New Year 2023 Investment Ideas | Globe Capital
30-Dec-2022
New Year 2023 Investment Ideas

Wishing everyone Happy and Prosperous New Year 2023

Report Overview

Company Name Industry Market Cap (Cr.) LTP TTM PE Expected Target
Deepak Fertilizer Ltd. Fertilizers 8966 708 7.7 957
Divis Labs Ltd. Pharma 90573 3412 30.27 4450
HCL Technology Ltd. IT 283442 1045 20.53 1325
HIL Ltd. Construction Material 1931 2562 11.72 3450
Nava Ltd Sponge Iron 3452 238 3.94 355

Note: Investment period – 12 Months Stock’s Price as on December 29, 2022

Deepak Fertilizers & Petrochemicals Corporation Limited
Profile:
Deepak Fertilisers and Petrochemicals Corporation Ltd. is among the India’s leading manufacturers of industrial chemicals and fertilisers. With a strong presence in Technical Ammonium Nitrate (mining chemicals), Industrial Chemicals and Crop Nutrition (fertilisers), the Company supports critical sectors of the economy such as infrastructure, mining, chemicals, pharmaceutical and agriculture. It  is leading manufacturer and marketer of Iso Propyl Alcohol (IPA) in India and largest manufacturer of Nitric Acid in South East Asia. The Company is developing specialised grades of Nitric acid and IPA to meet specific requirements to cater needs of the industry/consumer.Key Triggers:

  • Excellent Q2FY23 Earnings: Its Q2 PAT jumps to nearly 3 times Y-o-Y to Rs 276 Cr driven by Chemicals Segment. Q2 FY23 Revenues increased y-o-y by 55% to Rs. 1,533 Cr. in Chemical segment comprising Mining Chemicals and Pharma/Speciality Chemicals. Segment Profit increased 193% y-o-y from Rs. 148 Cr in Q2FY22 to Rs. 434 Cr in Q2 FY23.
  • Recent order book & Positive management outlook: The Company has signed a binding 20-year agreement with Aarti Industries for the supply and offtake of nitric acid valued at Rs 8,000 crore.

Valuation & View:

At the current price of Rs. 708, the stock is trading at ttm P/E multiple of 7.7x with ttm EPS of Rs. 92. Hence, we recommend a ‘BUY’ rating for the target price of Rs. 975 in 12 months perspective.

Key Risk:

  • Government’s adverse fertilizer subsidy policy may dent profitability.
Valuation Metrics
CMP (Rs.) 708
Target Price (Rs.) 975
NIFTY 50 18191
52 Week H/L 1062/366
Market Cap (Cr.) 8963
P/E (ttm) 7.74
EPS (ttm) 92.2
P/BV (ttm) 1.96
Book Value (ttm) 361
Industry Fertilizers

Chart comparison with Sensex

Source: Ace Equity

Divis Lab Limited
Profile:
Divi’s Laboratories Limited is a leading manufacturer of Active Pharmaceutical Ingredients (“API”), intermediates as well as nutraceutical ingredients offering quality products with the high level of compliance to customers in over 95 countries. The Company is recognised as a reliable supplier of generic APIs, a trustworthy custom manufacturer to big pharma and is among the top API manufacturers worldwide.Key Triggers:

  • HY23 Earnings: For the half year period, it has consolidated revenue of Rs. 4,278 crores and the profit after tax of Rs. 1,196 crores. Its EBIDTA margin for the quarter accounted to 36% and 38.5% for half year. Exports for the quarter accounted to 87%. As of 30th September, it has cash on books of Rs. 3,336 crores, receivables of Rs. 1,840 crores and inventories of Rs. 2,970 crores.
  • Positive Industry Outlook: According to Grand view research report, the API market is expected to grow at 6% CAGR in a forecasted period of 2022 – 2030 with revenue of approx. $353 billion from $222 billion. The growth can be attributed to the advancements in API manufacturing and the rising prevalence of chronic diseases. Favorable government policies for API production, along with changes in geopolitical situations, are boosting the market growth.

Valuation & View:

At the current price of Rs 3412, the stock is trading at ttm PE multiple of 30.27 times with an EPS of Rs 112.72. Hence, we recommend a BUY rating for the target price of Rs 4450 in 12 months perspective.

Key Risk:

  • Any adverse news from FDI may dent profitability.
Valuation Metrics
CMP (Rs.) 3412
Target Price (Rs.) 4450
NIFTY 50 18191
52 Week H/L 4708/3195
Market Cap (Cr.) 90572
P/E (ttm) 30.27
EPS (ttm) 112.72
P/BV (ttm) 7.46
Book Value (ttm) 457
Industry Pharma API

Chart comparison with Sensex

Source: Ace Equity

HCL Tech Limited
Profile:
HCL Technologies is structured around three categories of service offerings: IT and Business Services (ITBS), Engineering and R&D Services (ERS), and Products & Platforms (P&P). ITBS enables global enterprises to transform their businesses through offerings in applications, infrastructure, digital process operations, and next generation digital transformation solutions.

Key Triggers:

  • Q2FY23 Financials: For the quarter ended 30-09-2022, the company has reported a Consolidated Total Income of Rs 24922.00 Crore, up 4.39 % from last quarter Total Income of Rs 23873.00 Crore and up 19.27 % from last year same quarter Total Income of Rs 20895.00 Crore. Company has reported net profit after tax of Rs 3487.00 Crore in latest quarter.
  • Leveraging Ecosystems for Innovation: Globally, IT spending is concentrated on cloud. By 2025, 51% of enterprise IT budgets are forecasted to be cloud related, surpassing non-cloud spending. The shift in the role of cloud is driven by evolving consumer expectations, global connectivity, digitization, and data, all of which are changing the way enterprises compete and behave. To help organizations thrive and meet market demands in this constantly shifting environment, HCL works with the world’s leading technology providers to address complex operational and business challenges.

Valuation & View:

At the current price of Rs. 1045, the stock is trading at ttm P/E multiple of 20.5x with the ttm EPS of 50.80. Hence, we recommend a ‘BUY’ rating for the target price of Rs. 1325 in 12 months perspective.

Key Risk:

  • Slowdown in economy may dent growth in profitability.
Valuation Metrics
CMP (Rs.) 1045
Target Price (Rs.) 1325
NIFTY 50 18191
52 Week H/L 1359/876
Market Cap (Cr.) 282787
P/E (ttm) 20.5
EPS (ttm) 50.88
P/BV (ttm) 4.63
Book Value (ttm) 226
Industry IT

Chart comparison with Sensex

Source: Ace Equity

HIL Limited
Profile:
Founded in 1946 and having completed 75 glorious years HIL Limited is an integral part of a burgeoning marketplace. It is the flagship company of the C K Birla Group, which is a growing US$2.8 billion conglomerate with diversified interests. With over 30,000 employees, 41 manufacturing facilities and numerous patents and awards, the Group’s businesses operate in five continents. Today, HIL is the acknowledged leader in the Building Material space in India. HIL has been honored with the title of “Asia’s Most Trusted Building Material Company for last 2 consecutive years by IBC INFOMEDIA.

Key Triggers:

  • The Company has build a sustainable distribution network by establishing Sales Joint Ventures/subsidiaries in selected markets.
  • The Company has delivered good profit growth of 28.2% CAGR over last 5 years.
  • Diversified product portfolio: The Company has a vast product portfolio, ranging from roofing, walling, flooring solutions and polymer solutions to engineering solutions.

Valuation & View:

At the current price of Rs 2562, the stock is trading at P/E multiple of 11.7x with an EPS of Rs 218.65. Hence, we recommend a ‘BUY’ rating for the target price of Rs. 3450 in 12 months perspective.

Key Risk:

  • Continuing raw material price inflation and higher sea freight can dent profitability.
Valuation Metrics
CMP (Rs.) 2562
Target Price (Rs.) 3450
NIFTY 50 18191
52 Week H/L 4865/2485
Market Cap (Cr.) 1952
P/E (ttm) 11.72
EPS (ttm) 218.65
P/BV (ttm) 1.62
Book Value (ttm) 1485
Industry Cement

Chart comparison with Sensex

Source: Ace Equity

NAVA Limited
Profile:
Nava Limited is earlier known as Nav Bharat Venture Ltd. It is a diversified organization with interests in ferro alloys, energy, O&M services, coal mining, commercial agri and health care. Operates in different geographies spanning across India, South East Asia and Africa.Key Triggers:

  • Strong Financial Performance: The Company has posted healthy Revenue and Profitability CAGR growth. 4 yrs revenue CAGR growth at ~109%), EBITDA CAGR growth at ~117%) & PATCAGR growth at 120%.
  • Low Gearing: Debt to Equity Ratio of 0.7x (FY22).
  • Non-core Asset Monetisation:
    •       Monetise 20 MW IPP Power plant in Andhra Pradesh
    •       Large land bank in Hyderabad, and Dharmavaram (near Kakinada Port) in Andhra Pradesh
    •       Sugar plant & project land, Samalkot, Andhra Pradesh
  • Healthcare Operations: The Company has forayed into healthcare-enabled services with initial focus in Singapore and Malaysia.

Valuation & View:

At the current price of Rs. 238, the stock is trading at ttm P/E multiple of 3.94x with ttm EPS of Rs. 59. Hence, we recommend a ‘BUY’ rating & accumulate on decline for the target price of Rs. 350 in 12 months perspective.

Key Risk:

  • Adverse economic conditions could negatively affect its business, financial condition and result of operations.
Valuation Metrics
CMP (Rs.) 238
Target Price (Rs.) 355
NIFTY 50 18191
52 Week H/L 279/108
Market Cap (Cr.) 3541
P/E (ttam) 3.94
EPS (ttm) 60.45
P/BV (ttm) 0.63
Book Value (ttm) 380
Industry Sponge Iron

Chart comparison with Sensex

Source: Ace Equity

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