Broking firm Sharekhan has listed the stocks of Sundram Fasteners and Indigo Paints as stocks to buy. The brokerage sees good appreciation in buying the stocks and here are some reasons for the same.
Buy Indigo Paints for a price target of Rs 3305
The brokerage sees a rally in the stocks to levels of Rs 3,305 from the current market price of Rs 2,547.
According to Sharekhan Indigo Paints Limited (IPL) is an emerging player, which has created a niche for itself in the highly competitive paints industry by launching differentiated products, creating brand equity through one prominent brand ‘Indigo' and follow bottoms-up approach to expand its distribution in the domestic market. It has market share of 2% but has strong potential to improve it in the coming years.
"Gross margins are highest among peers at 48% led by Indigo's locational advantage and healthy mix of revenues from differentiated products. With a differentiated product portfolio and bottom-up approach, Indigo Paints is emerging as one of India's fastest growing paints companies. Revenues and PAT clocked a CAGR of 22% and 71% over FY2018-21," the brokerage has said.
According to the firm, better working capital management has kept net working capital cycle low at 13-14 days.
"We initiate coverage on Indigo Paints with a Buy and assign a target price of Rs. 3,305. Differentiated business model, excellent return profile and strong structural growth outlook will keep valuation at a premium of 60x/44x its FY2023/24E earnings versus peers," Sharekhan has said.
Buy Sundram Fasteners, Says Sharekhan
Sharekhan has set a target price of Rs 994 on the stock of Sundram Fasteners as against the current market price of Rs 754.
According to Sharekhan the company displayed strong performance in Q1FY2022, beating street expectations, led by robust operational performance, despite tough environment. Export and non-automotive segments remain the top focus areas for the management to de-risk business from cyclicality.
"We expect Sundram Fasteners earnings CAGR to improve by 32.3% during FY2021E-FY2023E, driven by a 26% revenue CAGR during FY2021E-FY2023E and a 20 bps improvement in EBITDA margin to 18.4% in FY2023E from 18.2% in FY2021, with ROCE progressing to 22.6% in FY2023E," the brokerage has said.
"We continue to retain our Buy rating on Sundram Fasteners Limited with an unchanged price target of Rs 994, led by the company's strong performance outpacing the automobile industry's growth through diversifying client and product portfolios, benefiting from its established client relationships, and prudent capital allocation," Sharekhan has said.
"The company has a strong long-term revenue visibility, given its strong relationships with original equipment manufacturers (OEMs), both in India and globally. We retain our Buy rating on the stock," the brokerage has added.
Shares in Sundram Fasteners last closed at Rs 754.90.
Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and is picked from the brokerage report of Sharekhan. Be careful while investing as the Sensex has now crossed 55,500 points. Investors can invest small amounts and avoid putting lumpsum.