Emkay Global has recommended buying the stock of Ultratech Cement, while Motilal Oswal has suggested buying the stock of Marico Industries.
Marico Industries: Price target of Rs 635
Motilal Oswal has set a price target of Rs 635 on the stock of Marico, as against the current market price of Rs 575. According to Motilal Oswal in 2QFY22, Marico witnessed improving demand trends across categories with the unlocking of the economy. Revenue growth in the quarter was in the low 20s, with volume growth close to the double digits on a 2-year CAGR basis.
"Within Saffola franchise, Saffola Edible Oils had a muted quarter, largely due to volatility in edible oil prices leading to trade destocking. The Foods and Premium Personal Care portfolios continued to grow smartly. The International business delivered double-digit constant-currency growth as positive trends were witnessed in all markets (ex- Vietnam)," the brokerage has said.
New products do well for Marico
According to Motilal Oswal, Marico has done very well in Honey and Noodles, with encouraging response. Saffola Oodles is among the top five selling Pasta and Noodle brands on Amazon, while MealMaker Soya Chunks already has 14% market share in modern trade (MT) and is now available nationally. Honey, Noodles and Soya Chunks are product categories that could achieve Rs 1 billion in sales. It expects the Foods business to clock Rs 5b/INR8.5-10b in sales by FY22/FY24
Rationale to buy the stock of Marico
According to Motilal Oswal the sustained topline momentum, with improving margin prospects over the trough seen in 1QFY22, has led to an improved outlook.
The brokerage has listed several positives including the ongoing topline growth momentum in each of its core segments and significantly higher growth rates/targets in the Foods portfolio. Apart from thus Rs 5 billion is targeted from the 'Digital-first' range of products are highly encouraging developments for a business that had an only 6% sales CAGR over FY15-20, before it reported double-digit growth in FY21.
"This much required diversification could lead to higher multiples compared to past. Valuations at 48.9x FY23E EPS is reasonable given strong earnings growth expectation.
Maintain Buy with target price of Rs 635 per share (50x Sep'23E EPS)," the brokerage has said.
Buy Ultatech Cement, says Emkay Global
Emkay Global has placed a buy call on the stock of Ultratech Cement with a price target of Rs 8,500 on the stock. According to the management it has guided for grey cement volume growth to be in the range of 6-8% YoY in H2FY22.
"Factoring in higher opex/ton due to input cost inflation, we cut our FY22-24 EBITDA estimates by 3-4%. We roll over to Dec'22 from Sep'22 and maintain our target price at Rs 8,500. Our DCF-based target price (11.25% WACC, 8% FCFF growth post FY26) implies a 1-year forward EV/EBITDA of 15x (vs. 15.6x earlier). Maintain Buy," Emkay Global has said.
The above stocks are picked from the brokerage report of Motilal Oswal and Emkay Global. 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.