Markets have hit new historic highs and its time to be a little cautious. Investing a lumpsum at the moment may not be a good idea and investors must look for staggered investing. One has to find value in stocks to generate decent returns from current levels. Here are two stocks that brokerage firm Emkay Global believes has the potential to generate good returns.
Gulf Oil Lubricants
Gulf Oil Lubricants shares were last seen trading at Rs 693 on the National Stock Exchange, as against a target price of Rs 1,000 on the stock that Emkay Global has set.
According to the broking firm all segments delivered double-digit growth year-on-year in Q4, with factory fills and exports also doing well.
"March base effect was there. B2C-B2B share was 60-40 in Q4. Industry declined in double-digits in FY21, while GOLI saw growth and gained market share. Q1FY22 saw the second Covid wave affecting demand but management expects a sharp bounce-back once the lockdowns are lifted, and maintains 2-3x of industry growth guidance. Gulf Oil Lubricants would try to manage EBITDA margins in the 16-18% guided band and has taken price hikes to cover for recent rise in raw material costs. Q2FY22 will see the full impact," the brokerage said in a report.
Gulf Oil Lubricants: Target price of Rs 1,000
"Base oil prices now are stabilizing at higher levels with refineries increasing runs. Gulf Oil Oil has Lubricants launched EV fluids globally. It is focusing on mineral based and semi-synthetics. BS 6 oils are 7-15% costlier than BS 4," the brokerage firm said in a report.
"Cash flow from operations was strong in FY21 at Rs 1.95 billon, or 95% of PAT. Dividend was healthy. Capex-CWIP in FY21 was on plant relating to tankages, peripheral infra etc. done annually," the broking firm has said.
Emkay Global has set an EPS target of Rs 50 for the firm in 2022-23 and valuing the same at around 20 times, should take the price to around Rs 1,000 from the current market price of Rs 1,000 the firm believes.
KEI Industries: Solid Quarterly Numbers
KEI industries is another stock that the brokerage is recommending. According to Emkay Global KEI posted healthy performance in Q4 with 17% yoy EBITDA growth, beating its estimate by 7%.
"EBIT margins across segments were impacted by the reclassification of unallocable expenses and a related expense of Rs 260 million pertaining to previous quarters. EBITDA margins in both the retail and institutional segments saw an improvement, and this is expected to sustain. Cable demand is holding up in Q1FY22, and management is confident about recovering the lost wire sales after current restrictions are eased.
KEI Industries: Target price of Rs 710
According to Emkay Global in FY22, the management is targeting 25% growth in domestic institutional sale and 35%+ retail growth.
"Projects are getting executed and real estate activities are progressing despite ongoing lockdowns. Management reiterated its strategy of increasing retail sales, and aims to achieve 35% growth, driven by retail network expansion. It has already hired 100 new employees to aggressively push retail segment sales and to achieve 20% growth in dealer network in FY22. The company also aims to grow revenues by 25% in the domestic institutional business," the brokerage said.
"We have raised FY22-23 EPS by 9-11% as we bake in 28-37bps higher EBITDA margins. Maintain Buy with a revised target price of Rs 710 (14x Sep'23E EPS) vs. Rs 554," the brokerage firm has said.
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