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Buy These 2 Stocks, Says Sharekhan For 26% Gains & Good Dividend Yields

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Broking firm Sharekhan has recommended buying the stocks of oil marketing company, HPCL and KEI industries. The brokerage sees gains of 25% on the stock of HPCL with solid dividend yields and around 22% gains on the stock of KEI Industries. Let's take a look at why the brokerage is bullish on the stock.

 

Good potential for the HPCL stock

Good potential for the HPCL stock

HPCL current market priceRs 259.25
HPCL target price Rs 325
Potential profits 25.00%

HPCL is one of the top oil marketing companies in the country. Broking firm Sharekhan believes that there is a potential to see an upside of at least 25% in the stock.

Sharekhan expects earnings to recover as volumes revive (petrol/diesel at >105%/91% of pre-COVID level), likely structural improvement in auto fuel margin, cyclical recovery in GRM and inventory gains.

"Commissioning of Mumbai/Vizag refinery in FY22E would drive refinery throughput and FCF," the brokerage has said.

Re-rating on HPCL possible with BPCL privatization
 

Re-rating on HPCL possible with BPCL privatization

HPCL reported a Q1FY22 PAT at Rs 1,795 crore (down 41% q-o-q) lagged estimate by 20% as the company reported GRM of $3.3/bbl and sharply missed estimates.

"The refinery/pipeline throughput was weaker than expected at 2.5 mmt/4.3 mmt, down 42.8%/19% q-o-q. Implied marketing margins rose 7% q-o-q (against an expected q-o-q decline) to Rs. 3,101/tonne led by auto fuel price hikes. Marketing sales volume of 8.8 mmt was in-line; refinery throughput fell due to shutdown for Mumbai refinery," the brokerage said.

According to Sharekhan, BPCL's privatisation could re-rate oil marketing company stocks. Apart from this, the stock also has a solid dividend yield.

"Valuation of 4.3x/0.8 FY23E EPS/BV is attractive considering recovery in core earnings, RoE of 20% and dividend yield of 7-8%. We maintain a Buy on HPCL with an unchanged price target of Rs. 340 on the stock," the brokerage has said.

Buy the stock of KEI Industries for an upside of 26%, says Sharekhan

Buy the stock of KEI Industries for an upside of 26%, says Sharekhan

KEI Industries current market priceRs 718.20
KEI target price Rs 909
Potential profits 26.60%

KEI Industries is a top player in the cable industry business and offers an extensive range of cabling solutions. The company manufactures and markets Extra-High Voltage, Medium Voltage and Low Voltage power cables.

KEI reported better-than-expected performance for Q1 FY22 with revenue/ EBITDA/ net profits at Rs. 1018 crores, Rs 114 crores and Rs 67 crores. The performance was driven by strong growth in cables and stainless steel wire segment.

KEI industries: An upside of 26% on the stock

KEI industries: An upside of 26% on the stock

According to Sharekhan, the stock price of KEI industries can reach a price of Rs 909, which is about 26% higher from the current levels.

"KEI's outlook is expected to be positive with its diversified user industries, increased focus on retail, high-margin EHV cables, and export sales along with focused industry approach as well as utilisation-driven capex plans which is likely to help in sustaining a strong growth trajectory.

An uptick in housing demand bodes well for KEI Industries given its increased focus on brand building, distribution expansion & increasing B2C sales ahead of proposed entry into FMEG products. The stock is currently trading at a P/E of 16x/14x its FY2023E/FY2024E EPS which leaves further room for upside. Hence, we retain Buy on the stock with a revised price target of Rs. 909," the brokerage has said.

Disclaimer

Disclaimer

Investing in stocks 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. Investors should take care because the markets have hit a new peak. Please consult a registered professional advisor before you take a decision.

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