Broking firm Sharekhan is betting on the stocks of Polycab and Persistent Systems for a decent upside.
Buy Persistent Systems, says Sharekhan
Sharekhan has set a price target of Rs 4,160 on the stock of Persistent Systems as against the current market price of Rs 3599.
"Our interaction with the management of Persistent Systems Limited indicate that the company would sustain its sequential revenue growth momentum (5.6% CQGR over the past six quarters) in the coming quarters because of broad-based demand, robust deal TCVs, healthy deal pipeline and new logo additions. With around 60% revenue contribution from digital engineering and lower legacy drags, we believe Persistent Systems is well poised to capture opportunities from the accelerated spend in the digital engineering area," the brokerage has said.
Sustainable growth momentum
According to Sharekhan Persistent Systems, is well positioned to capture opportunities in the market place, given its strong capabilities in the product engineering space, strong executions, hiring of senior-level talents, and an effective sales incentive programme.
"At the current market price, the stock is trading at a valuation of 31x/28x its FY2023E/FY2024E earnings, justified given its strong earnings growth potential, healthy cash conversion, and M&A opportunity for strengthening its capability. We expect USD revenue/earnings to report a CAGR of 20%/30% over FY2021-FY2024E. Hence, we retain our Buy rating on the stock with a revised price target of Rs. 4,160," the brokerage has said.
Buy Polycab, says Sharekhan
Sharekhan believes that the stock of Polycab is a good buy at the current levels and the stock can hit a price target of Rs 2850 from the current levels of Rs 2468.
"Our interaction with the management of Polycab India Limited (Polycab) indicate both B2B and B2C business gaining traction m-o-m with pick up in infrastructure construction and residential demand. Consolidation of copper prices from mid-June is expected to lead to dealer restocking, pick-up in primary sales, and decline in inventory levels. The upcoming festive season bodes well for its B2C products such as lights, switches, and wires. Management reiterates H2FY2022 to be better than H1. The Project leap to touch Rs. 20,000 crore revenue by FY2026 remains intact," the brokerage has said.
Valuations of Polycab India
According to Sharekhan, the company is one of the quasi plays on both infrastructure and consumption growth story of India. "We have revised our estimates upwards for FY2022-FY2024, factoring higher growth in both its B2B and B2C verticals. We believe Polycab is a quasi play on both infrastructure and consumption story of India. Consistent market share gains in the core business and expected scaling up of the FMEG business provide positive outlook in the medium to long term. The stock is currently trading at a P/E of 29x/25x its FY2023E/FY2024E earnings. We retain Buy on the stock with a revised price target of Rs. 2,850," Sharekhan has said.
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