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

Good potential for the HPCL stock

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

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

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

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

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.