ICICI Direct, a brokerage house has placed a buy call on the stocks of TeamLease, SBI Cards and Payments and Federal Bank. The brokerage has selected a 12-month target period, and following their Q3FY22 results, the brokerage anticipates the stocks to skyrocket to hit their target price, which is detailed below.
TeamLease Ltd (TLL)
ICICI Direct has highlighted in a report that "Teamlease's share price has grown ~4.2x over the past five years (from ~Rs 886 in January 2017 to ~Rs 3,800 levels in January 2022). We now revise our recommendation on the stock from HOLD to BUY. We value Teamlease at Rs 4500 i.e. 36x P/E on FY24E."
Q3FY22 results of TLL according to the brokerage
- Revenues increased 15.7% QoQ, aided by 17% QoQ growth in general staffing.
- Earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins declined 10 bps QoQ 2.1%.
- The company added 22,000 associates for the quarter.
Key triggers for future price performance of TLL as per the brokerage
- The key beneficiary of underpenetrated temporary staffing market (0.5% in 2015 vs. global average of 1.7%) and formalisation (16% in 2018).
- The pandemic has forced enterprises to shift to a variable cost structure, which is leading to increased outsourcing of flexi staffing. Hence, we expect overall revenues to increase at a 23.5% compound annual growth rate (CAGR) in FY21-24E.
- TLL is expected to register healthy margins, mainly led by a reversal of discounts, improving the core to associate ratio, improving specialised staffing margins and higher revenue growth
SBI Cards and Payments
According to ICICI Direct, "SBI Cards' stock price has given ~13% returns since its listing but this was post more than 25% correction in the past few months. We believe it is attractive considering strong prospects for growth and profitability. We maintain a BUY rating on the stock. We roll over and value SBI Cards at ~32x FY24E EPS (7.8x FY24E ABV) and revise our target price to Rs 1000 from Rs 1200 earlier."
Q3FY22 results of SBI Cards according to ICICI Direct
- Spends up 47% YoY, 27% QoQ at Rs 55397 crore.
- Net investment income (NII) up 9.8% YoY to Rs 996 crore, Net Interest Margin Securities (NIMs) down 10 bps QoQ to 14%.
- C/I ratio up 586 bps QoQ to 60%, credit cost elevated, up 8.2% QoQ.
- Gross non-performing assets (GNPA) down 96 bps QoQ at 2.4%, RBI Re at 2% of net loans.
Key triggers for future price performance of SBI Cards according to ICICI Direct
- Digitisation and, thus, healthy recovery in spending to aid business growth.
- Bottoming out of the revolver book to aid margins ahead.
- BNPL remains a competition; levers are available to safeguard earnings.
- Strong return ratio profile to aid valuations.
Federal Bank Ltd (FBL)
In a report, ICICI Direct has said that "Federal Bank's share price has increased by ~40% in the past one year from around Rs 69 to Rs 96 per share. Factoring in a diversified asset mix and improving growth and return ratios outlook, we retain our BUY rating on the stock. Rolling to FY24E, we value Federal Bank at ~1.3x FY24E ABV and maintain our target price at Rs 120 per share."
Q3FY22 results of Federal Bank as per the brokerage
- Loans up 12.1% YoY, 4.7% QoQ at Rs 1.4 lakh crore, deposits up 8.5% YoY.
- NII up 7.1% YoY, 4% QoQ, NIMs rose 7 bps at 3.27% QoQ.
- GNPA down 18 bps QoQ to 3.06%, restructured book at ~2.6%.
Key triggers for future price performance of Federal Bank as per the brokerage
- Selective credit disbursement to aid earnings and profitability.
- Strong liability franchisee to support margins if rates harden.
- Digital and Fintech partnerships grow the overall business.
- Improving return ratios profile, return on assets (RoA) reaching 1%, is encouraging
The stocks have been picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.