Markets are still just 1% away from hitting lifetime peaks. The Sensex has closed at 52,318 points and has fallen for 3-days in a row. Broking firm Sharekhan has recommended buying some stocks for the long term which have the potential to generate good returns. Here are a few such stocks.
Intellect Design Arena
The first stock that the broking firm Sharekhan is recommending to buy is the stock of Intellect Design Arena Limited. The company is engaged in Financial Technology for Banking, Insurance and other Financial Services. It provides a suite of solutions for every form of banking from corporate to retail.
Sharekhan sees a number of reasons to buy the stock. The firms believes that the company has invested well in its product portfolio and platforms over time, which positions it to capture opportunities across segments.
Apart from this according to the broking firm, Intellect Design Arena recorded 32 digital-led wins in FY2021.
"We expect Intellect Design to report 21.3% year-on-year revenue growth in Q1FY2022 led by traction for products and strong growth momentum in ‘Software as a Service' revenue. EBITDA margin would also improve on quarter-on-quarter. The management expects EBITDA margin to gradually improve to 30% by Q4FY2022. Revenue/earnings are expected to clock a 17%/29% CAGR over FY2021-FY2023E, aided by strong traction for products and rise in margins," the firm has said.
Reason to buy the shares of Intellect Design Arena
According to Sharekhan, the company's consistent large deal wins in liquidity management in the iGTB space, strong traction for its iGCB in European market, and improving demand for its Intellect SEEC products would drive its revenue growth momentum in FY2022.
"At the current market price, the stock is trading at a valuation of 30 times and 22 times, FY2022E/FY2023E earnings. We continue to like the stock given favourable industry tailwinds, its future-ready integrated product portfolio, increasing ‘Software as a Service' revenue contribution, and possibilities of improving financial metrics. Hence, we maintain our Buy rating on the stock with an unchanged target price of Rs. 900," the firm has said.
Intellect Design Arena shares were last seen trading at Rs 732. The target price on the stock of Rs 900, means the brokerage sees gains of 22 per cent from the current share price.
Another stock that Sharekhan is recommending to buy is the stock of Triveni Engineering. The company is the largest integrated sugar manufacturer in India and has presence in engineering businesses, spanning power transmission, water & wastewater treatment solutions, and defence.
According to the brokerage the power transmission and water businesses have strong order books of Rs 166 crore and Rs 912 crore, respectively.
"With better working capital management, the company reduced consolidated debt by Rs. 562 crore resulting in a 35% reduction in the interest cost. The company has planned a capital expenditure of Rs. 350 crore, which will be largely done through internal accruals. Thus, we expect balance sheet to remain stable in the coming years," the firm has said.
Triveni Engineering: Decent on valuations
Sharekhan has set a price target of Rs 240 on the stock, which a good 20% higher from the current market price of Rs 197.
"With consistent improvement in sugar realisations, higher capacity utilisation in the expanded distillery facility and improved order book in the engineering business, Triveni Engineering is well-poised to achieve strong earnings growth of 30% over FY2021- 23. Earnings growth will also be supported by reduction in debt and lowering of tax rate to 25% in the coming years.
Despite strong run-up in the recent past, the stock is trading at decent valuations of 9.5 times its FY2023E Earnings Per Share (and EV/EBIDTA of 6.9x FY2023E). A structural change in the sugar industry, strong growth prospects in the distillery business and lean balance sheet will further aid re-rating of the stock. We maintain our Buy recommendation on the stock with a revised price target of Rs. 240," the firm has said.
All of the above stocks are picked from the report of brokerage firm Sharekhan. Investing in stocks are risky and investors should do their own research. The author, the brokerage firm or Greynium Information Technologies Pvt Ltd is not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as markets have run-up significantly.