2 Stocks To Buy With Potential Upside of Up To 62%: Suggested By Edelweiss

The stock of Indo Count Industries Ltd (ICIL) and Aegis Logistics Ltd (AGIS) has been recommended for buy by Edelweiss, a brokerage and research company. ICILs stock is expected to gain 62 percent, while AGIS stock is expected to rise 44 percent, from the current market price according to the brokerage. Indo Count is among Indias top end-to-end bedding companies, engaged as a global authority and pre-eminent manufacturer of bedsheets. The brokerage expects ICILs shares to rise to a target price of Rs 411 from current levels, representing a 62 percent gain. At the time when the brokerage recommended the stock to buy the market price was Rs 254, however, it is today trading at Rs 252.Q2FY22 Result of ICILAccording to the brokerage ICIL reported volumes of 18.9mn meters during the quarter (decline of 17% YoY). Owing to supply chain issues, the company lost out on booking 2mn meters volume during the quarter. Realisation was up by a staggering 27% YoY and stood at ~INR388/meter (usual run-rate INR315-320/meter), translating into a revenue of INR761cr (5% YoY growth over a low base), thereby compensating for lower volumes. Revenue came in-line with our estimates of INR 789cr.The brokerage in its research report has stated that Owing to higher realization and better product mix, gross margin of ICIL for the quarter grew 327bps YoY to 52.9%. However, normalization of expenses in the form of higher employee spends (up by 130bps) and other overheads (up by 200bps) negated the positive impact of gross margins, as EBITDA margins remained flat at 17.5% during the quarter, in-line with our estimates. PAT declined by 3% YoY to INR 88cr, higher than our expectations of INR 80cr due to higher other income.What should investors do?The brokerage has said ICIL has maintained its volume guidance of 85-90mn meters for FY22E with revenue of INR 3,200 cr. With a ~25% increase in average realization and still room for improvement in realizations on the back of better product mix and expected price hikes, we believe ICIL is well placed to surpass its FY22E revenue guidance. Hence, we have revised our revenue/EBITDA/PAT estimates upwards by 11%/16%/9% for FY22E and 12%/15%/16% for FY23E. Also, the company has started receiving export incentives amount from the government and would be realizing larger amounts of export incentives in the subsequent quarters, which would help improve its W.C. position. With this background, we have revised upwards our target price to INR411/share (previous TP: 394/share) at P/E of 18x on FY23E earnings estimates.Advertisement Aegis Logistics Limited (AGIS), is Indias leading oil, gas, and chemical logistics company and AGIS shares are expected to grow 44 percent to a target price of Rs 320 from current levels, according to the brokerage. The market price of the stock when the brokerage suggested buying was Rs 223, but it is now trading at Rs 210.70.Q2FY22 Result of AGISAccording to the research report of the brokerage Aegis Logistics (AGIS) Q2FY22 performance was above expectations with revival in LPG volumes driven by opening-up of travel and eateries. PAT for the quarter came in at INR94cr (v/s consensus expectation of INR80cr).Edelweiss has reported that AGIS Q2FY22 numbers were above expectations as EBITDA of Gas and Liquid segment increased by 19% YoY and 18% YoY, respectively. This was driven by a 10% YoY increase in LPG distribution volumes as Autogas and restaurants demand recovered. However, the LPG terminal at Kandla with 4mt throughput capacity has been further delayed with commissioning now expected in H2FY22. We are no longer modelling any volume contribution from Kandla in FY22 and taking only 0.7mt in FY23.What should investors do?Edelweiss has said that AGIS is trading at FY23E EV/EBITDA of 10x, lower than the cheap 11x multiple paid by Vopak for strategic partnership through a 51:49 JV. We believe these levels do not account for the growth optionality available with AGIS post Vopak deal. It announced that the JV will add a total of 175,000 KL of liquid and 100,000 t of gas storage capacity at Pipavav, Haldia, Mangalore and Kochi for INR1,250cr. We maintain BUY on the stock with a target price of INR320/share, valuing at 15x FY23E EV/EBITDA multiple. The above 2 stock picks are from Edelweiss Wealth Research report, investors need to do their own analysis and research before betting on any of the stocks. Herein the brokerage recommendation should not be construed for investment advice.