YSL : Top 4 Stock Picks for Dec’21. Potential Upside up to 35%
Recommended stocks -
1. *ICICI BANK*
CMP - 716
Target - 881
Upside - 23%
Period - 12 months
Reason :
1. Contingent Covid Provisions
2. Other Excess Provision
3. Provision on Restructured book
4. Specific provisions and these provide the highest coverage for NPA plus restructuring
5. Business mix Risk score (from Assset quality standpoint)- 0.84
6. Ability to increase, the share of higher yielding loans in a risk calibrated manner.
2. *PNC INFRA*
CMP - 300
Target - 405
Upside - 35%
Period - 12 months
Reason :
1. Healthy order book of 3.5× of FY21 revenue provides revenue visibility.
Entry into water segment to help diversify.
2. Strong execution and operational capabilities supported by largely owned construction equipment
3. Robust tendering from NHAI to boost the awarding activities in near term driven by HAM and EPC projects.
4. Strong balance sheet,improvement in Net working capital days and double digit margin profile to support.
5. Recent order inflow,continued focus on Asset monetization and comfortable balance sheet provide comfort.trades at attractive P/E 15× FY23
3. *Apollo Pipes*
CMP -603
Target -784
Upside - 30%
Period - 12 months
1. Industry Tailwind : large investments likely to flow in irrigation segment(50% pipe demand)
Coupled with healthy capital outlay in water supply system(35%pipe demand)
*Formalization of Industry* :
Plastic pipe Industry is witnessing material shift in demand from unorganized (35%) to organized segment(65%).
*Expanding Regional Presence* :
Apollo Pipes has been predominantly present in North India where it command robust market share. With new capacities in place,company is set to expand its regional presence in west,South East and Central India.
Gross profit margins to expand by 150 bps over FY21-FY24E
*Balance sheet to strengthen further*
Apollo Pipes have strengthened their balance sheet by reducing total debt from Rs. 1552 MN in FY18 to Rs.522 MN in FY21.
*Lucrative Valuation*:
Apollo Pipes is currently trading at P/E(x) of 25x on FY24E EPS as compared to Industry average of 34x.
4. *Oberoi Realty*
CMP - 855
Target- 1130
Upside : 32%
Period : 12 months
1.Diversifying residential business by entering in the society development.
2.Company is willing to enter NCR market ,which we believe, will give further visibility of Earning and reduce dependence on one geography.
3. Oberoi is in process of commissioning Anniuty assets (Sky City Mall,Commerz III ,Sky City Extension) and Hospitality Asset (Ritz Calton-Worli, Sky City Borivali) ,which will take the annuity revenue to 4.2x.
4. Oberoi is expected to launch the Thane project in Jan-22 which will further boost the company cash flow as projects has developable area of 14msf and with the selling price of 15000/sft company can generate top line of 210bn.