Two Stocks Debut On Buy List; One Sector Losing Favour 
A stock broker talks on a telephone while working on his computer. (Photographer: Chris Ratcliffe/Bloomberg)

Two Stocks Debut On Buy List; One Sector Losing Favour 

International brokerage houses CLSA initiated a new buy on Kansai Nerolac Paints Ltd. while UBS added Aegis Logistics Ltd. list of stock bets. Meanwhile, UBS also gave its outlook on India’s industrial and infrastructure sector.

UBS On Aegis Logistics

The company is a leader in third party liquefied petroleum gas terminals and robust LPG demand in India puts it in a good position, the brokerage said in a report.

UBS initiated coverage on Aegis Logistics with a ‘Buy’ and a target price of Rs 280. The stock currently trades at Rs 234.7 apiece.

Factors such as government initiatives, low penetration, consumer preference for clean coking fuel and lack of alternate fuel will drive demand for LPG in the country. Since higher LPG demand is a boon for the company, UBS expects a big improvement in the company’s throughput capacity. The brokerage firm also forecasts higher profitability for Aegis Logistics.

UBS expects the operational income and earnings per share to grow at a compounded annual growth rate of 36 percent each between financial years 2018-2021.

CLSA On Kansai Nerolac

The company has a higher leverage to capital expenditure revival, which is a good signal for the company, CLSA said in a report. The brokerage firm does not see any significant risks to the paint maker's margin even as the input prices are on an uptrend.

CLSA initiated coverage on Kansai Nerolac with a ‘Buy’ and target price of Rs 600, which is 24 percent upside from the current market price.

CLSA notes that Kansai Nerolac has a market share of 60 percent in the auto original equipment manufacturer segment, where industrial paint is an important commodity.

It expects the company's revenue to grow at a compound annual growth rate of 16 percent over financial years 2017 to 2019, while the earnings per share will grow at more than 17 percent CAGR over financial years 2018 to 2020. Strong balance sheet and high governance levels will help sustain higher valuations, said CLSA.

UBS On India Industrial And Infrastructure

The implementation of Goods and Services Tax brought with it a lot of woes for the “vulnerable” sector, it said in a report. It worsened an already sluggish trajectory. Among all these roadblocks, when the largest company, L&T, cuts its order guidance, it definitely does not signal well for the sector and, hence, it underscores UBS' concerns about a cyclical capex recovery. If the earnings downgrade cycle persists, the stocks of this sector will be vulnerable to de-rating, said UBS.

UBS’s prior forecast that earnings per share for the sector stocks will grow at a CAGR of 18 percent remains elusive, the report said.

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