3 Stocks Anand Rathi Suggests For Potential Gains Of Up To 37.18%

Anand Rathi, one of the leading brokerage houses, sees potential gains from stocks of three companies - Greenlam Industries, PNC Infratech and Emami. Greenlam Industries is a small cap company operating in the building materials segment.

Emami and PNC Inratech are mid-cap companies. Emami operates in a fast-moving consumer goods space dealing in personal care products while PNC Infratech is from the infrastructure sector.

Each of these companies is showing bright prospects and by investing in their stocks, the investors can earn a return of up to 37.18%, believes the stock-broking firm. The reasons for such a positive view about the stock of these companies are given below.

1. Buy shares of Emami at a target price of Rs 470 (upside potential of 21.45%)

Emami reported a high 23.9% Q4 EBITDA margin beating the estimated margin of 21.1%. The Q4 gross margin expansion of 60bps yoy was boosted by the fall in input prices and less brand spending.

As per the Anand Rathi research report, management expects a ~250bp gross margin gain in FY24 based on current input prices. The rising rural demand and D2C brands would drive 8-10% domestic revenue growth while the international business should maintain 20% revenue growth on market expansion.

View: "We slightly raise our FY24e/FY25e to reflect Q4 and management guidance. We maintain our Buy rating with a 12-month target price of Rs470 (25x FY25e EPS)," says the brokerage firm.

Stock price: The current market price is Rs 396.25, down by 1% on an intraday basis. The 52-week low is at Rs 340.95 and the 52-week high is at Rs 524.95.

2. Buy shares of PNC Infratech at a target price of Rs 416 (upside potential of 32.06%)

As per the research report, the gradually stabilising pace of execution at PNC's UP water supply orders and steadily progressing execution at its appointed road order book are reassuring and enable the company to set the tone for a healthy FY24.

The firm suggests that the assurance is good for the foreseeable future, but growth beyond that would need more. Recent diversification into water supply and railways, and healthy road prospects would help. The timing issue took leverage up, but the BS is sturdy for any growth.

View: "Success with monetisation efforts would make it sturdier. On the swifter-than-expected pace of execution, we slightly raise our revenue estimates. Resultantly, FY24e and FY25e earnings are up ~2% each. FY23 actuals too have a role in the earnings revision," the report said.

"At the CMP, it (excl. investments) is available at PER of 9.1x FY25e. On reassuring execution, a well-set balance sheet, and healthy assurance we retain our Buy rating with a price target of Rs 416," it added.

Stock price: The current market price is Rs 312.55, up by 1.54% on an intraday basis. The 52-week low is at Rs 219.35 and the 52-week high is at Rs 354.55.

3. Buy shares of Greenlam Industries at a target price of Rs 487 (upside potential of 37.18%)

Greenlam Industries posted a strong performance in the quarter. Its Q4 revenue, EBITDA and PAT grew respectively 15%, 49% and 80% y/y to Rs 5,338 million, Rs 741 million and Rs 461 million.

Ease in the input costs has led to the expansion in the gross margin from 396bps yoy to 48.8%. The better gross margin and lower other expenses (freight costs) helped the EBITDA margin rise 318bps y/y to 13.9%, the brokerage firm mentioned in its research note.

It further added that the margin was restricted by higher employee expenses, up 27% y/y. Higher other income (3.4x y/y) and lower tax incidence (16.4% vs. 22.3% a year ago, tax reversal arising out of refund for FY14-15) led to a significant increase in profit after tax.

View: The demand outlook seems promising: input-cost tailwinds and operating leverage would expand margins. "We expect 30%/27% revenue/earnings CAGRs over FY23-25. We are upbeat about the company and maintain our Buy recommendation on it, with a 12- month target price of Rs.487 (earlier Rs501) based on 30x FY25e earnings," it said.

Stock price: The current market price is Rs 371.40, up by 2.72% on an intraday basis. The 52-week low is at Rs 280 and the 52-week high is at Rs 380.

Disclaimer

The stocks have been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the author or the brokerage house will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.