Domestic stock markets have entered the last week of July, heading towards the monthly futures & options expiry. Analysts are expecting heightened volatility this week and the India VIX is not disappointing them. India VIX rose 5.5% on Monday to regain 17 levels after having plummeted below the same last week. S&P BSE Sensex was down nearly 400 points or 0.68% while NSE Nifty 50 was nearing 16,600. While bulls and bears expected to battle it out this week on Dalal Street, analysts at JM Financial have picked two Tata Group stocks — Tata Elxsi and Tata Consumer Products — projecting as much as 19% upside backed by fundamental and technical analysis.
Tata Elxsi: BUY
Target: Rs 10,000 | Upside: 19%
The stock is favoured by fundamental analysts at JM Financial given its strong growth potential, market share gains, superior margin profile, differentiated capabilities in digital engineering and strong balance sheet with cash and investments at 51% of total assets. “Tata Elxsi is a consistently strong performer achieving >6% QoQ CC growth (with sustained margin expansion) for eight consecutive quarters. Its Q1FY23 revenue growth was strong at 6.5% QoQ CC (Est: 5% QoQ CC). The company’s Q1FY23 EBITDA margin at 32.8% (+30bps QoQ) was a strong beat on estimate of 30% despite wage hike for senior employees during the quarter,” analysts said.
On the technical side, the stock is expected to chart an up move now. “After a strong uptrend, the stock has seen consolidation to form a symmetrical triangle pattern. Breakout is typically expected in the direction of previous trend i.e. upside in this case,” analysts said. The target price of Rs 10,000 per share translated to an upside of 19% from Monday’s opening price of Rs 8,385 per share.
Tata Consumer Products: BUY
Target: Rs 900 | Upside: 12%
Analysts at JM Financial noted that Tata consumer has been reporting resilient volume and revenue growth in India tea/salt business with 3-year CAGR tracking well ahead of FMCG industry growth rate. “India tea segmental margin has fully recovered and is well above 2HFY20 levels even as tea commodity prices are still 20-25% above 2HFY20 as commodity prices ease we expect margins to expand further,” they added. To augment the growth potential, Tata Consumer has been on an acquisition spree which may strengthen the company’s footprint. “Stock trades at 45x its FY24 Earnings and is likely to stay elevated given strong growth outlook.”
The stock is up 7.63% so far this year, outperforming the headline indices. “After the major up move, the stock witnessed correction from 890-650 odd levels. Price has consolidated at lower levels to form a base. Price is now resuming its uptrend,” analysts said. The projected target price of Rs 900 hints at an upside of 12%.