The bond bulls are in charge. (Photographer: Michael Nagle)
Brokerage houses initiated coverage on three stocks with a ‘Buy' rating. They are information technologies firms Larsen & Toubro Infotech Ltd., Zensar Technologies Ltd., and fertilizer maker Deepak Nitrite Ltd.
Among these three firms, L&T Infotech and Deepak Nitrite got their highest target prices.
Here's what the analysts had to say:
IDBI Capital On Larsen & Toubro Infotech
- Initiated ‘Buy' with target price of Rs 1,300, implying a potential upside of 16.7 percent from yesterday's close.
- Larsen & Toubro Infotech has all the ingredients of being a sustainable growth engines.
- Strong presence in high growth digital solutions.
- Expect Larsen & Toubro Infotech to continue to outperform the sector.
- Likely to become more aggressive than before; to be most feared competitor.
- Momentum across – large clients, large deal wins, large deal pipeline to continue.
- Expect revenue in dollar terms and earnings per share to grow at a compounded annual growth rate of 14 percent and 13 percent, respectively over the financial years through March 2020.
- Strong growth performance warrants premium valuation.
Prabhudas Lilladher On Zensar Technologies
- Initiated ‘Buy' with target price of Rs 1,000, implying a potential upside of 13.6 percent from yesterday's close.
- Increasing proportion of revenues from Digital SBU coupled with deal wins to revive revenue growth trajectory.
- Expect gradual recovery on the margin front.
- Revival in growth to drive selling, general and administrative expenses leverage and margin expansion over the financial years through March 2020.
- Strong expertise in Oracle offerings remains the key proposition.
- Zensar now positioned to address complete value chain in retail e-commerce
- Earnings per share estimates for the current and next two financial years are at Rs 52, Rs 65 and Rs 80, respectively.
- Dollar revenue growth for the current and next two financial years estimated at 3.7 percent, 10.3 percent and 11 percent, respectively.
- Valuations remain reasonable; Room for re-rating over two-year period.
Edelweiss Investment On Deepak Nitrite
- Initiated ‘Buy' with a target price of Rs 360, implying a potential upside of 31 percent from yesterday's close.
- New plant to revitalise business dynamics from April 2019 onwards
- Positives: improving product mix, efficiency to drive performance products business.
- Company set to reap benefits of capacities as well as performance products
- Expect spectacular revenue and margin spurt with higher utilisation levels and business expansion
- Revenue is expected to double and margins quadruple; Net profit to grow at a compounded rate of 38 percent over the financial years through March 2020.
- Debt funded capex to generate healthy returns.
- Debt-to-equity expected to soar two times; return on capital employed to expand to 17 percent by March 2020.
- Free cash flows from April 2019 with scope for forward integration.
- Low valuations for a strong cash flow generating business.
- Bull case price target of Rs 414.
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