The revival in the Indian indices has been in tune with their overseas peers. Asian and European markets traded higher, offering positive cues for the Indian indices. After opening lower, Indian markets rebounded and gained nearly 0.5 per cent, led by gains in Reliance Industries Ltd and IT stocks. The frontline S&P BSE Sensex bounced back 1,059 points from the day’s low of 56,930 to settle at 57,989, up 697 points or 1.22 per cent. The index had touched an intra-day high of 58,053.
Here are a few stock recommendations that are likely to give you two-digit returns by Siddharth Sedani – vice president, equity advisory, Anand Rathi Shares and Stock Brokers.
Havells- View Buy: Rs 1137 | Target – Rs 1362
It is India’s leading electrical appliances & equipment manufacturer with a diversified product portfolio consisting of switchgear, cables, electrical consumer durables, and lighting & fixtures. Apart from ‘Havells’, HIL’s other major brands include Crabtree, Standard, Reo, and Lloyd. The company manufactures ~90 per cent of its products in-house & presently owns 14 manufacturing facilities in Alwar, Baddi, Faridabad, Haridwar, Guwhati, Ghiloth, Neemrana & Sahibabad. In all its business segments, Havells has a strong presence in the organised product category with market share ranging between 6 per cent and 20 per cent.
A robust balance sheet with RoE & RoCE of 20 per cent & 25 per cent, respectively (five-year average), with stringent working capital policy. Revenue up 15 per cent YoY to Rs 3652 crore supported by strong growth in the wire & cable segment (was up 33 per cent YoY). The company has hiked prices by 5-10 per cent, where margins were lower. Management expects the volatility in raw material prices to normalise by the next fiscal. We expect 13 per cent/23 per cent revenue/PAT CAGRs over FY22- FY24, which could result in the post-tax RoCE expanding from 16.4 per cent to 20 per cent.
Navin Fluorine – View Buy: Rs 4122|Target – Rs 5050
Navin Fluorine (NFIL) operates one of the largest integrated fluorochemicals complexes in India with a presence in speciality chemicals, CRAMS, inorganic fluoride and refrigerant segments. The company has two manufacturing facility in Surat and Dewas while it is setting up a new greenfield capacity at Dahej, In terms of revenue contribution, speciality chemical constitutes 40 per cent of overall revenue followed by CRAMS of 25 per cent and rest from refrigerant (~18 per cent) and inorganic fluoride (~17 per cent) businesses. Navin entered a many-year agreement with a large MNC to manufacture and supply a key agro-chemical fluoro-intermediate, The contract is of ~Rs8bn over five years (with annual peak revenue of Rs1.5bn-1.7bn).
Reported revenue growth was 23 per cent YoY to | 379 crore, led by speciality chemical (up 25 per cent YoY), inorganic fluoride (up 46 per cent YoY) and refrigerants (up 53 per cent YoY). Gross margins were up 170 bps YoY to 55.6 per cent while EBITDA margin was up 40 bps YoY to 26 per cent, due to higher operating cost such as employee (up 30 per cent YoY) and other cost (up 28 per cent YoY). EBITDA was up 24 per cent YoY to | 98.6 crore. PAT increased 17 per cent YoY to | 68.8 crore.
Capex would be Rs1.25bn, including Rs140m invested to expand the effluent treatment plant. We expect revenue, EBITDA and PAT to clock 40 per cent, 47 per cent and 49 per cent CAGRs respectively over FY22-24 on the good prospects for its high-value business, orders in CRAMS, sound R&D product pipeline and the start of revenue from MPP and HPP in FY23.
Tata Steel – View Buy : Rs 1300 | Target – Rs 1776
Tata Steel Group is among the top global steel companies with an annual steel production capacity of ~34 million tonnes per annum (MTPA). Tata Steel achieved a new highest ever quarterly consolidated EBITDA of Rs 164.5 billion, which reflects a margin of 27.3 per cent. The consolidated profit after tax was also one of the highest at Rs 123.6 billion with a net profit margin of 20.5 per cent. Tata Steel is aiming to double Indian operations steel production capacity to 40 million tonnes (MT) by 2030. Chinese steel curbs are likely to keep steel prices and a return to profitability at the European operations.
India’s share in Tata Steel’s overall consolidated production capacity has risen from 29 per cent in 2010 to 57 per centin 2020 and is likely to reach 73 per cent by 2030. For FY22E, Tata Steel is targeting over US$2 billion gross debt reduction wherein it will prioritize offshore debt repayment. After a strong performance in H1FY22, we expect the rest of the year to be stronger for Tata Steel standalone operations. Domestic steel prices are at a discount to import parity prices allowing companies to push through price hikes. Iron ore integration in domestic operations enables the company to capture the increase in steel prices in profits. European operations are also expected to remain profitable with an improvement in spreads which lead to a further fall in net debt over FY22-FY24 even though Tata Steel will continue to pursue growth capex in India.
BEL – View Buy: Rs 209 | Target – Rs 243
BEL is a Navratna PSU under the Ministry of Defence, Government of India, which provides advanced products and systems for military, government and civilian customers. BEL is focusing primarily on the various ‘Make in India’ programmes. It has offered its various products and services to major Platform OEMs and their Tier I suppliers. The order book of the Company as on 31 December 2021 is at around Rs 560 billion. The order book comprises major programmes like Long Range Surface-to-Air Missile System (LRSAM), the Akash Missile Systems, Command & Control System, BattleField Surveillance Systems, Fire Control Systems, Software Defined Radios, Coastal Surveillance Systems, Advanced Composite Communication System, Naval Systems, Electronic Warfare Suite, etc.
BEL is targeting a healthy growth of 12-15 per cent and management is confident of maintaining margins around 20-22 per cent for FY2022E despite higher commodity prices as it has a strong indigenous portfolio of products, which has reduced dependence on imports and other commodity prices. The future of the company looks promising. The Defence Sector is being opened up for private sector participation with the evolution of Defence Procurement Procedure. In this changing business scenario. BEL is focusing on enhancing interaction at various levels and building long-term relationships with customers, emerging Strategic Partners and other key stakeholders in the Indian defence industry as a trusted and committed partner.
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