Pick of the week (Jan 17)

Bank of Baroda — Buy
Recommendation by JM Financial

We now believe BOB offers favourable risk-reward as asset quality improves and RoAs bounce from current suppressed levels. We upgrade BOB to BUY with a TP of INR95.

Karnataka Bank — Buy

Recommendation by Anand Rathi Share and Stock Brokers

Lower treasury income and higher opex (one-time superannuation expense) led to a ~13 per cent sequential decline in operating profit for Karnataka Bank. With the standstill on NPA recognition, asset quality and PCR improved. With the expected pick-up in earnings in FY22 and limited downside from current levels, we maintain a Buy, at a TP of Rs 85 valuing it at 0.3x P/ABV on its FY23e book.

Wipro Ltd — Hold

Recommendation by Emkay Global Financial Services

We raise FY21/22/23E EPS by 9.7%/10.9%/10.4% as we factor in Q3 performance, better EBITM and robust deal signings. Wipro has shown better performance in Q3; however, weakness persists in client metrics. Given rich valuations and patchy performance in the past, we maintain Hold with a revised TP of Rs 420 (earlier Rs 380).

Infosys Ltd — Buy

Recommendation by Emkay Global Financial Services

We raise FY21/22/23E EPS by 3.5%/5.5%/5.1% on strong Q3. We expect Infosys’ valuation gap with TCS to narrow down further on the back of sustained strong operating performance. The stock has rallied 20%/80% in the last 1M/1Y. We maintain Buy/OW in EAP with a revised TP of Rs1,550 (Rs1,470 earlier) at 25x FY23E earnings.

CESC — Buy

Recommendation by Motilal Oswal Institutional Equities

Performances at Dhariwal and distribution franchises (DFs) would continue to improve. Furthermore, the co. has declared an interim dividend of INR 45/sh, highlighting the co.’s willingness to return excess cash. Despite factoring in the tightening of norms at Haldia and S/A, the stock trades attractively at 7x FY22 P/E. Maintain Buy, with TP of INR873/sh.

Hindustan Unilever Ltd — Add

Recommendation by Centrum Broking

German personal care company Sebamed (marketed by USV Pvt. Ltd.) and market leader Hindustan Unilever have entangled in the ad-war of soaps. This is shocking that challenger brand has gone aggressive, making an effort to expand its brand reach to induce trials using social media platforms to grab eyeballs through provocative ads.

Nevertheless, we reckon, HUL products are backed by strong clinical evidence, science and technology which is consumer tested and enjoys strong brand loyalty. But such incidence appears to be short term and temporary in nature, yet when social media is so active it will have a cascading effect in our view. We have an ADD rating with DCF based target price of Rs2,779.

United Breweries — Buy

Recommendation by Emkay Global Financial Services

We raise FY22/23 earnings forecasts by 10-13 % on account of positive changes in regulatory environment and better recovery trends in key markets. We reiterate conviction Buy with a revised TP of Rs1,420, based on 27.5x Mar’23 EV/EBITDA (implied P/E of 49x)

Indian Railway Finance Corporation — Subscribe

Recommendation by LKP Securities

The promoter, Government of India (100% holding pre issue) is executing OFS of 594 mn shares with an OFS size of Rs 14.8 bn. Additionally, fresh issue of 1,188 mn shares aggregating to Rs 29.7bn. The net issue size stands at Rs 44.55 bn. Post IPO, the shareholding of GOI will be 86.4%. The issue price band stands at Rs 25 — Rs 26.

At a higher price band (Rs 26), the stock is valued at 1(x) FY20 P/BVPS. Attractive valuation with healthy return ratios make us optimistic on the long term prospects for IRFC. We recommend SUBSCRIBE for long term.

Indigo Paints — Subscribe

Recommendation by IIFL Securities

We recommend subscribing to the IPO: Despite our negative stance on the paints sector, we recommend subscribing to the Indigo Paints IPO, given the favourable growth-valuation equation. We forecast FY20-23ii sales/Ebitda/PAT CAGR of 20%/36%/48% vs. 9%/13%/14% for the top four, on aggregate. Per our estimates, Indigo Paints would yield a valuation of 46x FY23 EPS, based on the upper price band vs. 63x for Asian Paints and 77x for Berger Paints. A combination of higher growth and lower valuations makes for an exciting investment opportunity.

Hindustan Petroleum — Buy

Recommendation by Goldman Sachs

Deep value with high and sustainable FCF generation, reiterate Buy, add to Conviction List.

The market is clearly not appreciating stability from fuel retailing integration, with HPCL underperforming pure-play refiners by 30% since early Nov vaccine newsflow.

We raise our 12M SOTP-based target price by 12% to Rs320, implying 42% upside, the highest in our Asia refining coverage, and add the stock to our Conviction List.

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.

–IANS
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