4 Stocks To Buy Today After Their Q3FY22 Results For Decent Returns In 1-Year

ICICI Direct, a brokerage firm, has listed four stocks with a 12-month target timeframe and a buy call recommendation. The brokerage's comments, including stock valuation and recommendations, are detailed here.

Polycab India

ICICI Direct has said "Polycab's share price has grown by ~2.5x over the past two years (from ~Rs 1019 in January 2020 to ~Rs 2510 levels in January 2021). We maintain our BUY rating on the stock. We revise our target price to Rs 3000/share valuing the stock at 35x P/E on FY24E EPS."

Q3FY22 results according to the brokerage

• Strong revenue growth of 23% YoY to Rs 3372 crore led by 25% growth in wire & cable segment. FMEG revenue growth of 11% came on a strong base.
• EBITDA margin declined ~200 bps YoY to 10.7% due to delay in price hikes and higher other expenses. Sequentially, margin improved 100 bps.
• PAT from continued operation at Rs 248.4 crore was up 1.4% YoY.

Key triggers for future price performance according to ICICI Direct

• Set a target to achieve Rs 20,000 crore revenues by FY26 (18% CAGR).
• Beneficiary of the government's plans to invest ~Rs 111 lakh crore in FY20- 25 under its National Infrastructure Pipeline.
• Total ~1.7 crore new houses under PMAY, urbanisation and rising aspiration level will give a significant boost to demand home appliances.
• Model revenue, earnings CAGR of ~17%, ~13%, respectively, in FY21-24E.

CSB Bank

According to ICICI Direct "CSB Bank stock has given marginal returns in the past one year, primarily on account of apprehensions on asset quality SME segment due to lockdowns but we believe as these overhangs fade away the stock should see a positive reflection. We retain our BUY rating on the stock. We value CSB Bank at ~1.7x FY24E ABV and keep unchanged our target price at Rs 320."

Q3FY22 Results

• NII up 21% YoY, NIM up 24 bps QoQ at 5.5%, C/I up to 58% from 56% QoQ.
• Overall provisions write-back of Rs 50.6 crore boosted PAT at Rs 148 crore.
• GNPA down 149 bps QoQ to 2.6%, R/S book at ~0.9% of loans.

Key triggers for future price performance

• Healthy recovery in the gold segment to aid performance.
• Multiple levers for margin improvement.
• Credit cost to remain benign due to and thus aiding profits.
• Loan growth to pick up as unlocking progresses and launch of new products.

Mphasis

ICICI Direct has said in a report that "Mphasis' share price has grown by ~6.5x over the past five years (from ~Rs 461 in January 2017 to ~Rs 3015 levels in January 2022). We change our recommendation on the stock from HOLD to BUY. We value Mphasis at Rs 3550 i.e. 32x P/E on FY23E EPS."

Q3FY22 Results

• Dollar revenues increased 8.8% QoQ to US$414 million
• Adjusted margins (ex-impact of Blink) were at 15.9%.
• An eighth consecutive quarter of US$200mn+ new deal wins.

Key triggers for future price performance

• Strategy to mine top 10/20 clients, adding high potential new logos, increase in deal sizes & expansion in Europe bodes well for long term growth.
• Further, management stability, improving deal size, market share gains via vendor consolidation, low legacy exposure and exposure to lesser impacted verticals to drive 23.4% CAGR growth in direct revenues in FY21-24E.
• Improving revenue trajectory, higher offshoring, pricing, and automation to boost margins (90 bps to 17.0% in FY21-24E).

Phillips Carbon Black Limited (PCBL)

ICICI Direct has claimed that "PCBL has been one of our early finds wherein it grew ~4x in the past five years (~Rs 55 in January 2017 to ~Rs 233 as of January 2022). We maintain our positive view and retain a BUY rating on the stock. Introducing FY24E, we roll over our valuations and now value PCBL at an unchanged target price of Rs 320 i.e. 12x P/E on FY23E-24E avg. EPS."

Q3FY22 Results

• Net sales came in at Rs 1156.1 crore with carbon black sales volume at ~117 KT, up 1% QoQ. Exports share of volume was at ~34% vs. usual <=30%.
• EBITDA in Q3FY22 came in at Rs 168.1 crore with EBITDA/tonne at ~Rs 14,420.
• Consequent PAT in Q3FY22 was at Rs 111.1 crore, down 9% QoQ.

Key triggers for future price performance

• Healthy double-digit growth on anvil. We expect sales, PAT to grow at 23%, 16%, CAGR, respectively, in FY21-24E, building in 11.4% volume CAGR.
• With greenfield expansion (~150 KT) under execution and successful strides made in the specialty carbon black domain, long term growth prospects are robust amid limited competition in overseas markets.
• Trades at inexpensive valuation of (less than 10x P/E on FY22E EPS of ~Rs 24/share).

Disclaimer

The stocks and figures have been picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.