Rs. 6393.8, equates to a potential upside of 25.9%.

StockCurrent priceTarget in 12 months
L&T InfoRs. 6393.8Rs. 8050

Q3FY22 Results: Strong revenue coupled with EBIT margin expansion QoQ.
-Constant currency revenues increased 9.2% QoQ
- EBIT margin expanded 70 bps QoQ due to strong revenues
- LTI added 27 logos in Q3, highest quarterly addition in many quarters

Brokerage's take on L&T Info and its valuations:

L&T Info's share price has grown by around 10.7x over the past five years (from around Rs. 630 in January 2017 to appx. 6,714 levels in January 2022). We maintain BUY rating on the stock. The company is valued at Rs. 8050 i.e. 42x FY23E EPS by the brokerage.

Key triggers for future price performance:

End-to-end solutions capability is expected to help the company in registering industry leading growth.

Ability to win large deals, presence in niche verticals, effectively mine clients, adding Fortune 500 clients and digital prowess are other key drivers.

Vendor consolidation opportunity and digital acceleration. We expect LTI to register 20.0% CAGR revenue growth in FY21-24E

About the company: Larsen & Toubro Infotech (LTI) offers application development, IMS, digital solution services to BFSI, retail, health, media & hi-tech verticals. LTI has 71 Fortune-500 clients with a presence in North America & Europe LTI has grown at 14% CAGR over FY18-21 with robust margins.

Alternate Stock Idea: Apart from LTI, the brokerage is bullish on Infosys. Upward revenue guidance prompts us to be positive on the stock. The brokerage has a BUY rating with a target price of Rs. 2300. Last the stock of Infosys traded at Rs. 1785.7 per share on the NSE.

Disclaimer:

Disclaimer:

The stocks have been picked from the brokerage report of ICICI Direct. 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. Ads by

 

Story first published: Saturday, January 22, 2022, 22:34 [IST]
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