Sharekhan’s research repor on Wipro
The management aims to transform the company into a more externally focused and decentralized organization to accelerate growth as compared to its earlier internal and operational centric approach. Company would invest on (1) go-to-market, (2) business solutions, (3) partnerships and (4) strategic M&A to accelerate growth; margin likely to sustain given structural changes, pricing power, operational excellence and lower discretionary expenses. The CEO stated that the leaner organization structure would reduce P&L to 4 units versus 25 units earlier, which would enable it to take better decision on go-to market strategy and optimize costs.
We maintain our Buy rating on Wipro with an unchanged PT of Rs. 450 as demand is improving across its large verticals.
Sharekhan’s research repor on Bharat Electronics
Management expects double digit revenue growth with margins to be around 20% for FY2021E. Reiterate FY2021 order inflow target of Rs. 15,000 crore. Order book remains healthy at Rs. 52,148 crore (4x its TTM revenue), which provides good revenue visibility. BEL is well positioned to benefit from rising defence expenditure supported by strong manufacturing base, execution track record, and continued focus on in-house R&D capabilities.
We retain our Buy rating on Bharat Electronics Limited (BEL) with an unchanged price target of Rs. 135, considering reasonable valuations and strong execution capabilities.
Sharekhan’s research repor on JK Lakshmi Cement
JKL has seen a sharp run-up of ~18% over a fortnight, led by strong outperformance in Q2FY2021 and favourable demand-supply dynamics emerging in its key regional markets viz. North and West. Average cement prices in West and North (together ~75% of sales mix) in October-November 2020 are up ~7% versus Q3FY2020. Cement prices are expected to rise further with the festive season nearing its end and onset of peak construction activities. The company’s expansion at UCWL would ease clinker and capacity constraints, providing the next leg of growth. Scheduled debt repayment and incremental debt for capex is expected to contain debt levels over the next two years.
We retain our Buy rating on JK Lakshmi Cement Limited (JKL) with a revised PT of Rs. 410, given its attractive valuation and healthy net earnings CAGR over FY2021E-FY2023E.
Sharekhan’s research repor on GAIL (India)
GAIL has cash balance of ~Rs. 1,614 crore, which makes it likely strong candidate to announce share buyback among PSUs. Earnings outlook has also improved as a sharp increase in spot LNG price to $6/mmbtu could help reverse H1FY2021 loss in the gas trading business, while the increase in HDPE prices bodes well for sustained improvement in the profitability of the petchem business. GAIL is likely to be the key beneficiary of government’s aim to increase share of gas in India’s energy mix to 15% by 2025 (versus only 6% currently) as the same provides sustainable volume growth opportunity for its gas pipeline and trading business. GAIL is trading at an attractive valuation of 5.6x its FY2023E EV/EBITDA (37% discount to historical average EV/EBITDA multiple) despite sharp run-up of 39% in the stock price in the past one month.
We retain our Buy rating on GAIL with a revised PT of Rs. 140, as unified tariff regulation is structurally positive for long-term volume growth.