2 stocks to buy on ICICI Direct for good earnings in 12 months
1. Dalmia Bharat sugar:
Dalmia Bharat Sugar is the only sugar company operating in both the UP and Maharashtra. The company has a sugar crushing capacity of 35,500 TCD (6 lakh tons per year), a distillery capacity of 300 KLD (8.5 crore liter pa) and a cogeneration capacity of 102 MW and a wind power of 16 , 5 MW (total 30 crore salable power units).
In its financial results for the first quarter of fiscal 22, the company reported muted numbers due to a strong base quarter. PAT came in at Rs. 124.4 crore due to a tax reversal, while EBITDA was also down 28% year-on-year.
Triggers for the future price performance of Dalmia Bharat
– The company is the fastest in using the B-heavy road, sugarcane juice and grains to produce ethanol. Distillery volumes are expected to increase 2.5 times to reach 21 crore liters by FY24.
– The company has been aggressive in exporting sugar and using higher world prices for white sugar. The cost of freight is much lower given its proximity to the ports.
– With increasing profitability and reducing sugar stocks, the sugar company would generate a cumulative free cash flow of Rs. 570 crore over the next two years despite an approximate Rs. 700 crore investment
ICICI Direct continues to maintain its BUY rating on the stock with a price target of Rs. 650, assigning a multiple of 14x earnings for fiscal year 23. This implies gains of 37.5% over the last year. traded price of the share. The brokerage firm expects a 2.5-fold increase in distillery volumes to increase profits with a CAGR of 18.4% over FY21-24E. Notably, Dalmia Bharat Sugar’s script has tripled in the past 3 years, from Rs. 160 in August 2016 to Rs. 479 in August 2021.
Last price traded – Rs. 472.65
Target price – Rs. 650
target period – 12 months
|Prize money (x)||14.3||12.2||10.3|
2. Aditya Birla Fashion and Retail
ICICI Direct placed a buy on retail company Aditya Birla Fashion and Retail for a target price of Rs. 265. This is a 19.5% gain from the last closing price of the share of Rs. 221.7.
|Store||Last negotiated price||Target price||Target period|
|Aditya birla fashion||Rs. 221.7||Rs. 265||12 months|
Under its retail chain, the company owns leading brands including Allen Solly, Van Heusen, Louis Philippe and Peter England, as well as the strong point of Pantaloons, the largest value fashion retailer.
The company has found ways to grow into an approximately US $ 2.8 billion business by fiscal year 26E, implying a 15% CAGR in fiscal year 20-26E, according to the report. ‘ICICI Direct.
Although Covid disrupted Aditya Birla Fashion’s performance in the second quarter, green shoots are visible with a 75% recovery in July. Revenue showed a 40% recovery from pre-Covid levels given the FY20 first quarter baseline.
Favorable winds for the future price performance of Aditya Birla Fashion
Aditya Birla has an aggressive expansion plan for FY22E with over 60 pants stores and over 400 lifestyle brand stores (franchisees). Penetration into small towns is also being considered. In addition, the company plans to launch a new Pentaloons site in the third quarter and a multi-brand app in the fourth quarter of fiscal 22.
Aditya Birla Fashion has strengthened its balance sheet thanks to a recent equity injection with net debt falling sharply from Rs. 2,500 crore to Rs. 530 crore as on FY20. ICICI Direct remains positive and maintains its PURCHASE rating on the stock. “We value the company at Rs. 265, or 2.5x FY23E EV / Sales,” the brokerage said.
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