Brokerages Initiate Coverage On These Three Stocks; One Auto Major Gets ‘Sell’

Brokerage houses initiated coverage on three companies today. While KEI Industries Ltd. and MAS Financial Services Ltd. got a ‘Buy’ rating each, TVS Motor Company Ltd. received a ‘Sell’. KEI Industries got its highest target price.

Here’s what the analysts had to say:

Motilal Oswal On KEI Industries

• Initiated ‘Buy’ with target price of Rs 537; implying a potential upside of 44 percent from yesterday's close.
• KEI likely to be major beneficiary of key government initiatives.
• KEI looking to enter newer markets in southern and eastern parts of India.
• Expanding retail segment to be a key growth driver.
• Extra high voltage cables and engineering, procurement and construction business to drive institutional segment growth.
• Exports to report decent growth due to strong geographical presence.
• Expanding margins due to improving business mix.
• Working capital cycle to improve along with positive free cash flow in future.
• Expect revenue, operating income and net profit to grow at a compounded annual growth rate of 18.7 percent, 21.6 percent and 33 percent, respectively. over the financial years through March 2020.
• Expect return on equity and return on capital employed to expand 26.5 percent and 20.5 percent, respectively by March 2020, compared to 23.5 percent and 18.5 percent, respectively, clocked during the financial year-ended March 2017.
• Given high growth expectation along with healthy financials, KEI deserves higher valuations.

Motilal Oswal On MAS Financial

• Initiated ‘Buy’ with target price of Rs 740, an upside of over 18 percent from yesterday’s close.
• An efficient player in high growth product segment.
• Present in high growth segments with differentiated offering.
• Strong risk management to lead to superior asset quality.
• Asset under management growth to be aided by micro, small and medium enterprise loans and housing loans.
• Expect AUM and net profit to grow at a CAGR of 25 percent and 36 percent, respectively, over the financial years through March 2020.
• Higher share of direct lending coupled with stable asset quality to support return on assets.
• Expect return on assets to improve to 2.7 percent by March 2020.
• Net interest margins to improve aided by asset and liability diversification.
• Consistent performance warrants premium valuations.
• Bull Case price target of Rs 907: Expect AUM and net profit to grow at a CAGR of 30 percent and 44 percent, respectively, over the financial years through March 2020.

Citi On TVS Motor

• Initiated ‘Sell’ with target price of Rs 700, a downside of over 7 percent from yesterday’s close.
• Competitive intensity to escalate in scooters.
• Weaker presence in motorcycles to impede growth.
• Valuations price-in margin improvement, not headwinds.
• Expect significant uptick in premium bikes market share to 15.5 percent by March 2020, compared to 11.7 percent, clocked in the financial year-ended March 2017.
• Premium bike segment could see pricing pressures.
• There is very little room for error for TVS Motor.
• Three-Wheeler growth depends on exports.
• Cash flow generation to aid deleveraging of balance sheet.
• Expect domestic volumes, export volumes and earnings per share to grow at CAGR of 20 percent, 15.6 percent and 30 percent, respectively over the financial years through March 2020.

Also Read: Brokerages Say These 3 Stocks May Rise Another 30%