Road maker Dilip Buildcon, education content publisher S Chand & Co. and engineering company Cummins India were upgraded by select brokerages, citing robust growth outlook in coming year. The brokerages expect stocks of these companies to return anywhere between 40 percent and 24 percent.
Here's what the brokerages had to say:
Credit Suisse on Cummins India
- Upgrades the stock’s rating to ‘Outperform’ from earlier ‘Neutral’ with a target price of Rs 975, implying a potential upside of 39 percent.
- It said the bullish call based on steady improvement in domestic power generation market and strong domestic industrial business.
- Sees likelihood of margin improvement and recovery in exports.
- Says domestic business has sequentially recovered from Goods and Services Tax issues.
- Factors that can help domestic business further: 1) cyclical recovery, 2) industrial and 3 ) traction in spare parts market.
IDFC Securities on S Chand & Co.
- Initiates coverage with an ‘Outperform' rating and a target price Rs 520, implying a potential upside of 26.7 percent from last regular trade.
- The company's holds a strong competitive edge (based on star authors, repository of titles, robust distribution network) over its rivals which will help it capitalise on content market growth.
- Scale up of digital investments will sharply improve company's profitability.
- Possible inorganic expansions could improve revenue seasonality.
- Regulatory or digital disruptions in the K-12 market is a key risk for the company.
BofAML On Dilip Buildcon
- Initiated ‘Buy’ with a target price of Rs 1,244, suggesting 24 percent potential upside.
- The company offers better margins, backed by healthy balance sheet, superior execution and project selection skills and low cost structure.
- Superior execution skills/margins to drive a 24 percent and 22 percent compounded annual growth rate in sales and earnings per share, respectively, in financial year 2018-20.
- Expect company to maintain industry leading 25 percent return on equity, led by better asset turns, working capital cycle, etc.
- Key risks: retrospective taxes, delay in cash flows for hybrid annuity model asset sales, and potential write-off of stuck receivables.