Prabhudas Lilladher Recommends A “Buy” On This Tata Stock For Good Returns

Markets are witnessing a subdued trend over the last few days. The Adani saga has ensured that markets remain under pressure. As we write the Sensex and the Nifty are both down. Here is a Tata Stock that is a "buy" as per Prabhudas Lilladher.

Prabhudas Lilladher revises its estimates downwards

Prabhudas Lilladher has said that it downward revises its FY23/FY24/FY25 adjusted earnings by 27.2%/10.3%/5.7% to factors in 1) margin contraction in UCP segment (-90bps YoY Q3FY23), due to high cost inventory & price competition, 2) losses in EMPS business (-Rs461mn) given delay in collections & settlements and 3) continued losses in Voltas Beko (-Rs326mn). Voltas (VOLT) share price declined ~35% YTD FY23, over concerns of losing market share in RAC and one-off losses in EMPS, however, we believe it has limited downside risk. "In YTD Dec-22 the company reported market share of 22.5% (vs 25.8% YTD Nov-21 & 22.8% YTD Sep-22), largely due to aggressive pricing from competitors. Management expects good volume growth in upcoming summer season, while not taking price hikes because of competition will impact margins," the brokerage has said.

Buy the stock of Voltas for a Target price of Rs 1030 on the stock

The brokerage has said that it continues to like Voltas for long term, despite near term challenges related to margins given 1) its leadership position in RAC 2) balance sheet comfort (Rs8.6bn net cash H1FY23) and 3) better traction in order flow from domestic/international. "We estimate 18.7% EPS CAGR over FY22-25 and maintain 'BUY' rating with SOTP based revised target price of Rs 980 (earlier Rs 1030) valuing UCP business at 45x FY25EPS," the brokerage has said.

Concall takeaways

According to PL, the management expects good demand in Q4FY23, with softening of rural inflation and buying across sales channels on forecast of hot weather. Also, the Commercial refrigerators continued growth momentum, mainly from OEM and retail chain.

"The EPS segment continued its healthy traction with delivery of textile machinery and focus on after sales service, Voltbek brand has sold over 3mn units since its launch, while demand for appliances was muted in Q3FY23 resulting in volume drop. It is expected to pick up with introduction of new SKUs," PL has said while highlighting the concall.

Disclaimer

The above-mentioned information is purely informational purposes only. The buy recommendation is picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author and the brokerage 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 taking any investment decision.