3 Stocks To Buy Recommended BY IIFL Securities With Potential Upside Up To 83%

The brokerage company IIFL Securities Limited, which is also a major investment advisory institution in India, has recommended three stocks to buy that have a huge potential upside.

RSWM Limited

Rajasthan Spinning & Weaving Mills (RSWM) Ltd. is one of India's major yarn producing firms and the brokerage IIFL Securities has recommended to "BUY" this stock and have set a target price of Rs 700 with a potential upside of 83%. The stock was recommended by the brokerage at a market price of Rs 375-391, and it is currently trading at Rs 483.90.

According to the brokerage "The company has been able to manage operations at full capacity throughout the period of restrictions. Q1FY22 ended with total revenues at Rs750cr and PAT of Rs37cr. Debts slightly increased as compared to 31st March due to increased working capital utilization on account of stock of cotton & increased volume of business. Debt is mostly from hydro & solar power plants which are in-state partnerships & which are now doing very well which will see a reduction in debt & improvement in ROE."

"As 100% FDI is allowed (automatic route), PLI of Rs10,683cr (USD 1.44 billion) for man-made fiber and Technical Textiles, support to handloom weavers under MUDRA Scheme will lead to the growth in the top & bottom line of the company. Increased penetration of organized retail, favorable demographics and rising income level will drive the demand of Textiles in the future Pandemic has led to an increased demand for Technical Textiles also" the brokerage has said.

Consolidated (Rs mn)	Net income	PAT Margin	EPS	P/E (x)	RoE (%)
FY22E	25,586	2.00%	21.7	16.9	6
FY23E	28400	3.00%	36.2	10.14	9

Sterling and Wilson Solar Ltd

Sterling and Wilson is a prominent MEP and EPC supplier for power, solar energy, data centers, diesel generator sets, cogen plants, buildings, etc. The brokerage has recommended investors to "BUY" this stock, and have set a target price of Rs 750 and an upside potential of 82 percent. The brokerage recommended the stock at a market price of Rs 400-422, but it is now trading at Rs 449.65.

According to the brokerage "Reliance Energy has made an open offer @375 to acquire 40%, which heralds the group into solar energy with the company being the biggest solar panel maker in the world. Also, it is the country's largest player in MEP & EPC execution with debt being paid off by past promoters."

"Order inflow till date at Rs473cr (623 MW) with 8.7 GW contracted O&M as of date. Gross Un-execute Order Value (UOV) as of date is Rs 8,731 cr. Management is focusing on targeting large markets like North America & Europe with a combined size of over 26.5 GW in CY21. Due to the impact caused by the increase in module and commodity prices, adjusted gross margins in Q1FY 22 continue to remain suppressed for the ongoing project" the brokerage has said.

Consolidated (Rs mn)	Net income	PAT Margin	EPS	EPS growth (%)	P/E (x)	RoE (%)
FY22E	54,365	4	3.4	-	31	22.8
FY23E	59,257	5	11.1	36	22.7	28

Tata Steel

Tata Steel is one of India's most well-known steel manufacturers. Tata Steel recently received the Steelie Award for Excellence in Digital Communications for the 12th time. According to the brokerage, Tata Steel now boasts 19.6mtpa of finished steel capacity in India and TSE's NSR jump has lagged spot prices, as ~60% of volumes entail a six-monthly re-pricing. Management indicated a EUR200/t jump in NSR at TSE in 2Q, as contracts have reset at higher pricing. This should continue inching up if such steel prices sustain.

"Tata Steel's standalone EBITDA at Rs102.1bn (+11% QoQ) was largely in line with estimates. Standalone EBITDA/t expanded to a decade high of Rs35,570, aided by price hikes. Domestic steel prices are at 20% discount to the landed cost of imports which offers room for further price hikes going forward if demand is strong" the brokerage has said.

IIFL Securities has said, "Combined with strength in India operations due to elevated steel prices, this drives 22%/15% upgrade to the FY22/23ii consolidated EBITDA of Tata Steel."

The brokerage has recommended buying this stock and has set a target price of Rs 1897 and an upside potential of 48 percent. The stock was advised at a market price of Rs 1260-1310 by the brokerage, however it is now trading at Rs 1,326.45.

Consolidated (Rs mn)	Net income	PAT Margin	EPS	EPS growth (%)	P/E (x)	RoE (%)
FY22E	2,323,093	29.1	342.1	380.1	4.3	44.9
FY23E	1,986,739	23.3	210.7	38.4	6.9	21

Disclaimer

The above stocks are picked from the brokerage report of IIFL Securities. 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.