In the current bullish phase of the market, the choice of good stock is not less than a challenge before the investors. Three brokerage houses in their recent analysis have recommended three such stocks which can give good returns to the investors. Let us see what is the profit potential in them and what is the target price.
Varun Beverages
Rating – BUY Target Price – Rs 1200 Brokerage Firm -Jefferies
Research and brokerage firm Jefferies is seeing growth in PepsiCo’s bottler company Varun Beverages. The brokerage firm has estimated a CAGR of 49 per cent. Brokerage firm says Varun Beverages’ volume recovery, new launches and expansion in distribution could be the reason for this. Along with this, reduction in margin general and interest costs will also prove to be helpful for the company. Considering all this, Varun Beverages Ltd seems to have room for multiple re-ratings. Its target price can be increased from Rs 930 to Rs 1200. The brokerage firm has given it a BUY rating, based on Sep-23/PE, it is looking up 42 times (earlier it was 35 times).
Glenmark Pharma
Rating – HOLD Target Price – Rs 610 Brokerage Firm – HSBC
HSBC has said that Glenmark has been a prominent name in its coverage. Glenmark Pharma’s Net Debt/Ebidta for FY 2020-21 is 1.7 times. The company has had little success in reducing its debt over the past few years and continues to dominate its earnings. Its net debt during the financial year 2020-21 was Rs 35.5 billion, out of which it was reduced by only Rs 2.1 billion last year. Glenmark is trying to reduce its debt and Rs 12 billion from the IPO of Glenmark Life Sciences can help it. Glenmark has spent Rs 60.6 billion on R&D from FY 2017 to 2021. Of this, 55 to 60 percent of innovation has been done on R&D and 40 to 45 percent on developing generic drugs. This is reflected in its range bound operating margin as it looks to increase. All these aspects are indicating an increase in the shares of Glenmark. Hence it can be held with a target price of Rs 610. Glenmark Pharma is trading at 14.1x/13x based on our EPS for FY 2022-23. Earlier it was expected to trade at a PE of 15.3x/16.7x on an average of 3 to 5 years. Glenmark sees a lot of potential in the next one-and-a-half years, but a lot will depend on the pace of its debt reduction and growing operating margins.
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APL Apollo Tubes
Rating – BUY Target Price – Rs 2065 Brokerage Firm – Motilal Oswal
APL Apollo Tubes (APAT) is the largest manufacturer of structural steel tubes in India. Due to the company ‘s diversified portfolio and product presence across the country , the risk is low . The company is utilizing up to 63 per cent of its capacity, which is quite high. Motilal Oswal believes that this will help it in operating leverage and will also improve profits. The company’s distribution network is strong. The increase in its warehouse, retail network and increase in SKUs will add to the last mile connectivity. With the increase in capacity, product accessibility and benefits from unorganized sector players, the company’s market share will grow beyond the current 50 per cent.
Motilal Oswal believes that domestic volumes of structural steel tubes will improve with the increase in steel consumption in the country. This will benefit the company. Warehousing, modular housing, modernization in villages and construction in urban, semi-urban areas will give impetus to the company. The brokerage firm believes that by the financial year 2021-24 (estimated), its revenue / profit will be 20/35 percent. The shares of the company can be given a BUY rating with a target price of Rs 2065.
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