Indian share markets staged a smart recovery in the calendar year 2020, rallying around 84 per cent from the March lows.
At the higher end of the price band, Indigo Paints IPO is aggressively priced at a PE ratio of 142 times FY20 earnings per share
Indian share markets staged a smart recovery in the calendar year 2020, rallying around 84 per cent from the March lows. In today’s session, BSE Sensex and Nifty 50 hit their respective record high levels of 47865.56 and 14,010.15, respectively. On a year-to-date (YTD) basis, headline indices have delivered 15 per cent returns. According to analysts at ICICI Direct Research, the resilient domestic setup points towards a recovery in key macroeconomic data viz. GDP, Infrastructure spending post a weak year. “CY21 presents an opportunity where the basic tenet of asset allocation and sectoral/security selection will be tested and identification of micro themes across segments will hold the key,” the report noted.
For CY21, ICICI Direct Research expects mid-caps and small caps to gain relatively more than the large caps. Its thesis is based on the fact that delta in earnings growth during a recovery phase will be high in mid-caps and small caps vis-à-vis large caps whereas multiple expansion in the former will provide additional alpha for capital appreciation. Other macro factors like benign interest rates and structural cost rationalisation measures will also aid operating and financial leverage for this category.
1. Phillips Carbon Black: The brokerage noted that Philips Carbon Black has a healthy balance sheet, capital efficient business model (RoCE, RoE over 15%) and generates robust cash flow from operations With a ‘buy’ rating to PCBL, the brokerage firm has given a target price of Rs 210, implying an upside of 23 per cent. It has valued it at 10x P/E on FY23E EPS of Rs 21.
2. PNC Infratech: ICICI Direct Research is positive on PNC Infratech due to its strong order book position, robust execution capabilities, consistent operating margins, and healthy return ratios. It will take PNC Infratech to jump 26 per cent to hit the target price of Rs 220 apiece pegged by the brokerage firm.
3. Divi’s Laboratories: ICICI Direct Research sees an upside of 16 per cent in Divis Laboratories share price in 2021. It has given a target price of Rs 4,425 apiece. The brokerage firm highlighted that Divi’s stays a quintessential play on Indian API/CRAMs segment with its product offerings and execution prowess.
4. Indoco Remedies: In 2021, Indoco Remedies share price is likely to surge 28 per cent and hit a target of Rs 380 apiece as predicted by the brokerage firm. The management has guided for significant export growth and margin improvement for FY21. “With better visibility, we expect the company to maintain consistency and generate strong FCF,” it said.
5. Navin Fluorine International: The brokerage firm noted that the company is planning to enter a new segment value chain from fluorine molecules. ICICI Direct Research believes that this can diversify business risk, to a certain extent, given it is largely dependent on agrochemical and pharma, at present. It has given a target price of Rs 3,040 apiece, up 17 per cent.
6. Amber Enterprises India: Manufacturer of room air conditioners (RAC), Amber Enterprises is a key supplier to top 10 AC brands. The brokerage firm sees a structural growth story in India’s RAC contract manufacturing industry along with major overseas brands choosing India as a manufacturing hub under their ‘China+1 strategy’. The brokerage firm has given a target price of Rs 2,830, an upside of 19 per cent.
7. HCL Technologies: ICICI Direct Research sees 17 per cent rally in the stock price in 2021 with a target price of Rs 1,105 apiece. The brokerage firm believes that growing opportunities in cloud, automation, cyber security are a sweet spot for HCL Technologies. Also, improved capital allocation policy and reasonable valuation made the brokerage firm positive on the stock.
(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)