Domestic brokerage house Anand Rathi has come out with 'buy' calls for these 4 firms post their September quarter results with a potential upside of up to 53 percent. Let's take a look:
BUY | CMP: ₹1,061 | Target: ₹1,400 | Upside: 32 percent
IT services provider Tech Mahindra reported a 4 percent year-on-year (YoY) fall in consolidated net profit at ₹1,285 crore for the quarter ended September 30. Consolidated revenue from operations for the quarter came in at ₹13,129.5 crore, up 20.6 percent YoY from ₹10,881.3 crore in the same quarter last fiscal.
"The company reported good revenue growth for the quarter under review. In constant currency (CC) terms the revenue grew by 16.8 percent YoY led by better performance across all regions - Americas, Europe & RoW," said the brokerage. It achieved strong broad-based growth across the industries it serves, noted Anand Rathi. Communication Media and Entertainment (CME), Manufacturing, Technology, BFSI, and Retail grew YoY by 10.3 percent, 11.1 percent, 25.5 percent, 11 percent, and 16.4 percent, respectively in constant currency terms.
It further noted that the company achieved net new large deals of $0.7billion in Q2-FY23. In both the CME and Enterprise business verticals the company has witnessed growth consistently over the last few quarters by winning large deals including significant wins in the 5G space, digital transformation, and adoption of cloud, it added. The company has also been making investments in its digital engineering capabilities and is now in a good position to provide engineering capabilities in the Met averse ecosystem, from network to devices to applications and use cases, or for that matter, offering software product development and capabilities therein, further pointed out Anand Rathi.
"The company continues to get positive demand across sectors, however, it is facing higher employee attrition and margin pressure due to higher employee expenses. We maintain our BUY rating on the stock with a revised target price of ₹1,400 per share," it recommended.
The stock has lost 32 percent in the last 1 year and 41 percent in 2022 YTD.
BUY | CMP: RS 336 | Target: ₹516 | Upside| 53.5 percent
"Driven by strong retail channel growth and its multi-brand outlets (MBO) channel doubling its revenue, Arvind Fashions’ Q2FY23 revenue grew 46 percent YoY. With higher productivity, lower discounts, and operating leverage, the EBITDA margin expanded 290 bps YoY to 9.8 percent. The company is on track to its profitable-growth target, working-capital optimization, de-levered balance sheet, and rising cash flows," noted the brokerage.
Going ahead, the management expects revenue to grow 12-15 percent driven by network expansion and healthy comparable growth. With better full-price sales and operating leverage, it expects margins to rise. It will continue to focus on reducing debt further and better inventory turns, leading to more cash flows, added the brokerage. However, it lowered FY23e/FY24e EBITDA by 6 percent/7 percent from earlier. Consistent performance with profitable revenue growth and rising return ratios are key monitorables, said Anand Rathi.
Keen competition and lower revenue growth are key risks, it added.
The stock has risen 7.5 percent in the last 1 year and 25 percent in 2022 YTD. It has lost 8 percent in November so far after a 14 percent and 18 percent jump in October and September, respectively.
BUY | CMP: ₹510 | Target: ₹650 | Upside 27 percent
The company reported a good set of numbers for the quarter under review with revenue growth of 19.8 percent YoY to ₹423 crore on standalone driven by strong performance in the domestic market navigating uneven monsoon distribution, said the brokerage. The management expects the domestic agrochemical industry to do well in H2FY23 due to residual moisture owning to the late withdrawal of the southwest monsoon, higher reservoir levels, and a rise in MSP (Minimum selling price) of Rabi crops for the upcoming 2023-24 marketing season, it noted.
On the profitability front, the EBITDA from operations for the quarter increased by 8.4 percent YoY to ₹66 crore with an operating margin of 15.3 percent. The company achieved the reported PAT of ₹47.7 crore, an increase of 4.5 percent YoY with a net margin of 11.2 percent translating into EPS of ₹11.92 per share for the quarter, informed Anand Rathi.
"We are positive on Heranba Industries, the company has a diverse product range, strong margins, strong balance sheet, capacity expansion, and further opportunities from off-patent products in highly regulated markets. We maintain a BUY rating on the stock with a revised target price of ₹650 per share," it said.
The stock has fallen 23 percent in the last one year and is down 25 percent in 2022 YTD. It is flat but in the red in November so far, extending losses for the fourth straight month. Between August-November, it has lost 10 percent.
BUY | CMP: ₹422 | Target: ₹615 | Upside: 46 percent
Glenmark Life Sciences reported revenue of ₹509 crore during Q2FY23 as against ₹561.7 crore in Q2FY22, a decline of 9.3 percent YoY on account of lower revenue from parent Glenmark Pharma, which was down 41 percent YoY. It reported an EBITDA of ₹143.6 crore in Q2FY23 as against ₹167 crore in Q2FY22, a de-growth of 14.2 percent YoY. EBITDA Margins for Q2FY23 stood at 28 percent while the profit after tax (PAT) for Q2FY23 came in at ₹106.8 crore as against ₹115 crore during Q2FY22, down 7.2 percent YoY.
"Revenues from the Generic Active Pharmaceutical Ingredient (API) segment decreased 4.5 percent YoY (ex-covid) to ₹453 crore during Q2FY23 whereas contract development and manufacturing company (CDMO) fell 37 percent. The Company’s key focused area of chronic therapies contributed 71 percent of the net sales. Europe business picked up in Q2 whereas US business witnessed muted demand. LATAM, Japan and India business (ex-GPL)continue the strong growth momentum. Regulated markets contribution increased to 75 percent with a growth of 7.1 percent QoQ and a decline of 9.7 percent YoY. Emerging markets remained stable YoY (ex-covid products)," informed the brokerage.
As per Anand Rathi, the Company has a good Margin Profile (Gross/EBITDA) and is able to sustain the Margin despite Industry Headwinds. With Capex coming live, diversification of Product portfolio and increasing geographic presence it expects the firm to perform better. It maintains a Buy rating on the stock with a target price of ₹615 per share.
The stock has fallen 32 percent in the last 1 year as well as in 2022 YTD. It is flat in November so far after a 10 percent jump in October.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.