The heightened global volatility as well as weak cues has been easily overcome by the Indian stock markets depicting inherent strength. In trade today (August 2, 2021) as we write, both the benchmark indices Nifty and Sensex have been trading firm with gains of over 0.6%, while the broader markets even performed better, with Nifty Midcap 100 up over 0.8% continuing their winning streak.
As the market is now likely to breakout from the current phase of consolidation and Nifty is seen to hit 16,300 mark, a leading brokerage firm suggests to accumulate quality stocks on dips. So, with bullish trend outlook going ahead here are 2 stock picks of Edelweiss brokerage firm that you can add to your portfolio:
1. Shriram Transport Finance Company:
For this NBFC company, Edelweiss in its latest report has retained the previous recommendation ‘Buy' and also raised the price target to Rs. 1700. The last traded price for the Shriram Transport is Rs. 1344.55, this suggest an upside potential of over 26%.
Q1Fy22 performance: Results mostly in line with Edelweiss' estimates
The NBFC company fared as per the estimates of the brokerage in terms of both revenue as well as PPOP. Nonetheless, PAT or profit after tax came in lower due to higher credit cost. Disbursements at the company were a positive and registered just 15% decline on a sequential basis because of the strong line up in the previous quarter, hence a better performance in comparison to peers.
Asset quality deteriorated though at a lower rate as was foreseen by the brokerage house. Collection efficiency of the NBFC major with focus mainly in vehicle financing also improved month on month and came in at 94%.
Double digit AUM growth, reduced credit cost, better disbursements some of the key triggers
The management has guided for a double digit AUM growth as well as lower credit cost in FY22 as against FY21. Also, it is mulling merger of the group companies' to realize cost benefit and cross-sell synergies.
Valuation and outlook: The brokerage firm hails the view that Shriram Transport is well placed to capture the revival in the CV cycle due to (a) it being the largest player in the CV financing space, (b) lower-than-expected restructuring, and (c) better than-expected asset quality. "The stock is trading at a significant discount of approximately 50% to Cholamandalam, which could reduce given the company's growth and asset quality trajectory. We Maintain ‘BUY' rating with a target price of INR1,700, valuing it at 1.7x FY23E ABPS", said Edelweiss.
|Price to earnings(x)||14.1||13.5|
|Price to book(x)||1.8||1.6|
2. Zydus Wellness:
Zydus Wellness started off its journey into the consumer wellness segment with the Sugar Free product it launched in the year 1988. And now the company has as many as 7 brands under its bouquet namely Sugarlite, Complan, Sugar Free, Glucon-D, Everyuth, Nycil and Nutralite.
After its Q1FY22 results, Edelweiss has maintained a ‘Buy' on the scrip of Zydus Wellness for a target of Rs. 2673 per share. The stock last traded at a price of Rs. 2144.90, implying an upside of 24.62 percent from here.
Q1Fy22 results of Zydus Wellness:
The wellness company's performance was steady for the period under review, the revenue went higher by 11% YoY with improvement in some of the brands including Complan, Sugar Free and Everyuth categories. Margin stood steady again despite an increase in milk as well as the price of palm oil. Also, to mitigate the impact of rising input costs, the company raised the prices by 2% during April -June quarter. Because of improving cost efficiency, EBIDTA also came in higher and operating margin also went up by a margin on a YoY basis. PAT or profit after tax improved significantly as the company went on reducing debt by a substantial amount to Rs. 450 crore from Rs. 1500 crore in the last year.
Valuation and outlook: The brokerage maintains ‘BUY' on Zydus Wellness and says in its report that "with the easing of lockdown restrictions, we expect ZWL to deliver stronger performance going forward, owing to its diversified portfolio, slew of new launches over the last two years and enhanced distribution reach. Given its lean balance sheet and negative working capital days, ZWL is trading at an attractive valuation of 37x/30x FY22/FY23E earnings. We reiterate ‘BUY' rating on the stock and maintain target price of INR2,673/share", said the brokerage firm.
Strong positives for the scrip of Zydus Wellness as viewed by the brokerage:
-Lean balance sheet with significant reduction in debt over the last one year
-Wide distribution network with over 5.5 lakh outlets, wider product portfolio
- Planning disintermediation i.e. mulling to directly service the market as other market players.
- Continuous replenishment model that will cut down on inventory.
|Price to earnings(x)||114.1||37.2|
|Price to book(x)||3||2.8|
Stock market investments are risky and investments listed are taken from brokerage reports. These should not be construed as investment advice and one should always ascertain their risk profile and other measures before taking any stock market bet.