Buy This Mid Cap Diversified Stock, Shares Likely To Surge 16%, Recommended By ICICI Securities

The brokerage firm ICICI Securities has suggested buy the stock of 3M India Ltd. for a target price of Rs 26,500 apiece. Investors buying the stock of the company at the current market price can expect potential gains of 16% in 12 months considering the estimated target price. 3M India is a mid Cap Diversified company having a market cap of Rs 25,747.28 crore.

Stock Outlook

On NSE, the Current Market Price (CMP) of 3M India is Rs 22,850 apiece. Its 52-week low is Rs 17,273 apiece recorded on 27 May 2022, and the 52-week high is Rs 27,800 apiece recorded on 08 November 2021. 

Returns on investments

The stock in the past 1 and 3 months gave 1.69% and 12.68% positive returns, respectively. Over the past 1 year, it has given a negative return of around 9.82%. In the past 3 and 5 years, it has given positive returns of 12.27% and 55.34%, respectively. 

3M India's FY22 annual report highlights

(1) Company is expanding its local manufacturing capacity for respirators, masks, hand sanitisers, etc; it will also supply industry consumables to mobile phone manufacturing companies availing the PLI schemes.

(2) 3M India is steadily investing in increasing its offline and online reach for Scotch Brite.

(3) It introduced four products in automotive and consumer segments. We expect launch of additional products in tandem with normalisation of the economy.

(4) Royalty as a percentage of sales reduced from 5.3% in FY21 to 5.2% in FY22.

Highlights from chairman's speech

(1) Company is a net beneficiary of rising infrastructure expenditure on roads and highways in India.

(2) It has launched multiple new products and solutions to meet new emerging demands.

(3) It has partnered with several medical bodies to upskill their paramedical staff and upgrade their clinical practices. 

Increasing local manufacturing prowess

3M India is expanding its manufacturing capacity for respirators and masks, to meet the rising demand. It has also completed a manufacturing project for hand sanitisers and disinfectants. Company will supply materials to mobile phone makers investing under the PLI schemes. "We expect increase in localised production to lead to reduction in 3M India's procurement of raw materials from related parties," the brokerage said.

Steady launch of new products

During the year, 3M India introduced two new products in the automotive segment (paint spray gun and ceramic coating). It also launched star-marked tape for all-weather reflectivity and a consumer respirator for protection with comfort. "We expect the number of new launches to increase with normalisation of the economy," the brokerage said.

Reduction in adspend and working capital

3M India's adspend as a percentage of net sales fell from 2.0% in FY21 to 1.6% in FY22 due to the impact of covid. Net working capital days also reduced YoY to 38. However, we model both adspend and working capital days to increase to pre-pandemic levels in FY23E-FY24E. 

The brokerage Maintain BUY with Rs 26,5000 target price

ICICI Securities said, "We model 3M India to report revenue and PAT CAGRs of 16.6% and 39.4% respectively over FY22-FY24E with steady improvement in RoE. Maintain BUY with a DCF-based target price of Rs26,500. Key risks: prolonged weakness in the economy, and failure of new products."

 

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.