Will the FPO fund infusion solve Vodafone Idea’s problems?

If you are someone who thinks that you have missed the current rally in the market or someone in search of value pick or someone receiving nil allotments in most IPOs. Well, do not get disappointed. Here are four stocks that are poised for re-rating and can deliver up to 92% returns according to YES Securities.

Godrej Industries | Target price – Rs 918 | Upside – 92%

The holding company of Godrej group, Godrej Industries, can turn out to be a gold mine. YES Securities believes that the stock can run up to Rs 918 from the current levels of Rs 478 delivering 92% returns.

“Godrej Industries operates in the oleo‐chemical business with stable operations and business prospects. The chemicals business continued its strong focus on cost control and operational efficiencies across product categories and has done well in the value‐added products category. Godrej Industries is trading at ~62% discount to its stake in group companies Godrej properties (49% stake), Godrej Consumer Products (24% stake) and Godrej Agrovet (59% stake). However, the adjusted discount comes out to be ~70% considering its investments and its other core businesses’ valuation. Currently, the stock is trading at an undemanding valuation of 20x FY23E P/E,” said the brokerage firm in a report.

Balrampur Chini | Target price – Rs 408 | Upside – 83%

Led by cost-efficient operations, market leadership position in sweetener products, integrated business model and proximity of plants are prime reasons for the brokerage house to be optimistic on Balrampur Chini. It is of the view that this counter can rise to Rs 408 from the current levels of Rs 218 implying a return of 83%.

“Balrampur Chini has showcased a healthy financial performance in the past (FY16‐20 PAT CAGR of ~39%) and has given ~40% payout through dividends/buybacks. The company has a clear roadmap to expand its presence in the ethanol and co‐generation segment to balance sugar inventories. It will post better FY21 and FY22 performance (profit/cash flows/reduction in debt), led by stronger non‐sugar segment performance, which has higher margins. Return on equity is expected to move upwards of 23% levels by FY23 on account of improved financials. Given the quality play, the stock is trading at an undemanding valuation of 5x of FY23e earnings,” the report added.

Dalmia Bharat | Target price – Rs 2,650 | Upside – 83%

The fourth-largest cement group Dalmia Bharat can scale up to Rs 2,650 from current levels of Rs 1,448 delivering 83% returns.

“Dalmia Bharat would turn debt-free with net cash reserves of ~Rs 400 crore by FY23E vs net debt of Rs 3,230 crore in FY20 (excluding MF units of Rs 390 crore), primarily led by the expected ~Rs 7,900 crore operating cash flow generation during the same span. Dalmia currently trades at an EV/EBITDA multiple of 8.5x on FY23E which is at a 30‐40% discount to the average valuation of its peers like Ramco and JK Cement. Valuation re‐rating is imminent as the company would continue to commission incremental capacity over the next two years along with balance sheet turning cash-rich,” noted the report.

CESC | Target price – Rs 1,136 | Upside – 80%

The brokerage firm believes that CESC is poised for re-rating and has set a price target of Rs 1,136 which is 80% higher compared to current levels of Rs 630.

“CESC is a proxy play to any power sector reforms in India due to its wide managerial experience, healthy balance sheet position and strong track record of profitability (PAT CAGR 23.5% FY10‐FY20). CESC’s assets generate healthy free cash flow. The company has showcased a healthy financial performance in the past owing to better operational efficiencies and cost control measures. It has declared an interim dividend of Rs.45/share, wherein the yield works out to 6.7% at the current market price. Further, improvement in financial performances across major business units and is likely to keep ROEs at +13% post FY22E. Also, the company is trading at a reasonable valuation of 5.8x FY23E P/E. In the evolving macro context and ‘top‐bottom analysis’, we believe, the stock is a candidate for re‐rating,” said the report.

(Disclaimer: The recommendations in this story are by the respective research or brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)