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In the last week, Indian benchmark indices outperformed global markets, thanks to a positive FOMC meeting conclusion and continued improvement in key economic data, which boosted investor confidence. Following a good opening on Tuesday, the Sensex and Nifty50 lost early gains due to weakening in Asian markets. Meanwhile, ICICI Securities and IDBI Capita have issued 'buy' recommendations on two scrips. The recommendations, together with their reasons, are listed below.
Dodla Dairy
ICICI Securities has a 'Buy' rating on Dodla Diary for a target price of Rs. 700, the last traded price of Rs.618 per share.
Dairy: One of the fastest-growing industries in India
According to ICICI Securities, Between FY15 and FY21, the Indian dairy industry grew at a CAGR of 9% in value terms. The primary growth drivers are steady nominal GDP growth, market share gains from the unorganized sector, and increased demand for value-added products. We anticipate that, in the medium to long term, expanding population, growth of HoReCa, and rising demand for milk as a source of protein will help the dairy sector sustain robust growth rates.
Valuation
"We value Dodla on DCF-basis arriving at a target price of Rs700. As per reverse DCF (assuming cost of equity at 11.3% and terminal growth at 4%), the company needs to achieve an EBITDA CAGR of 12% over FY21-FY32E. The EBITDA CAGR over FY11- 21 was 29.4%.
We model revenue and PAT CAGRs of 14.2% and 17.6%, respectively, over FY21-FY23E. We forecast RoE to be upwards of 17% in FY23E. We initiate coverage on the stock with a BUY rating and DCF-based target price of Rs700 (24x FY23E)," the brokerage has said.
Chalet Hotels
IDBI Capital has a 'Buy' rating on Chalet Hotels for a target price of Rs. 295, the last traded price of Rs.206 per share with a potential upside of 43%.
Strong positioning in high-end branded hotels in key business cities
According to IDBI Capital, Following a large revenue loss in FY21, the domestic hotel business is likely to rebound better in FY22, aided by a vaccination drive and pent-up demand in the leisure travel sector. To run its hotels under high-end worldwide names, the company has worked with well-known global hospitality giants such as "J W Marriott" and "The Accor."
Valuation
"We expect on a low base of FY21, net sales to grow at a CAGR of 68% over FY21-24E supported by net sales CAGR of 77% and 42% in hotels and retail-commercial segment respectively. Cost optimization measures and increasing share of high margin commercial segment will drive EBITDA CAGR of 341% over the same period.
We believe Chalet is poised to benefit from multiple levers viz active asset management of the assets, inventory addition in the hotel and commercial segment, mixed-use of retail-commercial properties, inorganic growth opportunities, and value unlocking opportunities in the Koramangla project. BUY with a TP of Rs295," the brokerage has said.
Disclaimer
Investing in equities poses a risk of financial losses. Investors must therefore exercise due 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. The above article is for informational purposes only.
