2 Stocks ICICI Direct Recommends To Buy For Gains Up To 17%

Indian markets in trade today (August 12, 2021) are trading firm despite mixed Asian peers. Midcap and Small cap indices have been outperforming, with gains of 0.85% and 1.80%, respectively, at the time of writing this copy. Nevertheless, if you given the current strong momentum in the equities wish to tap the market, here are listed out 2 stock picks of ICICI Direct that have the potential to return up to 17% in the short term of 12 months.

1. Globus Spirits: ‘Buy' Global Spirits For Gains Over 17%

ICICI Direct has maintained its 'Buy' rating on the stock of Globus Spirits for a target of Rs. 1050 to be hit in the short term of 12 months. Globus Spirits' scrip last traded at a price of Rs. 893, hence the given target implies an upside potential of 17.58 percent. The price of the scrip at the time of recommendation was Rs. 853.55.

Globus Spirits is the largest grain based ENA manufacturer in India The company also supplies Indian made Indian liquor (IMIL) and premium IMFL in India.

What will aid Globus Spirits' stock performance?

GSL has a product range across these two ends of liquor segment (hour glass shaped consumption), including manufacturing extra neutral alcohol (ENA) to contract bottling of Indian made foreign liquor (IMFL), to marketing, selling IMIL, several by-products, says the brokerage house.

• Additionally, Globus Spirits captures remium price points in IMIL space via higher strength liquor.

• The centre expedited 20% blending target to 2025, leading to higher diversion of ENA towards ethanol.

• The company is nearing net-debt free position with return ratios reaching 25%+ levels

• Globus Spirits' is benefitting from the changes in the liquor industry dynamics including inflation in ENA prices and growth in IMIL aided by better quality, higher strength and attractive product positioning.

The brokerage values the stock of Globus Spirits at Rs.1050 i.e. 11x P/E on FY23E EPS. The company's margin grew for the Q1Fy22 period driven by IMIL and ethanol sales. Consequently, its PAT increased 10% QoQ to Rs. 56 crore.

Last traded price of Globus Spirits	Rs. 893
Target	Rs. 1050
Potential upside	17.58%

In crores	FY19	FY20	FY21E	"5 Year CAGR (FY16-21P)"	FY22E	FY23E	2 Year CAGR
Net Sales	985.9	1168.8	1230.8	11.00%	1433.3	1762.7	19.70%
EBITDA	88.3	124.7	254.7	22.70%	336.8	414.2	27.50%
PAT	24.3	49.9	140.8	32.50%	213.6	272.2	39.00%
P/E (x)	100.6	49	17.4		11.5	9
M.Cap/Sales (x)	2.5	2.1	2		1.7	1.4
RoCE (%)	9.5	14.5	28		31.8	31
RoE (%)	6.1	11.2	24.1		26.9	25.6

Alternate Stock Idea: ICICI Direct is also positive on United Spirits. The subsidiary of Diageo Plc., United Spirits is the country's leading alcoholic beverage company. ICICI Direct has given a 'Buy' rating on the stock, with a target price of Rs. 770. The stock last traded at a price of Rs. 654 per share on the NSE.

2. CAMS or Computer Age Management Services: ‘Buy' CAMS for gains over 12%

ICICI Direct has maintained its 'Buy' rating on the mutual fund transfer agency, CAMS, for a target price of Rs. 3500, implying gains of over 12% from the last traded price of Rs. 3111. At the time of recommendation, the scrip quoted a price of Rs. 3108.8.

CAMS is the leading mutual fund registrar and transfer agent (RTA) commanding a market share of approximately 70%. The company has a track record of operating with high margins (of over 30%) and return ratios.

Rationale for a 'Buy' on CAMS

• Underpenetrated markets offer structural growth opportunity to the company.

• Other key strengths include technological know-how, market leadership and long- standing client relationship.

• Also pick up in non-mutual fund business as well as launch of new products will drive revenue growth and diversification.

• Steady growth & consistent elevated margin to aid valuation.

In the just ended quarter, the company posted steady sequential performance. Revenue from operations rose 35% YoY led by growth in AUM.

ICICI Direct values CAMS at ~56x FY23E EPS and revise our target price from Rs. 2800 to Rs. 3500 per share.

CAMS last traded price	Rs. 3111
Target	Rs. 3500
Potential gains	>12%
Stock performance over last 9 months	2.5 times over the past nine months (from close to Rs. 1300 in November 2020 to Rs. 3,250 in August 2021).

(|n crore)	FY19	FY20	FY21	"4 year CAGR (FY17-FY21)"	FY22E	FY23E	"2 year CAGR(FY21-23E)"
Revenue	711.7	721.3	735.3	2.70%	867.9	964.9	14.60%
EBITDA	217.9	286.6	296	12.30%	382.4	432	20.80%
PAT	135.2	172.4	205.3	8.60%	265.9	303.7	21.60%
EPS (|)	27.7	35.3	42.1		54.4	62.1
Managed AUM (| lakh crore)	15.8	18.2	20		23.6	27.3
RoCE (%)	41.90%	46.00%	65.30%		56.60%	56.10%
P/E (x)	109.7	86	72.3		55.9	48.9

Alternate Stock Idea: Other than CAMS, ICICI Direct is positive on Nippon Life. "It offers a play on under-penetrated asset management industry coupled with strong distribution and focused approach on active & passive AUM", says the brokerage. The company suggest to buy the scrip for a target price of Rs. 480, as against the stock's last trading price of Rs. 384.30 per share.

 

 

Disclaimer:

Stock market investments are risky. Better identify your risk potential and investment goals before parking your surplus into equities. Also, the investments listed above are taken from brokerage report of ICICI Direct and need not be construed as investment advice. The company nor the author will be held responsible for any decision taken based on this story.

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