Broking firm, Emkay Global believes that the stocks of State Bank of India (SBI) and Kalpatru Towers have enough steam left to generate returns of up to 34%. In fact, the brokerage sees an upside of 34% in State Bank of India within a 12-months time frame. Let's take a look at why the brokerage is bullish on the same.
State Bank of India: Buy says Emkay Global
|Current market price||Rs 444|
|Target price||Rs 600|
|Upside potential in the next 1-year||34.00%|
First quarter FY22 operating performance beat estimates on healthy fees/treasury gains, but high provisions led to a 5% miss on net profits at Rs 65 billion (estimates Rs 68.4 billion). "Asset quality performance was mixed, with gross non performing assets up 34 basis points qoq to 5.3% (led by retail/SME), restructured pool rising moderately to 0.8% of loans (pipeline at 0.1%) and SMA pool flat quarter-on-quarter at 0.5%," Emkay Global has said.
Emkay Global sees solid returns from SBI stock
State Bank of India has already seen decent non performing assets clawback of Rs 48 billion in July with a pickup in collections, while restructuring should reduce SME NPAs. This, along with the transfer of non performing assets to NARCL (Rs 200 billion/0.8% of loans) and resolutions via NCLT, should meaningfully bring down Non Performing Assets.
"We trimmed earnings estimates for FY22-23 by 5/3%, but expect the bank to deliver 13-15% Return on Equity over FY22-24E (seen before AQR)," the brokerage has said.
Retain Buy and overweight stance with a target price of Rs 600 on the stock of State Bank of India, valuing core bank at 1.4 times Sep'23E ABV and subs/investments at Rs185, leading to a 32% upside. SBI is the second best pick after ICICI, and we believe that better-than-expected growth/asset quality movement could provide further upsides to earnings/valuations," the brokerage has said.
Kalpataru Power & Transmission
|Current market price||Rs 465|
|Target price||Rs 560|
|Upside potential in the next 1-year||19.00%|
According to Emkay Global, Kalpataru Power & Transmission sales grew 9% with EBITDAM similar to that of last year (10.4%).
"Order inflows for Kalpataru Power & Transmission (SA) in year-to-date FY22 stood at Rs 8.65 billion (down from Rs 18.7 billion in Q1FY21), largely from inflows in the T&D and Railways segments. The order book now stands at Rs 133.9 billion, excluding L1 orders of Rs 25.5 billion," the brokerage has said.
The management has maintained its full-year margin guidance of 10% plus. Order inflows were at a staggering Rs 46.6 billion, leading to an all-time record high order book of Rs160 billion.
"We maintain Buy with a revised target price of Rs 560 (Rs 525 earlier), as we roll forward to Sept'23E, based on SoTP. We retain our earlier estimates. JMC is valued at Rs 60 per share based on a 30% discount to the current market price," Emkay Global has said.
The above stocks are based on the report of Emkay Global. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise some caution as the Nifty has now crossed a record peak of 16,200 points. Please consult a professional advisor.