2 MidCap Company Stocks to Buy As Recommended By ICICI Securities

On Wednesday, the Indian equity indexes recovered some of their early losses as selling pressure in heavyweights eased. Meanwhile, ICICI Direct, a brokerage firm, has recommended buying Nesco and East India Hotels stocks with a potential upside of up to 23% in the next 12 months.

Buy East India Hotels with upaide potential of 23%

East India Hotels' stock has a 'Buy' recommendation from ICICI Securities, with a price target of Rs. 180. At the present price of Rs. 146, potential investors can make a 23 percent profit.

Q2FY22 Results

• Due to higher revenues, the operational performance exceeded our expectations. However, impairment loss had a negative influence on the bottom line.
• Revenues increased by 233.6 percent year over year to Rs 201.6 crore (or 70% of pre-Covid levels), owing to high demand from the leisure category.
• Operating losses were also reduced to Rs 12.3 crore (compared to an I-direct forecast of an EBITDA loss of Rs 45.9 crore).
• A loss of Rs 27.4 crore on non-current investments by a subsidiary resulted in a net loss of Rs 50.4 crore.

Target and Valuation

"The b/s provides strong immunity to weather the challenges while strategic property locations provide visibility to ride on the longterm tourism growth story. Hence, we remain positive on the company with BUY rating on the stock. Target Price and Valuation: We value company at | 180 i.e. 30x FY23E EV/EBITDA," the brokerage has said.

Key triggers for future price-performance:

In the next three to four years, the current crisis will limit overall room supply in the industry, bode good for branded businesses like EIH.
Expect company to recover to 94 percent of pre-Covid levels by FY23E, with EBITDA exceeding pre-Covid levels; margins are expected to be close to 23 percent; venturing into the premium café industry has the potential for long-term value development.

 

Buy Nesco with upside potential upto 22%

ICICI Securities has a 'Buy' recommendation on Nesco, with a price objective of Rs. 770. Potential investors can make a 22 percent profit at the current price of Rs. 629.

Company update

Nesco had a sluggish FY21 and H1FY22, but is on the mend thanks to higher IT park occupancy and a steady pick-up in the show industry.
Revenues were increased 26 percent year over year in Q2FY22, coming in at Rs 80.8 crore. The IT park's sales increased by 18 percent year on year to Rs 65.2 crore, while exhibition revenues were flat. EBITDA increased by 62.3 percent year over year to Rs 50.3 crore, while PAT increased by 54 percent to Rs 44 crore.

Target and Valuation

"Nesco's share price was up ~65% over the past five years. We maintain BUY rating on the stock. With improved occupancies in IT park and gradual recovery in exhibition business, earnings recovery to be sharp, going ahead Target Price and Valuation: We value Nesco at Rs 770/share," the broekrage has said.

Key triggers for future price performance

Exhibition business will progressively rebound with improved vaccination rates and economic recovery, with pre-Covid run rates projected by H2FY23.
Improving IT park occupancy and identifying a strategic sweet spot in the Goregaon micro market to ensure long-term demand for existing and planned capex.

Dsiclaimer

The above stock has 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.