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2 Stocks To Buy From HDFC Securities For Promising Gains Of Up To 29%
Benchmark Indian indices despite mixed Asian market cues were trading firm with Nifty close to its all time high, while the mid-cap and the small-cap indices underperform in trade today (August 9, 2021). Nevertheless, after breakout above 16,000 levels, technical analysts are of the opinion that Nifty will scale higher levels going ahead in the short term, provided the level of 15,930 is not violated. So as the overall market momentum is strong, here are 2 HDFC Securities' stock picks for good potential upside:
HDFC Securities is bullish on the stock of the country's leading PVC pipe manufacturers and multi polymer processing company, Prince Pipes and has maintained its 'Buy' call with an unchanged target price of Rs. 870 per share against its last traded price of Rs. 673, implying an upside of over 29%.
In the Q1 period of FY22, the company registered decline in volume by 56% sequentially, dragging lower its revenue, EBITDA/APAT by 57/72/ 82% QoQ to INR 3.31/0.41/0.18bn respectively, said the brokerage firm.
Promising aspects of Prince Pipes that will drive company's growth as decoded by HDFC Securities
• Demand improvement since May 2021 on the back of strong plumbing/SWR requirement.
• The company partnered with UltraTech's UBS platform for widening its retail reach.
• Riding on the Ludrizol deal, the firm ventured into the industrial CPVC pipe segment.
Con call highlights
• Inventory losses unlikely in Q2 as PVC pipes are increasing once again.
• Company succeeded in reducing its pricing delta in comparison to market leaders over the last few years.
• On robust real estate plumbing sales will pick up while demand for pipes has normalized during Q2
• Agri demand will see uptick from November.
"We maintain our BUY rating on Prince Pipes with an unchanged target price of INR 870/sh (18.5x its Jun'23E EBITDA, implying 30x P/E)", said the brokerage.
| Last traded price of Prince Pipes | Rs. 673 |
|---|---|
| Target price | Rs. 870 |
| Upside potential | 29.27% |
Financial summary and estimates
| YE Mar(INR mn)" | "Q1 FY22" | "Q1 FY21" | "YoY (%)" | "Q4 FY21" | "QoQ(%)" | FY20 | FY21 | FY22E | FY23E | FY24E |
|---|---|---|---|---|---|---|---|---|---|---|
| "Pipes sales (KMT)" | 28.52 | 38.3 | -25.5 | 64.32 | -55.7 | 132.8 | 138.3 | 168.7 | 202.5 | 232.8 |
| NSR (Rs/Kg) | 179 | 122 | 46.8 | 183 | 179 | 123 | 150 | 154 | 150 | 151 |
| EBITDA (Rs/Kg) | 22 | 13 | 75.3 | 35 | 22 | 17 | 26 | 24 | 26 | 27 |
| Net Sales | 3306 | 3025 | 9.3 | 7614 | -56.6 | 16357 | 20715 | 26031 | 30300 | 35089 |
| EBITDA | 413 | 316 | 30.5 | 1468 | -71.9 | 2288 | 3616 | 3556 | 4652 | 5482 |
| EBITDAM (%) | 12.5 | 10.5 | 19.3 | 14 | 17.5 | 13.7 | 15.4 | 15.6 | ||
| APAT | 178 | 113 | 57.8 | 972 | -81.7 | 1125 | 2218 | 2200 | 3018 | 3465 |
| Diluted EPS (Rs) | 0.8 | 0.5 | 57.8 | 4.4 | -81.7 | 10.2 | 20.2 | 20 | 27.4 | 31.5 |
| EV / EBITDA (x) | 33.7 | 20.9 | 20.8 | 15.5 | 12.9 | |||||
| P/E (x) | 68.6 | 34.8 | 35.1 | 25.6 | 22.3 | |||||
| RoE (%) | 18.2 | 23.6 | 19.4 | 22.3 | 21.3 |
2. BSE:
For the BSE scrip, HDFC Securities has maintained its previous 'Buy' rating but raised target price from Rs. 1075 to Rs. 1385. This is against the last traded price of Rs. 1198.7, meaning a decent return of 15.54 percent.
The brokerage house has continued with its 'Buy' call on BSE owing to better than expected EBITDA. Further its market share in the cash segment has come in at 7.2 percent while it is working on to rebuild the derivatives volume, whose current market share is placed at only approximately 6.5%.
"Revenue growth will be led by continued growth in transaction volume, StAR MF and stable listing revenue. INX, which is growing strongly, can be a revenue driver if BSE starts charging (expected in FY23E). We increase the EPS estimate by +10.2/9.6% for FY22/23E, based on volume uptick and better margin. We assign an SoTP-based target price of INR 1,385, by assigning 20x (earlier 15x) to core June-23E PAT (Rs. 546/share), Rs. 466/share for the CDSL stake, and adding net cash of Rs. 372/share", added the brokerage.
| Last traded price of BSE | Rs. 1198.7 |
|---|---|
| Target price | Rs. 1385 |
| Upside potential | 15.54% |
Financial Summary
| YE March (INR mn)" | 1Q FY22 | 1Q FY21 | YoY (%) | 4Q FY21 | QoQ (%) | "FY20" | "FY21" | "FY22E" | "FY23E" | "FY24E" |
|---|---|---|---|---|---|---|---|---|---|---|
| Net Revenues | 1570 | 1032 | 52.1 | 1522 | 3.1 | 4505 | 5014 | 5996 | 7003 | 7800 |
| EBITDA | 507 | -78 | NM | 461 | 10 | 81 | 725 | 1364 | 1979 | 2385 |
| APAT | 628 | 391 | 60.7 | 414 | 51.8 | 1410 | 1750 | 2514 | 3019 | 3437 |
| Diluted EPS (INR) | 14 | 8.7 | 60.7 | 9.2 | 51.8 | 31.3 | 38.9 | 55.9 | 67.1 | 76.4 |
| P/E (x) | 38.9 | 31.3 | 21.8 | 18.1 | 15.9 | |||||
| EV / EBITDA (x) | 455.2 | 52.5 | 27 | 18 | 14.2 | |||||
| RoE (%) | 5.8 | 7 | 9.8 | 11.5 | 12.7 |
Change in estimates
| INR Mn | "FY22E Old" | "FY22E Revised" | "Change %" | "FY23E Old" | "FY23E Revised" | "Change %" | "FY24E Old" | "FY24E Revised" | "Change%" |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 5810 | 5996 | 3.2 | 6800 | 7003 | 3 | 7617 | 7800 | 2.4 |
| EBITDA | 1206 | 1364 | 13 | 1808 | 1979 | 9.5 | 2237 | 2385 | 6.6 |
| "EBITDA margin (%)" | 20.8 | 22.7 | 198bps | 26.6 | 28.3 | 167bps | 29.4 | 30.6 | 121bps |
| APAT | 2282 | 2514 | 10.2 | 2754 | 3019 | 9.6 | 3156 | 3437 | 8.9 |
| EPS (INR) | 50.7 | 55.9 | 10.2 | 61.2 | 67.1 | 9.6 | 70.1 | 76.4 | 8.9 |
| Source: Company, HSIE Research |
Disclaimer:
The stocks or shares to buy listed out in the story are taken from brokerage report of HDFC Securities and is for informational purpose only. You should analyse your risk and other aspects before participating in the equity markets. Further a more cautious approach is needed when markets trade at record highs. Investments mentioned here need not be construed as investment advice, the company and the author shall not be responsible for any decisions taken based on the above report.
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