PICK OF THE WEEK : Stock Market Trading

sensex up

TCS’ Q2FY21 results delivered a strong beat on Revenues, EBIT margin and APAT. Sharp bounce back in growth in key verticals like BFSI, Retail &CPG and Lifesciences is the key positive in the results.

Led by 2QFY21 margin beat, we raise our EPS estimates by 3.6/6.4/4% for FY21/FY22E/FY23E. TCS trades at 27.4x FY22E EPS and 25.8x Sep22E EPS. We now value TCS at 28x Sep22E EPS which yields a TP of Rs2970/sh (vs 27x Sep22E EPS). This represents an 9% upgrade in our Target price

led by EPS upgrades and P/E upgrade. Retain Add.

InterGlobe Aviation -Buy

Air passenger traffic grew 41.2% mom in Sept-20 and trends in early October (during the long weekend) suggest a renewed propensity for leisure travel. Fuel costs remain benign and 2%appreciation in INR vis-a-vis USD in Q2FY21 provides incremental relief. This, along with IndiGo’s own cost saving measures lowers the threshold traffic to ~70% of pre-Covid for reaching cash break-even. IndiGo has gained 12% market share YTD FY21 but we factor it will retain only 50-55% of this

on sustainable basis. We maintain our Buy rating with a revised price target of Rs1638 based on 10x FY22E EBITDAR (9x earlier).

Bajaj Finance-Hold

Recommendation by Emkay Global Financial Services

The loan growth has taken a hit as management has turned risk-averse due to the regional lockdowns amid rising Covid-19 cases. However, our channel checks indicate that BAF was back to lending and disbursing in September 20. We will watch out for details on this front in Q2 results and

management commentary.

We await clarity on the asset quality after the completion of the moratorium. Management commentary on the future growth strategy also remains key monitorable from the results. We maintain Hold on the

stock with a TP of Rs2,950, corresponding to ~3.5x P/B Sept’22E.


Recommendation by Emkay Global Financial Services

We expect Marico to deliver close to 10% sales growth with both domestic and international (favorable currency) recording 10% growth. We estimate 15% EBITDA/PAT growth for Q2, led by flat ad spends and cost savings. The recovery in VAHO is a positive.

Strong growth trends in rural, driving further recovery in Parachute and VAHO and continued momentum in Saffola, can provide some upsides. However at 38x FY22E EPS, recent positives appear priced in. Maintain Hold with a TP of Rs350.

PI Industries: BUY

Recommendation by Axis Securities

We initiate coverage on PI Industries with BUY and Target Price of Rs. 2155/share with a 11% upside as we value the stock at 33x P/E on its FY23E EPS given its unique business model aided by steady growing CSM and Domestic Formulation business and higher growth in adjacent segments through inorganic acquisitions. We expect PI’s Revenue/EBITDA/PAT to witness a 25/29/29% CAGR with average ROE of 15% and Asset Turn of 1.5-2.0x over FY20-23E.

Persistent Systems Ltd: BUY

Recommendation by Axis Securities

We initiate coverage on Persistent Systems Ltd (Persistent) with a BUY rating and target Price of Rs 1,580 valuing at 21x to its FY23E EPS. We believe Persistent is well placed to bounce back post COVID 19 pandemic led by 1) Better vertical mix (having minimal impact of COVID-19) thereby faster recovery in terms of IT spending 2) Significant growth opportunities in Technology Services and Allied Services. Robust IBM portfolio will help to gain the momentum 3) Sustainable operating margins led by better services mix and efficient execution 4) Healthy balance sheet, strong return ratios and free cash flow generation 5) Ramp up in new deal wins and strong client addition will help Persistent to attain long term sustainable growth.

Amara Raja Batteries-Buy

Recommendation by Anand Rathi Share and Stock Brokers

Its progress in battery technology in automotives would go a long way in Amara Raja Batteries gaining market share in two-wheeler OEM and, possibly, a rub-off effect in the replacement market in the next 2-3 years, in our view. We upgrade the stock to a Buy at a target price of


Stamped punched grid in two-wheeler OEM. The company’s progress to stamped grid technology in two-wheeler OEMs would go a long way in market-share expansion both in its OEM and replacement businesses. We understand from channel checks that Amara Raja’s success in this technology in the replacement market would be replicated in its OEM business too.

UPL Ltd.-Buy

Recommendation by Geojit Financial Services Ltd

Despite a marginal drop in revenues in Q1FY21, EBITDA stood at Rs. 1,704cr, up by 29.3% YoY, with EBITDA margin improved by 510bps YoY to 21.8%, aided by raw material savings, cost synergies as well as better product and regional mix. We remain positive on the stock as we believe that the strong demand for CPC products is likely to drive growth further. Hence, we have maintained a BUY rating on the stock with a revised price target of Rs. 601 based on 12x FY22E adj. EPS.


Recommendation by Emkay Global Financial Services

Overall business momentum for HDFCB remains healthy compared to the industry, but we believe that the asset quality trend and management transition will be the key things to watch out for in the

near-to-medium term. Currently, we have a Buy rating on the stock with a TP of Rs1300, given its strong stress management capability across cycles and superior return ratios.

Hero Motocorp Ltd.-Buy

Recommendation by Axis Securities

HMCL is in a sweet spot as strong rural-led recovery plays to its strength in the Economy-Executive category in the Motorcycles segment. With an apt product portfolio for the rural market, the highest brand recall, and a strong distribution network, it is best placed to benefit from the ongoing momentum in the rural economy (50% of the company’s domestic volumes is derived from rural India). Wholesale dispatches for the company are expected to be healthy in the near term given low channel inventory ahead of the Festive season. The channel filling to build up inventory will drive volumes in the near term.

HMCL is working hard towards recovering its lost market share in the Premium Segment as well as the Scooter segment. Hero launched four new models under its Xtreme & XPulse brands over the year, marking a re-entry in the premium motorcycle segment. Co’s latest offering Xtreme 160R has been well received by the customers. In the scooter segment, the company has launched Destini 125 scooter with start-stop technology and Maestro Edge 125 scooter.

We recommend to buy with a target price of Rs. 3,450.

(Disclaimer: Views and recommendations given are those of brokerages and analysts and do not represent those of IANS. Users should check with certified experts before taking any investment decision. IANS has no financial liability whatsoever to any user on account of the use of

information provided.)

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