From UPL to Britannia: These 8 stock picks by Centrum can give up to 57% upside in 2023

InterGlobe Aviation (IndiGo): The brokerage maintains a buy call and has a target price of ₹2,430 for the airline stock, indicating an upside of nearly 21%. According to Centrum, IndiGo continues to consolidate its dominant position in the domestic market (58% market share in Q2FY23) and is targeting a quantum jump in its positioning on overseas routes. Fare increases have thus far covered the impact of elevated fuel costs with traffic remaining resilient and any further reduction in fuel costs whether it is led by easing of present geopolitical tensions or otherwise can act as a material upside trigger for the stock, it noted. Lower fuel costs give airlines more room to stimulate demand through lower fares and discounts while sustaining their gross spreads, added the brokerage.   

Solar Industries: The brokerage has a buy call on the stock with a target price of ₹4,700, indicating an upside of 12 percent. The firm is one of Centrum's top picks in the Capital Goods sector due to (1) leadership in industrial explosives with a 25% market share (2) robust growth prospects in packaged explosives (a proxy play on infra capex) (3) strong scale up in defence and overseas segment. Winning large defence orders of Pinaka rockets, ammunition, etc as well as large explosives orders in mining tenders are key upside triggers, it added. However, a slowdown in mining and construction activities may hamper demand for explosives, cautioned the brokerage. 

Triveni Turbine: The brokerage has a buy call on the stock with a target price of ₹345, indicating a potential upside of 16 percent. The brokerage said that Triveni is one of its top picks in the Capital Goods sector due to (1) its leadership position in the 0-30 MW industrial steam turbine industry (50% domestic market share) and second largest player globally, (2) strong competitive moat given turbine is a customized product, (3) ably complimented by robust exports sales and high margins aftermarket services. Further, scale-up in quarterly order inflows will enhance revenue visibility and faster success rate in 30-100 MW turbines and API turbines are key triggers in the near-to-medium term, it added. However, a slowdown in industrial capex activity and any delay in upgrading to new advanced technology could challenge itsleadership position, cautioned Centrum. 

UPL: The brokerage has a buy call on UPL with a target price of ₹1,215, indicating a potential upside of 57.5 percent. The brokerage noted that UPL, over the last decade has evolved from a generic agrochemicals company to a branded generic to offering differentiated and sustainable solutions company. Its growth is also a function of multiple acquisitions (30+ in the past 25 years), the largest being Arysta in 2018, added the brokerage. UPL has been able to garner synergy benefits from these inorganic initiatives and the brokerage believes UPL’s realignment into four different platforms/companies will unlock value in coming years. UPL is expected to report an EBITDA/ PAT CAGR of 12.1%/19.2% during FY22-24E, it added. 

Navine Fluorine: The brokerage has a buy call on the stock with a target price of ₹5,244, implying a potential upside of 22 percent. Navin Fluorine International (Navin) belongs to the Padmanabh Mafatlal Group and is among the pioneers of refrigerant gas manufacturing in India. The company is one of the largest specialty fluorochemical manufacturers, said the brokerage. Navin has multiple projects under execution with a cumulative capitalization of over ₹16 bn in FY23-24E, informed Centrum. Together, these new projects entail a revenue potential of ₹13 bn in FY25E and with the large-scale capex, Navin’s revenue growth trajectory is expected to accelerate from 14% revenue CAGR over FY17-22 to 33% over FY22-25E, it predicted.   

Balrampur Chini Mills: The brokerage has a buy call on the stock with a target price of ₹486, indicating a potential upside of 26.5 percent. Balrampur Chini Mills, a leader with a share of 4% in the sugar/ethanol market, is all set to benefit from expansion in distillery capacity from 560 KLPD currently (1.75x from FY20) to 1,050 KLPD in 2HFY23 and concurrent increase in the addressable ethanol market (expected to nearly double from ₹240 bn to ₹450 bn over FY21-24), noted the brokerage. On the back of an 8.2% revenue CAGR and an improving margin profile, Centrum expects the firm to post robust 15.4% earnings CAGR over FY22-25E. It sees Balrampur Chini as a play on Bio-energy at a time when replacing imported fossil fuel with greener options and enhancing energy security is gaining relevance. 

Britannia Industries: The brokerage has a buy call on the stock with a target price of ₹5,055, indicating a potential upside of 13 percent. Britannia Industries is one of the leading food companies in India with a 100-year legacy, which operates in several segments like Biscuits, Bread, Diary, Cakes, Rusk & Others. The firm has gained market share past several years reacting quickly to changes in consumer preferences, offering better quality, using its market intelligence, and simultaneously ensuring good volume and margin growth, noted Centrum. It believes Britannia’s long-term business fundamentals are intact and the growth strategy is driven by expanding its footprint in across adjacencies in the fast-growing dairy and value-add segment. Moreover, it likes its commitment to becoming a ‘Total Food Company’ and with strong execution capabilities and striving for profitable growth culture it could improve its performance further. 

Kalyan Jewellers: The brokerage has a buy call on the stock with a target price of ₹138, implying a potential upside of 16 percent. Kalyan Jewellers is one of the largest jewelry companies in India. The brokerage reckons Kalyan’s strategy revolved around adding new stores in non-south markets and calibrated expansion in the Middle East region. Further management appears to be confident in its strategy of non-South markets to improve the studded ratio, serving millennials meeting their aspirational demand by introducing new designs, it added.