Today's trade continues to be upbeat due to good global indications, with both the major indices hitting new highs. Given the positive momentum, Edelweiss Wealth Research has recommended these two options as part of its positional picks for short-term gains of up to 23%.
Buy Globus Spirits with a target price of Rs 1,475
Globus Spirits is a positive stock, according to Edelweiss Wealth. The firm has set a target price of Rs. 1,475, which would represent a 22 percent increase over the current market price of Rs. 1212 a share. Globus Spirits (GBSL) is a major player in India's alcohol beverage industry. With the introduction of premium price point Rajasthan Medium Liquor, GBSL has an industry-leading ROCE, which has improved dramatically over FY20-21.
According to the brokerage, investment thesis shows that GBSL is well-positioned to report a strong 27 percent earnings CAGR over FY21-24E on the back of I integrated operations with strategic geographic advantage, (ii) increased penetration of high-priced products in the Consumer business, and (iii) upside from doubling its distillery capacity to leverage the Ethanol Blending Programme (EBP).
Outlook and Valuation of Globus Spirits
"We initiate coverage on GBSL with a ‘Tactical BUY' rating and a target price of INR1,475/share. Our valuation assigns 14.5x EV/EBITDA multiple to the Consumer segment and 7.2x FY23E EV/EBITDA multiple to the Manufacturing segment. At our target price of INR1,475/share, GBSL is trading at FY23E P/E of 18.5x and EV/EBITDA of 11.5x. Our EPS forecast implies FY21-24E CAGR of 27% translating into FY23E PEG ratio of 0.68x," the brokerage has said.
Key beneficiary of favorable trends within sector
According to Edelweiss, GBSL is one of the primary benefactors of the government's Ethanol Blending Program(EBP). By FY24E, the business expects to add 14 million litres to its ENA/Ethanol capacity, bringing it to 30 million litres, providing profitability clarity in the medium term. Product range expansion and greater penetration of premium price point items (medium liquor) within IMIL in its main states are expected to support GBSL's Consumer segment growth.
Target Price: Rs 1,475
Buy Bharat Electronics with a target price of Rs 255
India's finances and strategic options have been squeezed throughout the years due to the country's status as one of the world's top weaponry importers.
According to the brokerage, BEL is ideally positioned to profit from the defence industry's indigenization drive. Because it (a) is the principal provider of strategic electronic assemblies and sub-assemblies, and (b) has a strong R&D team for regularly generating difficult goods, we feel the company checks all the boxes to be the preferred partner of India's armed forces' modernization effort.
Outlook and valuation of Bharat Electronics
"We believe BEL is the best play in India's defence sector with strong order book of INR54,500cr, which provides healthy 15-18% revenue growth visibility over the next 2-3 years.
Further, we expect the company's top line to be a beneficiary through (a) strong technological capability, (b) partaking in the modernisation drive of defence forces, (c) ‘Atmanirbhar Bharat' initiatives via DPEPP, 2020, and (d) growing opportunities in exports and non-defence market. The stock is currently trading at 16x FY23E EPS. We expect healthy upside in the stock's valuation on the back of strict financial discipline. Hence, we initiate ‘Tactical BUY' on BEL with a target price of INR255/per share, valuing it at 20x on FY23E EPS," the brokerage has said.
According to Edelweiss Wealth Research, Bharat Electronics Ltd (BEL), India's largest DPSU, is ideally positioned to profit from these advantages. BEL has been able to move up the value chain because to its strong R&D setup. The organization has effectively moved from a component supplier to a system integrator during the previous few years. BEL now has a healthy order book of INR54,500cr due to industry tailwinds. This, combined with past financial discipline, gives a good growth outlook for the company's top line and profitability in the next 2-3 years.
Target Price: Rs 255
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.