Broking firm Sharekhan is betting on the stocks of Britannia Industries and Sundram Fasteners for good gains.
Britannia: Sustainable growth likely, says Sharekhan
Sharekhan has set a price target of Rs 4740 on the stock of Britannia Industries, as against the current market price of Rs 4068.
Britannia has its medium to long term growth strategies in place with growing the core biscuit portfolio by gaining market share through sustained innovation and distribution expansion (especially in the Hindi speaking belt) while growing the adjacencies such as dairy/bakery by investing across the value chain (setting up facilities, innovations and higher marketing spends), Sharekhan has said.
"This along with improved supply chain management and operating efficiencies would help to post better margins in the coming years (barring FY22 which is affected by higher input prices)," the brokerage has said.
Britannia, price target of Rs 4,740 on the stock
"With sustained market share gain, new product launches and higher traction on new channels (including e-commerce), we expect Britannia's core biscuit category to grow ahead of industry growth in the medium term. This along with scale-up in revenues of adjacent categories and efficiencies would help Britannia to achieve double digit earning growth over FY2021-24E (barring FY2022)," Sharekhan has said.
The stock is trading at 43.5x/37.6x its FY2023/24E EPS, which is at discount to its large peers. "Strong growth prospects across key categories, higher cash generation ability, discounted valuations and receding risk of inter-corporate deposits makes it a good investment pick in the FMCG space. We maintain our Buy recommendation on the stock with a revised price target of Rs. 4,740," the brokerage has noted.
Buy, Sundram Fasteners, says Sharekhan
Sharekhan has set a price target of Rs 1100 on the stock of Sundram Fasteners as against the current market price of Rs 942.
"The company's order book remains at healthy levels with sectors such as farm implements, printed circuit boards, and industrial power generation growing rapidly. Domestic original equipment orders have improved more than 90% of pre-COVID levels across segments with commercial vehicle segments showing strong signs of recovery," it has said.
Major capex over, price target of Rs 1100 on the stock
According to Sharekhan the company has completed major three-year capex plan in FY2020. The company had invested Rs. 1,000 crore during FY2017-FY2020 and had expanded capacity across segments. Currently, the company is operating at 80% capacity utilisation. The recent capex programme has enabled the company to increase revenue by 25-30% without any major investments and will improve its turnover at minimal cost.
"The stock is trading at a P/E multiple of 28 times and EV/EBITDA multiple of 17.2x its FY2023E estimates, which is trading at the higher end of its average multiples. The stock's premium valuation is justified given strong pedigree of its promoter, revenue visibility and ability to pass on costs to its customers. We retain our Buy rating on the stock with a revised price of Rs. 1,100," the brokerage has said.
The above stocks are picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.