3 Stocks Rated New ‘Buy’ At Brokerages

Brokerage houses initiated coverage on three stocks with a ‘Buy’ rating. They are information technologies firms Larsen & Toubro Infotech Ltd., Zensar Technologies Ltd., and fertilizer maker Deepak Nitrite Ltd.

Among these three firms, L&T Infotech and Deepak Nitrite got their highest target prices.

Here’s what the analysts had to say:

IDBI Capital On Larsen & Toubro Infotech

• Initiated ‘Buy’ with target price of Rs 1,300, implying a potential upside of 16.7 percent from yesterday’s close.
• Larsen & Toubro Infotech has all the ingredients of being a sustainable growth engines.
• Strong presence in high growth digital solutions.
• Expect Larsen & Toubro Infotech to continue to outperform the sector.
• Likely to become more aggressive than before; to be most feared competitor.
• Momentum across – large clients, large deal wins, large deal pipeline to continue.
• Expect revenue in dollar terms and earnings per share to grow at a compounded annual growth rate of 14 percent and 13 percent, respectively over the financial years through March 2020.
• Strong growth performance warrants premium valuation.

Prabhudas Lilladher On Zensar Technologies

• Initiated ‘Buy’ with target price of Rs 1,000, implying a potential upside of 13.6 percent from yesterday’s close.
• Increasing proportion of revenues from Digital SBU coupled with deal wins to revive revenue growth trajectory.
• Expect gradual recovery on the margin front.
• Revival in growth to drive selling, general and administrative expenses leverage and margin expansion over the financial years through March 2020.
• Strong expertise in Oracle offerings remains the key proposition.
• Zensar now positioned to address complete value chain in retail e-commerce
• Earnings per share estimates for the current and next two financial years are at Rs 52, Rs 65 and Rs 80, respectively.
• Dollar revenue growth for the current and next two financial years estimated at 3.7 percent, 10.3 percent and 11 percent, respectively.
• Valuations remain reasonable; Room for re-rating over two-year period.

Edelweiss Investment On Deepak Nitrite

• Initiated ‘Buy’ with a target price of Rs 360, implying a potential upside of 31 percent from yesterday’s close.
• New plant to revitalise business dynamics from April 2019 onwards
• Positives: improving product mix, efficiency to drive performance products business.
• Company set to reap benefits of capacities as well as performance products
• Expect spectacular revenue and margin spurt with higher utilisation levels and business expansion
• Revenue is expected to double and margins quadruple; Net profit to grow at a compounded rate of 38 percent over the financial years through March 2020.
• Debt funded capex to generate healthy returns.
• Debt-to-equity expected to soar two times; return on capital employed to expand to 17 percent by March 2020.
• Free cash flows from April 2019 with scope for forward integration.
• Low valuations for a strong cash flow generating business.
• Bull case price target of Rs 414.