LIC Housing Finance — Reduce, Recommendation by HDFC Securities
While LICHF’s operating performance was in line with estimates, (PPOP growth at 1.3/3.4%), earnings were ahead of estimates as provisioning continued to undershoot estimates. Over the years, non-core assets have contributed to a bulk of the portfolio growth, resulting in disproportionate risk (already reflecting in high developer NPAs). Furthermore, the company holds negligible provisions on early-bucket stressed assets. Potentially elevated provisions, coupled with stiff competition from banks in LICHF’s core business underpin our REDUCE rating (revised target price of INR 381).
Jubilant FoodWorks — Reduce
We expect the recovery to gain pace in 4QFY21 and healthy growth in FY22. We maintain our EPS estimate for FY21/22/23. We value Jubilant at 50x P/E on Mar-23E EPS and derive a target price of Rs 2,204. We believe a large part of the recovery is priced in since the stock has run up sharply (40% in 6M). Maintain REDUCE.
Ujjivan Small Finance Bank — Sell
Recommendation by Emkay Global Financial Services
We retain Sell with a TP of Rs 34 (based on 1.6x FY23E ABV) due to its weak liability profile, higher dependence on MFI with rising asset-quality risk and higher valuations vs. peers.
Bajaj Electricals — Buy
Recommendation by J M Financial
We upgrade BEL to BUY with potential upside of 52% and note that our growth /margin assumptions are modestly below recent performance. Key Risk: Sharp disruption in macro recovery momentum and unforeseen significant losses in BEL’s EPC segment.
Nocil — Buy
Recommendation by Anand Rathi Share and Stock Brokers
We upgrade our rating on Nocil to a Buy with a higher TP of Rs 200 (earlier Rs160). We raise our estimates and expect 40%/57%/60% CAGRs in revenue/EBITDA/PAT over FY21-23. The growth drivers are positive guidance by global and domestic tyre manufacturers, rising rubber consumption, shifting of supply from China to India, higher exports and better demand globally.
Thermax — Neutral
Recommendation by Motilal Oswal Institutional Equities
We estimate revenue/EBITDA/adjusted PAT CAGR of 15%/30%/33% over FY21-23E, factoring in improved performance from Danstoker as well as a low base of FY21, as TMX has seen a disproportionate impact of Covid-19. Weak ordering environment, coupled with order book depletion, is a significant risk to our FY22-23E revenue estimate. On account of higher margin assumption, we increase our FY22E/FY23E EPS estimate by 3%/10%. Maintain Neutral.
HG Infra Engineering — Buy
Recommendation by Centrum Broking
We introduce our FY23 estimates and value HG’s EPC business at 9x FY23E earnings with HAM assets valued at Rs 40/share on 0.7x P/B basis. Maintain Buy with 12-month price target of Rs 370.
Can Fin Homes Ltd — Buy
Recommendation by Geojit Financial Services
The extension of tax incentives for affordable homes in the budget is expected to increase demand which looks positive. NIM is expected to stay above 3% in FY22E & FY23E due to the lower cost of funds even though aggressive pricing to attract new customers might reduce yield in the near term. We reiterate our Buy rating on the stock with a rolled forward target price of Rs.596 based on 2.3x FY23E Adj BVPS.
Trent — Sell
Trent’s 3Q performance surprised positively. Revenue recovery at 83% of base quarter was commendable (HSIE: 81% recovery). Westside recovered 78% (In- line). Hence, the revenue beat has come from its value play — Zudio. Bigger surprise was on GM recovery, which expanded 574bp YoY to 56.4% (HSIE: 48%). We suspect GM expansion was led by (1) write back of the conservative inventory provisions made in 1Q (Impact of Rs 140mn in 3Q), (2) better GMs in Zudio. Note: GMs are still down ~280bp in 9MFY21. Costs continue to normalise; hence, EBITDAM beat lags GM beat. We maintain our SELL recommendation on the stock with an SOTP-based TP of Rs. 575/sh (implying 32x FY23 EV/EBITDA). Note: TP change largely mimics EPS change.
Vinati Organics — Sell
Our SELL recommendation on Vinati Organics with a discounted cash flow- based target price of INR 1,015 (WACC 10%, terminal growth 3.5%) is driven by (1) demand slowdown for the high-margin 2-Acrylamido 2- Methylapropane Sulphonic Acid (ATBS) that contributed ~60% to its revenue mix in FY20, (2) shift in revenue mix towards lower-margin Iso Butyl Benzene (IBB), which formed ~25% of the mix in 3Q versus 16% in FY20, and (3) slow ramp-up in the recently-commissioned Butyl Phenol product line. In the absence of a new product pipeline, we believe current valuations are high at ~33x FY23E EPS. 3Q EBITDA/PAT were 27/12% below estimates owing to a 10% decline in revenue, higher-than-expected opex, higher-than-anticipated depreciation, offset by higher-than-anticipated other income and lower-than- anticipated tax outgo.
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