Brokerage targets on four stocks namely PNC Infratech, Sobha, Hindustan Aeronautics and Ahluwalia Contract suggest potential double-digit upsides over the next 12-months. While analysts are positive on PNC Infratech, Hindustan Aeronautics and Ahluwalia Contracts due to their strong order books, they like Sobha due to strong pipeline and positive residential sales momentum in the Bengaluru housing market.
PNC Infratech | IDBI Capital | Target Rs 355 | Upside potential 33%
IDBI Capital said PNC Infratech’s September quarter results missed its estimates by 20 per cent. The miss, it said, was on account of lower execution (revenue de-growth at 3 per cent YoY) due to extended monsoon. On the back of this, company also revised its revenue growth guidance to 10-15 per cent against 15 per cent earlier. Ebitda margin is expected to be maintained at 13.5 per cent.
“Post the results, we have marginally reduce EPS estimate by 4 per cent for FY23E/24E and target price is revised to Rs 355 (earlier Rs369). The stock trades at 9 times FY24E EPS, which is the lower end of
historical range. We retain a BUY rating,” IDBI Capital said.
IDBI Capital said the order book for PNC Infratech is healthy at Rs 19,300 crore, which equals to 3 times FY22 revenues. The stock catalyst would be the receipt of appointed date for HAM projects as executable order book is 61 per cent of the total order book, it said.
Sobha | Nirmal Bang | Target Rs 870 | Upside potential 37%
Nirmal Bang Institutional Equities noted that Sobha reported highest-ever sales booking of Rs 1,160 crore in September quarter, up 2 per cent QoQ, driven by higher average realisation of Rs 8,709 per square feet (sqft).
Bengaluru, it said, continues to remain the key market for Sobha as it derives 78 per cent of its total sales volume from this market. In 2QFY23, Sobha launched two projects with a total developable area of 0.88 million sqft in Bengaluru and Thiruvananthapuram markets.
“We believe that a strong pipeline and positive residential sales momentum in the Bengaluru housing market will aid new sales value, thereby boosting the company’s cash flows. The company also plans to enter the Hyderabad market in FY24 Additionally, inventory remained at a low level of 12.1 million sqft (excluding projects in the pipeline) in 2QFY23,” it said.
The brokerage expects consolidation in the industry to continue and, being an organized player, Sobha
with its balanced portfolio in Bengaluru and other markets remains in a good position to capitalise on the opportunities amid the ongoing residential up-cycle.
Hindustan Aeronautics | ICICIdirect | Target Rs 3,300 | Upside potential 23%
Hindustan Aeronautics (HAL), the largest defence PSU in India, is engaged in design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures
ICICIdirect said the company has delivered revenue, Ebitda and PAT CAGRs of 7.4 per cent, 12 per cent
and 26.5 per cent, respectively, over FY18-22. In FY22, repair & overhaul contributed 64 per cent to total revenues while manufacturing contributed 30 per cent of the revenues.
“We expect HAL to deliver revenue and Ebitda CAGR of 10.3 per cent and 14.7 per cent, respectively, over FY22-25E. PAT is likely to grow at 14.2 per cent CAGR (FY21-25E). Increase in profitability with strong asset turnover is expected to result in healthy return ratios over FY23-25E. We continue to remain positive and retain our BUY rating on the stock,” it said.
Key triggers for the stock includes order-book position, order inflows in MRO and LCA Tejas MK1A deliveries to IAF, which are expected from FY24E end.
Ahluwalia Contracts | Axis Securities | Target Rs 485 | Upside potential 13%
Axis Securities said Ahluwalia Contracts faced project execution hurdles, owing to design-related work of new EPC projects and extended monsoon season that impacted revenue growth for the company. But the management indicated that execution would see substantial improvement in the next two quarters with improved margins and maintained its target of achieving revenue growth of 15 per cent in FY23. Axis Securities expects the company to report margins in the range of 11%-12 per cent going ahead.
“With favourable attributes such as a strong and diversified order book position, healthy bidding pipeline, order inflows, asset-light model and emerging opportunities in the construction space, we expect the company to generate healthy free cash flows moving ahead. Currently, the stock is trading at 13 times and 11 times FY23E and FY24E EPS. We value the company at 13 times FY24E EPS to arrive at the target of Rs 485/share, implying an upside potential of 20 per cent from the current levels,” Axis Securities said.
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