Analyst Corner: SBI best placed in current cycle; target price at Rs 600
SBI has much “option value,” both in earnings (1% RoA) and multiples. Our bull case (>100% upside) reflects this. Its retail franchise has improved, and the corporate cycle is turning – we see material upside risk. Raise price target to Rs 600; we now apply a 25% bull case weight to the core.
GUJGA would be the biggest beneficiary of any directive on Green Tax announced by MoRHT (refer to our report) – as Gujarat has no government directive on the use of CNG yet.
Gujarat Gas (GUJGA) has proved to be a clear outperformer since the curbing of polluting fuels at Morbi – an impetus by the government toward the adoption of greener fuel. Since our upgrade in Dec’19, the stock is up 116% – it has outperformed the Nifty by ~95% – despite which the stock trades at 21x FY23E EPS currently. Interestingly, we have upgraded our EPS every quarter since then (from Rs 12.3 to Rs 19.9 for FY22E) on the back of better-than-expected volume growth. CGDs have been a true consumption story and, as highlighted in Exhibit 1, the market has always valued volume growth for these names. GUJGA has clocked volume growth of ~8% QoQ each time since 1QFY20 – despite the COVID-led disruption witnessed in 1HFY21. Over the past five years, the company has posted a volume CAGR of ~11%; we build in the same volume growth over the next two years as well.
The Ceramic Association of Morbi expects growth of 25–30% in FY22 (v/s ~15% in FY21) as 60 more industrial units are likely to be commissioned over Oct–Dec’21 and the current units would undergo further expansions. Also, we have been highlighting that any further pollution control measure or impetus on growing gas consumption in India hereafter would benefit GUJGA significantly (v/s the other two incumbents).
- Rakesh Jhunjhunwala might have lost nearly Rs 500 crore in last four days as Sensex, Nifty slip
- Petrol price at all-time high of Rs 97/litre in Mumbai; diesel crosses Rs 88-mark
- Crypto mania: Bitcoin, ether hit fresh highs
GUJGA would be the biggest beneficiary of any directive on Green Tax announced by MoRHT (refer to our report) – as Gujarat has no government directive on the use of CNG yet. Factoring in all of the above, the stock demands an upgrade, thus closing the gap v/s IGL (same volume growth potential of 10–12% over the medium term) – we value the stock at 24x (from 22x earlier) to arrive at target price of Rs 560/share. Reiterate Buy, with the possibility of further earnings upgrades going forward.
Power Grid rating – Buy: Strong show by transmission segment
Decline in capitalisation could impact growth; valuations are attractive; TP raised to Rs 248; ‘Buy’ rating maintained
Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.
Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.
- Gujarat Gas Reiterate buy with TP of Rs 560
Apollo Hospitals rating – Buy: Recovery in hospital biz continued in Q3
Outlook remains steady; rise in out-station patients’ volume to be a catalyst; TP up to Rs 3,050; ‘Buy’ retained