Markets have been buoyant over the last few weeks that to strong global cues. Here are 4 stocks that long-term investors could buy and hold according to brokerage firm Sharekhan.
Arvind: Buy the stock for a price target of Rs 125
Brokerage firm Sharekhan has said to buy the stock of Arvind Limited for a price target of Rs 125. "Arvind reported strong Q1FY2023 performance with volume and price-led growth (because of low base of Q1FY2022). Strong revenue growth of 63.9% y-o-y to Rs. 2,352.1 crore can be attributed to robust performance by both textile and advanced materials divisions (AMD), which grew by 68.1% and 44.7% y-o-y, respectively," the brokerage has noted.
The denim, woven, and garment divisions registered strong revenue growth of 30%, 84.3%, and 81%, y-o-y respectively, in Q1FY2023, aided by better price realisation across segments. Gross margin declined by 556 bps y-o-y, impacted by input cost inflation, while EBITDA margin expanded by 164 bps y-o-y, aided by better operating leverage. EBITDA grew by 98.7% y-o-y to Rs. 220.2 crore. Adjusted PAT came in at Rs. 108.5 crore in Q1FY2023, against loss of Rs. 3.2 crore in Q1FY2022. Net debt stood at Rs. 1,809 crore in Q1FY2023-end (up by Rs. 127 crore q-o-q).
Correcting cotton price good for Arvind
Cotton (corrected by 35% from November 2021) and spinning prices have corrected from their high in recent times. If the same continues to correct in the coming months, it augurs well from demand as well as profitability perspective. The company will pass on the benefit of lower prices to customers, which will help in getting in better export orders. Moreover, lower input prices would help margins to improve.
"Better mix would help profitability to improve consistently in the medium term. The stock has corrected by 17% in the last three months and is currently trading at 7.8x/6.0x its FY2023E/FY2024E EPS (5.0x/3.8x its FY2023E/FY2024E EV/EBITDA). We maintain Buy with a revised price target of Rs. 125," the brokerage has said.
The Ramco Cement
Sharekhan has set a price target of Rs 830 on the stock of The Ramco Cement, with a buy call on the stock.
The Ramco Cements Limited (Ramco) reported better-than-expected standalone performance led by strong volume growth of 55% y-o-y along with marginally higher than expected realisations and lower than expected costs per tonne. Standalone revenues rose by 44% y-o-y at Rs. 1772.5 crore (blended realisations down 5.6% y-o-y & 1.5% q-o-q) with 55% y-o-y rise in volumes (aided by higher cement sales in East which comprised 30% of overall volumes as against 20% in Q4FY2022). Blended EBITDA/tonne of Rs. 782 (down 48% y-o-y) was better than our expectation of Rs. 669/ tonne. Standalone operating profit/net profit declined by 17%/34% y-o-y at Rs. 301 crore/Rs. 112 crore, which were higher than our expectation. The company expects to achieve upper band of targeting a 12-15% volume growth for FY2023 while power & fuel costs are expected to tread lower from September 2022. Its clinker capacity increased to 13.65 mtpa with successful trial production from clinkering plant in Kurnool.
"We remain upbeat on its regional leadership positioning and operational efficiencies which would help drive volumes and operational profitability going ahead. Hence, we maintain a Buy with an unchanged price target of Rs. 850," Sharekhan has said.
Buy Mahindra Logistics Stock, says Sharekhan
Sharekhan is also upbeat on the stock of Mahindra Logistics. "The company continued to revive its operational performance-optimizing capacities and rationalising costs which are expected to sustain going ahead. The new order wins are expected to contribute gradually on its earnings. Company continues to focus on the addition of warehousing capacities, scaling up network services business, and eyeing capabilities-based acquisitions in the logistics space. "We remain optimistic about Mahindra Logistics long-term growth potential. Hence, we retain a Buy rating on the stock while lower our price target to Rs. 600, factoring the effect of higher interest expense on net earnings for FY2024E," the brokerage has said.
Buy Bajaj Consumer Care
Sharekhan has also suggested buying the stock of Bajaj Consumercare. The company's near-term performance will be affected by slowdown in the rural demand and spike in the input prices.
"However, we expect momentum to shift with recovery in the rural demand and stabilisation in the input prices. We liked the company's revamped focus on driving growth through new product launches, distribution expansion and market share gains in the light hair oil category to drive sustainable earning growth in the medium term. Further the company is focusing on improving its position in overall hair oil market with improved traction to new launches. The stock has underperformed the broader indices and is trading discounted valuations of 13.3x and 11.3x its FY2023E and FY2024E earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs. 200," the brokerage has said.