2 Stocks To Hold: ICICI Direct Gives Hold Rating to 2 Mid Cap Stocks

Leading brokerage firm ICICI Direct has assigned hold rating to 2 mid cap stocks. These stocks are Jyothy Labs Ltd and Astral Ltd. Check Key takeaways below:

1. Jyothy Labs Ltd

The current market price of Jyothi Labs Ltd (JLL) is Rs 194 apiece with 52-week high at Rs 208 apiece and 52-week low at Rs 130 apiece, respectively. The mid cap company has a market capitalisation of Rs 7147 crore. The stock operates in FMCG sector and the company was incorporated in 1992. The stock has given maximum return of 24% in last 1-year.

Valuation: According to ICICI Direct, "JLL's share price has underperformed the FMCG index with mere 17% return (from Rs 168 in November 2017 to Rs 193 in November 2022). We raise our FY23E & FY24E EPS estimate by 11.7% & 22.5%, respectively. We maintain our HOLD rating on the stock. We value the stock at Rs 205, valuing the business at 26x FY24 earnings."

Key Triggers For Future Performance: With softening of palm oil and polypropylene prices, gross margins are likely to improve. However, crude and related commodity still remain at elevated levels. We expect margins to partly recover to 14% levels by FY24 (against average of ~16% during FY17-20). Dish washing & fabric wash segment driving growth with sustainable revenue growth (three-year CAGR of ~14%). We expect single digit volume growth in these segments, going forward.

About The Stock: Jyothy labs (JLL) is an FMCG company with a presence in fabric whiteners, detergents, dishwashing products, household insecticides (HI) & personal care products. It has leading brand Ujala in fabric whitener with 83.7% market share and a sizeable dish washing & HI business with mid-teens market share.

2. Astral Ltd

The current market price of the mid cap stock is Rs 1937 apiece with 52-week high at Rs 2654 apiece and 52-week low at Rs 1584 apiece, respectively. The company has a market capitlisation of Rs 39,033 crore. The stock has given a maximum return of 308% in last 5-years. The mid cap stock operates in Plastics sector and came into existence in 1996.

Valuation: According to ICICI Direct, "Astral's share price has grown by ~2.6x over the past five years (from ~Rs 776 in November 2017 to ~Rs 2000 levels in November 2022). We maintain our HOLD rating on the stock. We value Astral at Rs 2275 i.e. 60x P/E on FY24E EPS."

Key triggers For Future Price Performance: Pick-up in housing sales and construction activities will augment growth in both pipes and adhesives. Capacity addition, launch of new products (water tank, valve) and diversification in sanitary ware and paint business to drive overall revenue CAGR of 22% in FY22-24E. Price hike, improved product mix (launch of high margin valve business) will help in recovery in EBITDA margin from FY24E onwards.

About The Stock: Astral is the leader in the CPVC piping segment and expanding into other building material business like adhesive, paints and sanitary ware. Astral is the third largest piping company with a value market share of 9%. In FY22, piping, adhesive contributed 77%, 23%, respectively, to its topline.

 

Disclaimer

The stocks have been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.