Explosives maker Solar Industries Ltd., agri-chemical manufacturer PI Industries Ltd. and Asia’s oldest stock exchange BSE Ltd. are the latest stocks to get a thumbs-up from brokerage houses.
Meanwhile, road maker IRB Infra Ltd. was downgraded by an international broking firm on legal concerns.
Here are more details
Ventura Securities on Solar Industries
- Initiated ‘Buy’ rating with a price target of Rs 1,537, implying a potential upside of 37 percent over 27 months.
- Solar Industries is a dominant player in the explosives industry and five times the size of its nearest peer.
- Infrastructure growth and mining boom to boost demand for explosives.
- Defense sector liberalisation and international market opportunities are positives.
- Expect healthy operating cash flows going ahead.
- Net debt to equity to be maintained at 0.4 times in future.
- Expect revenue, operating income and net profit to grow at a compounded annual growth rate of 25.3 percent, 27.2 percent and 28.6 percent by March 2020.
- Expect return on equity to expand by 157 basis points to 21.7 percent by March 2020.
- Expect return on capital employed to expand by 357 basis points to 28.7 percent by March 2020.
- Incisive business strategy, enviable financial performance, regulatory compliance and well managed capex make compelling case for premium valuation.
Credit Suisse on PI Industries
- Initiated ‘Outperform’ rating and price target of Rs 1,150.
- PI strongly positioned in custom synthesis and manufacturing; Order book provides visibility.
- PI to have a less than 5 percent market share of global industry in custom synthesis and manufacturing, offering ample opportunity to grow.
- Focus on speciality products in domestic business a key differentiator.
- Expect revenue of custom synthesis and manufacturing business and domestic business to grow at a compounded annual growth rate of 20 percent and 14 percent by March 2020.
- Operating margins should sustain in narrow range.
Nomura on BSE
- Initiated ‘Neutral’ rating with a price target of Rs 1,000; implying a potential upside of 9 percent.
- Monetising/diversifying its franchise but losing the core battle.
- Large part of BSE’s business value driven by non-core segment.
- High EBIT growth led by transaction revenues from highly volatile illiquid segment.
- Refrain from giving higher multiple to unsustainable/volatile portion.
- Dependence on investment income reducing; Operational costs stable.
- Expect revenue, EBIT and profit before tax to grow at a compounded annual growth rate of 4 percent, 11 percent and 14 percent respectively by March 2020.
- EBIT margin to improve to 30 percent by March 2020.
HSBC on IRB Infra
- Downgrade to ‘Hold’ from ‘Buy’; cut target price to Rs 200 from Rs 331
- CBI filed a charge sheet against IRB, along with promoter, subsidiary, and few other employees in a government land grab case
- Historically, the stock has reacted very negatively on such news flow
- Very difficult to predict how the case will progress
- Expect stock to be under pressure and will not be driven by business fundamentals
- Downgrade to ‘Hold’ despite attractive valuations