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1 Shipping Stock And 1 Metal Stock To Buy As Suggested By ICICI Securities

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On Monday, the Indian equity benchmarks nudged higher, powered by increases in banking and information technology heavyweights. Meanwhile, ICICI Securities Limited, a brokerage firm, suggested buying large-cap stock Hindalco and one mid-cap stock Gujarat Pipavav.

 

Buy Hindalco with upside potential of 28%

Buy Hindalco with upside potential of 28%

ICICI Securities rates Hindalco stock as a 'Buy,' with a potential upside of 28 percent in one year with a target price of Rs 600.

Q2FY22 Results:

Hindalco reported a stellar performance in Q2FY22.

  • Hindalco's wholly owned foreign subsidiary Novelis reported sales volume of 968 KT (up 5% YoY) in Q2FY22, which was generally in line with our expectation of 974 KT.
  • Hindalco's India business reported a topline of Rs17393 crore for Q2FY22. Hindalco's India business had an EBITDA of Rs 3602 crore. Hindalco's India business's subsequent PAT was Rs 1815 crore.
  • Hindalco reported consolidated topline of Rs 47665 crore for Q2FY22, up 53% YoY and 15% QoQ, while consolidated EBITDA was Rs 8048 crore, up 56% YoY and 19% QoQ.

Target Price and Valuation

'Hindalco's share price has given a return of 125% over last 12 months. We maintain our BUY rating on the stock Target Price and Valuation: We value Hindalco at Rs 600, based on SoTP valuation, the brokerage has said.

Key triggers for future price-performance:

  • Novelis has kept its EBITDA/tonne projection of US$500/tonne unchanged.
  • We estimate Hindalco's consolidated topline to increase at a CAGR of 19.6 percent between FY21 and FY23E, while consolidated EBITDA and consolidated PAT will grow at a CAGR of 23.6 percent and 53.1 percent, respectively.
Gujarat Pipavav
 

Gujarat Pipavav

ICICI Securities rates Gujarat Pipavav stock as a 'Buy,' with a potential upside of 18 percent in one year with a target price of Rs 130.

Q2FY22 Results:

  • Container volume declines are offset by bulk volume gains.
  • Net revenues increased by 7% year on year to $ 195 crore.
  • EBITDA increased by 6% year on year to | 109 crore, with margins of 56% (up from 56.3 percent in Q2FY21).

Target and valuation

"We expect the normalisation of global container trade (in the medium term) and extension of agreement (in the medium term) to be key triggers for a re-rating of the stock. We remain positive on the stock and maintain our BUY recommendation Target Price and Valuation: We value the stock at Rs 130 i.e. 19x P/E on FY23E EPS," the brokerage has said.

Key triggers for future price-performance:

  • Despite a tariff increase (5-6%), GPPL container realisation remains at a significant discount to Mundra (15%), which the company aims to lower (via frequent small hikes).
  • DFC commissioning is slated to begin in September (increased market share and scheduled train operating).
  • Exim volumes are likely to increase as a result of the addition of two new service lines.
  • In FY23E, the company will be debt-free, with return ratios reaching 16 percent or higher.
Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of ICICI Securities. 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.

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