2 Stocks To Buy With Upside Potential of 17%, Says ICICI Direct

As selling resumed in Asian markets following a one-day hiatus as worries of a China crackdown loomed, Indian markets saw a gap-down start to the day, with the SGX Nifty ruling 100 points lower at 15,739 in the early morning.

ICICI Direct, India's largest popular brokerage firm, is betting on two stocks for long-term gains, with a large number of individual investors. Let's take a look at why the brokerage thinks these two equities are going to do well.

Grindwell Norton

Grindwell Norton (GNL) is the abrasive market leader in India, with a 26 percent market share. Abrasives (57 percent), ceramics & plastics (33 percent), and IT services & others are among the segments (10 percent ).

Grindwell Norton Q1FY22 Results:

• Employee bonuses contributed to a QoQ drop in margins.
• Due to lower fleet utilisation and increased staff expense, revenues decreased by 20% QoQ to Rs 223 crore, and EBITDA decreased by 41% QoQ to Rs 32 crore, with margins of 14.4% (vs. 19.4% in Q4).
• As a result of the poor operational performance, PAT decreased by 44 percent to Rs 24 crore.

"Long-term incremental growth is predicted to be driven by rapid growth in performance plastics and ceramics, as well as exports. We retain our BUY recommendation due to the company's high growth prospects and margins.
Target Price and Estimated Value: GNL is valued at Rs 1510, or 48x P/E on FY23E EPS," says ICICI Direct in its latest report

Grindwell Norton: Key triggers for future price performance

• With steady penetration of new value added goods, the goal is to preserve market share in abrasives while increasing market share in ceramics and plastics.
• To generate margin expansion (from 16.7 percent in FY20 to 20.6 percent in FY23E), high margin value added items and a solutions-oriented strategy were used.
• Over FY21-23E, we project revenue and EBITDA to expand at a CAGR of 16.7% and 19.2%, respectively.
• Double-digit return ratios, net debt-free b/s, and excellent cash generation.

CMP: Rs 1290
Target: Rs 1510
Upside Potential: 17%
Target Period: 12 -18 months

Alternate Stock Idea:

Apart from GNL, ICICI Direct also appreciates Elgi Equipment in our coverage.
"Gaining inroads in overseas markets would fuel growth among domestic compressor market leaders with good b/s and return ratios. BUY with a target price of Rs 260", ICICI Direct said in its research report.

 

TCI Express

TCI Express is a leading asset-light B2B express logistics provider with 28 sorting centres and 800+ owned pan-India centres spanning 40000 pick-up and delivery points (95 percent of revenues).

TCI Express Q1FY22 Results:

• Employee bonuses caused a QoQ drop in margins.
• Due to lower fleet utilisation and high employee expense, revenues decreased by 20% QoQ to | 223 crore. EBITDA decreased by 41% QoQ to | 32 crore, with margins of 14.4% (vs. 19.4% in Q4).
• Following that, due to poor operational performance, PAT decreased by 44% to Rs 24 crore.

"TCIEL with its greater pan-India footprint and diversified offerings such as cold chain express (for catering to pharma sector and would be asset light), air express division, customer to customer (C2C) express logistics is continually building a moat in its B2B segment.  We remain positive on the stock and maintain our BUY recommendation Target Price and Valuation: We value the stock at Rs 1850 i.e. 35x P/E on FY23E EPS," ICICI Securities said in its research report.

TCI Express: Key triggers for future price performance

 

• TCIEL has remained unaffected by the sector's rising competitiveness, owing to the company's relentless focus on building capabilities in the B2B segment through owned branch offices, a focus on MSME and SME clients, and continued investments in IT networks, among other things, which helps the company maintain control over user experience and provide value added services to clients.
• Continuous cost reduction and improved turnaround times through investments in IT, sorting centres, and automation Asset-light business strategy with a predicted RoIC of 25%+ in FY23.

CMP: Rs 1570
Target: Rs 1850
Upside Potential: 18%
Target Period: 12 months

Alternate Stock Idea

Apart from TCI Express, ICICI Direct remains bullish on BlueDart. BlueDart has benefited from the post-pandemic flight to quality trend, which has resulted in stronger tonnage growth, underpinned by greater digital connectivity with consumers and a focus on servicing larger clients and brands. The stock has a BUY recommendation from us, with a target price of Rs 6300, says ICICI Direct in its latest report.

 

Disclaimer

Stock investing is risky, and investors must exercise 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. Investors should take care because the markets have closed at an all-time high