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2 Large Cap Stocks To Buy Post Their Q3FY22 Results

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Reliance Industries and Container Corporation of India (CONCOR) are the two large cap stocks to buy based on the recommendation of the brokerage house ICICI Direct. Container Corporation of India Ltd is a logistic company having a market cap of Rs 37,995.60 Cr and Reliance Industries is a refinery company having a market cap of Rs 1,676,511.83 Cr. Post their Q3FY22 results, the brokerage feels the stocks have a strong potential upside in 12 months.

 

Reliance Industries (RIL)
 

Reliance Industries (RIL)

According to ICICI Direct "Long term prospects and dominant standing of RIL in each of its product & service portfolio, provide comfort for long term value creation. RIL's consumer business will be the growth driver, going ahead. The company has a strong balance sheet post fundraising while its traditional business will continue to generate steady cash flows. We roll overvaluations to FY24E and maintain our BUY rating on the stock. We value RIL at Rs 2950 on a sum-of-the-parts valuation (SoTP) basis."

Q3FY22 results according to the brokerage

  • RIL's results were ahead of estimates on the profitability front.
  • Revenue was up 54.3% YoY to Rs 191271 crore as all key segments reported revenue growth. It grew 9.9% QoQ led by retail and oil-to-chemical (O2C) segments.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) were at Rs 29706 crore, up 37.7% YoY, 14.2% QoQ. EBITDA growth YoY was mainly driven by O2C (38.7%) and oil & gas (508x) on account of better downstream demand & margins in O2C and growth in gas output as well as realisation.
  • Exceptional gain of Rs 2836 crore was reported owing to sale of shale gas assets in North America. Subsequently, profit after tax (PAT) was at Rs 18549 crore, up 41.6% YoY.

Key triggers for future price performance according to ICICI Direct

  • Increment value accretion from the 'digital ecosystem' that will be captured at the Jio Platforms (JPL) level.
  • Steady free cash flow (FCF) generation in the retail segment would enable the company to maintain debt at lower levels and improve its ability to invest in future inorganic opportunities.
  • Steady cash flow in the O2C segment is expected to continue and will enable RIL to invest in new energy verticals.
Container Corporation of India (CONCOR)

Container Corporation of India (CONCOR)

The brokerage has claimed that "With timely price hikes, commissioning of CPFS Swaroopganj and expected launch of three new terminals, Concor is expected to capitalise on the increasing volumes, by strengthening its infra and improving its earnings before interest and taxes (EBIT) per twenty-foot equivalent unit (TeU) (currently at ~Rs 3400 per TeU). We remain positive on the long term growth prospects of the stock and maintain our BUY recommendation. We value the stock at Rs 780 i.e. 21x P/E on FY24E EPS."

Q3FY22 results of CONCOR according to the brokerage

  • Revenues grew 10% YoY to Rs 1920 crore, led by volume growth of 7%.
  • EBITDA margins expanded 253 bps YoY to 23.7%, mainly due to lower payment of land license fees (LLF) charges. EBITDA grew 23% to Rs 456 crore.
  • PAT grew 20% YoY to Rs 287 crore.

Key triggers for future price performance as per ICICI Direct

  • Concor expects to double its domestic volumes in medium term (via higher movement of bulk commodities). Also, higher double stacking with mixed trains along with assured transit times will help Concor efficiently utilise its rolling stocks.
  • Clarity on land policy by GoI is expected to facilitate Concor's privatisation.
  • Technology introductions like flexi bag, dwarf containers (can also be triple stacked) would help Concor create opportunities in high volume markets such as bulk transport.
  • Diversification of services to help Concor retain pricing power over other plain-vanilla players.
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.

Story first published: Monday, January 24, 2022, 9:21 [IST]
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