1 FMCG And 1 Heavy Electrical Equipment Stock To Buy For Good Upside: ICICI Direct

It's earnings season going on in respect of the fourth quarter of the fiscal year 2022 and brokerages considering how the company's quarterly performance is panning out are giving their calls such as 'Hold', 'Buy' or 'Sell'. Accordingly, here are 2 'Buy' recommendations from the respectable brokerage house of ICICI Direct which has suggested to buy Dabur- the stock from the personal care or FMCG segment and another from the consumer electronic space.

Let's see what rationale and target price the brokerage has for both of the stocks:

Dabur:

Dabur is a well known personal care brand offering Ayurveda based products across categories. The company has dominant position in health supplement, OTC and ethical products and is fast gaining market share in oral segment too. Also, the firm is working on to ramp up its direct reach to 1.5 million stores in next two years. Around 50% of the company's sales as per the brokerage are realised from rural regions.

As for the Q4 results, the company's adjusted PAT has been steady at Rs. 379.3 crore, Sales at the company have gone higher YoY by 7.7% aided partially by price hike and 2% volumes growth

Growing Agri-economy is seen to be major driving force for Dabur:

The brokerage sees the agri-economy picking up due to gains in agri exports which thus will provide impetus to the revenue or sales from the rural markets. Also, the firm catering to the demands of its customers is expanding both product wise and is also coming up with variants in a category say as in case of Chyawanprash and Honey. Furthermore, the company is leaving no stone unturned and is ramping up its distribution channel to accommodate one and all through e-commerce channel as well.

Buy Dabur for Rs. 680 target price: The brokerage report highlighted that the scrip in 5 years time has given return to the tune of 88.4% and moved higher in price to Rs. 529 as in May 2022 from Rs. 280-5 years ago. Further it goes on to mention that Dabur is well placed to mitigate margin pressure as it has low dependence on crude based raw material. "We maintain our BUY rating on the stock and value it at Rs. 680 on ascribing 52x FY24 earnings multiple", adds the brokerage.

ABB:

 The mid-cap stock is a leading player in technological offerings and integrates software to its electrification, robotics, automation and motion portfolio. The company operates in primarily 3 segments including robotics and motion, electrification, industrial/ process automation (22%)

Q1Cy22 exceptional even in difficult time: Revenue at the company has edged higher 20.8% YoY to Rs. 1968.3 crore. Revenue uptick is primarily on the back of growth in exports as well as service business together with execution of backlog. PAT logged a stupendous increase of 161.8% YoY to Rs. 370.1 crore, including exceptional item of Rs. 293 crore pertaining to profit on sale of turbocharger business. Also order inflows are placed at a robust Rs. 2291 crore, up 26% YoY.

 

Digitisation and automation across segments to boosts company's prospects- Buy ABB for Rs. 2625 target price

First and foremost the brokerage seems the company to benefit from changes in the power sector i.e. from electrification to digitisation and automation. Also, the brokerage sees the electrical equipment major to see improvement in operating margins given the increase in capacity utilisation,change in revenue mix, cost optimisation programmes and localisation. Also, the company is witnessing recovery in some of the segments including datacentre, renewables, electronics, food & beverages and pharma. Furthermore, the company is putting its focus on order win and has good order book at its command in the Q1 period of Cy22. "Expect revenue, EBITDA to grow at CAGR of ~21.3%, 30.9%, respectively,
in CY21E-23E due to strong traction in short cycle products and services", adds the brokerage firm.

Buy ABB for Rs. 2625 target as deepening penetration of automation and digitisation across segments shall aid the company's long term growth story.

ICICI is bullish on the stock from a long term perspective and has even changed its rating on ABB India to a 'buy' from the earlier 'hold' and values it at Rs. 2625 (70x on CY23E EPS). This at the current price of Rs. 2254.2, implies a potential upside of over 16.5%.

 

Disclaimer:

The stocks are taken from the brokerage report of ICICI Direct after due consideration of their March ended results. The story should not be construed as an investment advice into the listed stocks.

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