Following robust global indications, quality benchmarks started the week on a positive note. The Nifty rose to a new all-time high of 16951 on Monday, before settling at 16931, up 1.4 percent. The index is expected to open a gap higher in the coming session, owing to strong global market conditions. For the reasons listed below, ICICI Securities, one of the country's leading brokerage houses for research-backed stock advice, has urged investors to buy Sudarshan Chemical and Bharti Airtel.
Buy Bharti Airtel with a target price of Rs 720
Bharti Airtel has announced that its board of directors has approved a rights issue worth up to Rs 21,000 crore at a price of Rs 535 per share, with a rights entitlement ratio of one equity share for every 14 equity shares owned, representing a 7 percent equity dilution.
ICICI Direct has recommended that investors buy Bharti Airtel with a price target of Rs 720, representing a 16% increase over the latest traded price.
According to ICICI Direct, the company anticipates a 5G spectrum auction in early FY23 and rollout in the second half, with initial deployment in large cities and later extension into smaller regions. Furthermore, the 5G device ecosystem has improved as the amount of 5G devices shipped has increased, and prices have become more fair.
Why buy the shares of Bharti Airtel?
"This move of expanding growth war chest (to capture incremental market share and 5G foray) without stretching leverage is positive, in our view. We remain constructive on Airtel ascribing it as one of our top picks. We maintain BUY rating with unchanged DCF based target price of Rs 720. We also advise subscribing to the rights issue.
Favourable industry structure of three players (two being strong) or two players, is a strong kicker for eventual hike in tariff as well as superior digital play in the medium to long term driven by growth opportunity from 5G," the brokerage has said in its research report.
Also, Sunil Bharti Mittal, promoter and Chairman, presented the company's goals as follows:
a) ARPU of 200 by the end of FY22 and eventually 300.
b) reduced leverage (net debt to EBITDA of 2x vs. 3x today), and c) robust return ratios in the teens vs. single digits currently.
Buy Sudarshan Chemical with upside potential of 17%
Sudarshan Chemical, which was founded in 1951, is a major participant in the Indian colour pigment sector, with a 35 percent market share, and is also one of the top four companies globally.
ICICI Direct has recommended that investors buy Sudarshan Chemical with a price target of Rs. 825, representing a 17% increase over the latest traded price Rs 707.
On FY21 PAT, ICICI Direct expect possible profits advantages from the price increase to be 4-5 percent. Going forward, we haven't factored in any prospective market share increases owing to anti-dumping. Any positive development can aid bottomline in high single digits on FY21 PAT.
Why buy the shares of Sudarshan Chemical?
The revenue growth of specialty pigments is expected to be aided by the upcoming capex. To improve the business's margin profile, a higher share of value-added business portfolio is required. Allocating additional FCF to organic and inorganic growth is expected to increase return ratios even more.
"The stock appreciated at 30% CAGR in last three years. We retain a BUY rating on the back of better growth outlook from speciality pigments.
Target Price and Valuation: We value Sudarshan Chemical at 25x P/E FY23E EPS to arrive at a revised target price of Rs 825/share," the brokerage has said.
The brokerage also suggests Neogen Chemical. As increased custom synthesis opportunities are projected to boost future revenue growth. Recommends a BUY with a target price of Rs 1095.
Stock investing is risky, and investors must exercise 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 closed at an all-time high.