Why Brokerages Are Bullish On Underperformers CDSL And NGL Fine-Chem

HDFC Securities and ICICI Direct have initiated coverage with “Buy” rating on two mid-cap stocks that have underperformed the benchmark index in 2018.

HDFC Securities has set a target price of Rs 425 on Central Depository Services (India) Ltd., implying an upside potential of as much as 50 percent. ICICI Direct expects NGL Fine-Chem Ltd. to rise between 13 percent and 23 percent in the next one year.

Shares of the depository services provider have fallen nearly 20 percent in 2018, while those of the drugmaker declined over 11 percent. That compares to the 10 percent fall of the benchmark Nifty Free Float Midcap 100 Index so far this year.

Here’s what these brokerages had to say about the two stocks:

HDFC Securities On CDSL

Initiated ‘Buy’ with a price target of Rs 425; implying a potential upside of 50 percent from Tuesday’s closing price.

• “Gem of a business” that investors constructive on India in the long term must own.
• CDSL is gaining market share.
• Robust balance sheet and cash generation.
• Pays healthy dividends, but the payout could be higher.
• Expect revenue, operating income and net profit to compound at 22 percent, 28 percent and 20 percent respectively over financial years 2017-2020.
• Expect operating margin to expand to 64 percent by March 2020, compared to 54.4 percent clocked in the previous financial year, led by fixed cost business model.

ICICI Direct On NGL Fine-Chem

Initiated ‘Buy’ with a price target of Rs 465 – Rs 505, implying a potential upside of 13.4 - 23.1 percent from Tuesday’s closing price.

• Capacity expansion to support future growth.
• Expect revenue, operating income and net profit to compound at 15 percent, 14 percent and 19 percent respectively, over financial years 2017-2020.
• The stock offers a compelling value proposition based on micro and macro parameters.