Select brokerage houses initiated coverage on drug maker Eris Lifesciences Ltd., auto part manufacturer Talbros Automotive Ltd. and packaging solutions provider Time Technoplast Ltd. with a bullish rating.
The brokerages saw a potential upside of anywhere between 11 percent and over 40 percent on these stocks. Besides that, one brokerage initiated a ‘Neutral rating on city gas provider Mahanagar Gas Ltd.
Here are the details:
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Credit Suisse On Eris Lifesciences
- Stock Rating: Initiated ‘Outperform’.
- Price Target: Set at Rs 770, implying a potential upside of 18 percent from yesterday’s close.
- Eris is a pure play in India pharma market, with presence in fast-growing cardiac and diabetes drugs.
- Eris has generated high free cash flow and used the same to accelerate growth.
- Eris has the best return profile and growth in the sector.
- Free cash flow generation at 60 percent of operating income.
- Return on capital employed at 100 percent and expected profit to grow at a compound annual growth rate of 24 percent over the financial years till March 2020.
- Turnaround of recent four loss-making acquisitions could re-rate the stock.
- With synergies coming in, market should be convinced on Eris’ ability to accelerate growth inorganically.
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Ventura Securities On Talbros Automotive
- Stock Rating: Initiated ‘Buy’.
- Price Target: Set at Rs 353, implying a potential upside of 41 percent from yesterday’s close.
- Talbros to resume high growth trajectory after a period of consolidation
- Expect revenue, operating income and net profit to grow at a compound annual growth rate of 14 percent, 16.5 percent and 33.5 percent respectively over the till March 2020.
- Notwithstanding the fact that electric vehicles are a threat to its business, we do not see the impact of the EVs coming into play prior 2023.
- Forgings segment to boost because new international orders from OEMs.
- Expect its joint ventures to see positive traction; Gasket segment to resume growth trajectory.
- introduction of heat shields and export orders from new client additions to its forgings business augurs well for revenue visibility over the medium term.
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ICICI Direct On Time Technoplast
- Stock Rating: Initiated ‘Buy’.
- Price Target: Set at Rs 230, implying a potential upside of 22 percent from yesterday’s close.
- Expansion in added products and new launches to boost Time Technoplast.
- VAP’s revenue contribution to sharply increase to 23 percent by March 2020.
- Better utilisation, stable raw material prices and lower interest outgo to help drive profitability.
- Expect revenue and net profit to grow at a compound annual growth rate of 16 percent and 25 percent respectively till the financial year-ending March 2020.
- Better earnings growth to expand return on equity and return on capital employed to 15 percent and 18 percent respectively by March 2020.
- Composite cylinder: Driver for future revenue growth; Company to launch this product by the second half of the next financial year.
Motilal Oswal On Mahanagar Gas
- Stock Rating: Initiated ‘Neutral’.
- Price Target: Set at Rs 1,219, implying a potential upside of 11 percent from yesterday’s close.
- Unlike Indraprasta Gas, Mahanagar Gas does not enjoy regulatory push with respect to commercial vehicles.
- Its geographical location also would result in lower potential from intercity travel than for Indraprasta Gas.
- Expect total volumes to grow at a compound annual growth rate of 11 percent over the financial years till March 2022, led by conversions and expansion in new areas.
- Industrial demand in Mumbai remains low. However, Raigad could offer a good growth area.
- Rising concerns on pollution to boosting CNG sales.
- Expect continued growth from the under-penetrated commercial segment.
- Petroleum and Natural Gas Regulatory Board’s bidding round could be opportunity for expansion beyond Mumbai.
- Expect operating income and earnings per share to grow at a compound annual growth rate of 7 percent each till March 2020. Expect strong free cash flow generation with higher dividend payout during the period.
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