Brokerages Pick Four Stocks With Potential Upside Between 12-23%
Credit Suisse Initiates Coverage On Hindustan Zinc
- Credit Suisse initiated coverage on Hindustan Zinc with a 'Neutral' rating as the company is poised to expand its volume after a seven year lull.
- The company expects to achieve 1.2 million tonnes of mined metal production over the next two years.
- Despite planned output, zinc prices have peaked in the recent times, due to which the company is fully valued.
- Operating income per tonne is expected to stay healthy leading to 'decent' free cash flow generation estimates.
- Albeit the recent decline in the share price, stock trades at significant higher rates, than its historic levels.
- Silver prices have stabilised, far lower than prior surge, leading to an expected growth in output from silver content mines.
- Credit Suisse has put a target price of Rs 325 on the stock, reflecting a near 12 percent upside from Thursday’s closing price.
Credit Suisse Initiates Coverage On Vedanta
- Credit Suisse initiated coverage on Vedanta Ltd. with an ‘Outperform’ rating, driven by volume expansion in oil and zinc international, and improved profitability in aluminium.
- Aluminium business is most important for the company's incremental gains, said the brokerage, adding that global supply-demand function and surging raw material prices augurs well for aluminium prices too.
- Valuations wise, Vedanta is not expensive compared to global metal and mining conglomerates.
- Much of the estimated upside in the company is purely execution-dependent due to which Credit Suisse’s price forecasts remain conservative.
- The most significant risk to the rating stems from the brokerage expecting lower volume growth, relative to the company estimates and a potential unexpected diversification.
- Credit Suisse has put a target price of Rs 345 on the stock, reflecting a near 21 percent upside from Thursday’s closing price.
Axis Capital Re-initiates Coverage On JSW Energy
- Axis Capital re-initiated coverage on JSW Energy Ltd. with a ‘Buy’ rating. The brokerage had dropped coverage in Dec. 2014.
- Falling reliance on merchant power and rising share of power purchase agreements will increase earnings visibility.
- The company boasts of lowest capital costs as well as current replacement costs, compared to its peers in the market.
- JSW Energy has its assets strategically located, which results in high plant load factor.
- Going ahead, the company plans to substitute 50 percent of its imported coal needs with 40 percent cheaper domestic coal, which will improve its revenues.
- Under-leveraged balance sheet will aid the company’s inorganic growth.
- Axis Capital has placed a target price of Rs 100 on the stock, reflecting an upside of nearly 23 percent to Thursday’s closing price.
Axis Capital Initiates ‘Buy’ On Mahindra Logistics
- Axis Capital initiated 'Buy' on Mahindra Logistics Ltd. as its focus on non-automotive and reducing dependence on M&M group is likely to aid margin expansion.
- Going ahead, the M&M group contribution is expected to reduce to 38 percent by FY20 versus 54 percent in FY17.
- Growth is expected to be driven by better client mining and new client additions.
- Gross margin are anticipated to remain largely stable across supply chain management and people transport solutions business.
- Goods and services tax implementation to drive clients’ focus on improving supply chain efficiency (and not tax-based efficiencies) resulting in streamlining logistics across verticals.
- Expect 28 percent earnings growth in compounded annual growth terms and firm return ratios given limited capital expenditure.
- Axis Capital has placed a target price of Rs 525 on the stock, reflecting an upside of nearly 19 percent from Thursday’s closing price.