Brokerage company Sharekhan has given buy call rating to the shares of Titan Company, TCS and Mahindra & Mahindra Ltd. Since the brokerage has set a target price of Rs. 2,900 for Titan. 3,650 for Tata Consultancy Services Limited, and Rs. 1,390 for Mahindra & Mahindra Limited (M&M), all of these blue-chip stocks offer tremendous potential at current market prices.
Titan Company
Sharekhan said in a note that “The pre-quarter update of Titan Company Limited (Titan) has started well for FY 2023, with strong 3.0x growth in revenue and strong growth in key businesses and subsidiaries.” We expect revenue to be at Rs.9,180 crore at consolidated level (and ~8,650 crore at standalone level). Jewelery business revenue (excluding bullion sales in the base quarter) grew 3x year on year to ~Rs.7,570 crore. Despite the near-term adversity of high inflation, the Company is confident of maintaining good growth momentum in the coming quarters on the back of growth in market share, network expansion and shift to trusted brands.The Company aims at maintaining good growth momentum through efficient capital allocation plans. It aims to achieve consistent double digit revenue growth over the next five years by consolidating core businesses such as Watches, Jewelery and Eye care.Furthermore, profitability is expected to improve steadily with steady growth in the jewelery business and increase in new ventures “
“Titan targets to generate over 20% revenue CAGR during FY2022-FY2027 based on its ambitious growth plan in the medium term. This will help in robustly improving cash flow in the coming years with consistent margin improvement. FY2023 will be a strong year for the company due to lower base across core businesses. The stock is down ~15% in the past three months, in line with a substantial correction in the broader indices. The company’s strong growth outlook, industry tailwinds over the medium term and strong balance sheet make it one of the best sports in retail. Hence, we maintain our buy recommendation on the stock with an unchanged price target (PT) of Rs. 2,900,” the brokerage said.
Tata Consultancy Services Limited (TCS)
The brokerage said that “TCS reported steady revenue growth with strong client growth and healthy deal wins across large revenue buckets, while margins fell behind our expectations due to wage revisions, supply-side challenges and rising discretionary spending . Constant currency (CC) revenue grew 3.5%/15.5% in Q1FY2023, in line with our estimates, driven by continued strong growth in North America and broad-based growth across verticals with strong growth in Retail and CPG. Deal TCV remained healthy at $8.2 billion (including two large deals worth $400 million+) during the first quarter of FY23, a 1.2% year-on-year increase, but down 27% on a quarter-on-quarter basis. The book-to-bill ratio was 1.21x, in line with its long-term average book-to-bill ratio. EBIT margin declined 190 bps qoq to 23.1%, behind our estimate. TCS is seeing strong traction in cloud adoption, operating model transformation, vendor consolidation, growth and transformation (G&T) programs. We believe the Company is well positioned to capitalize on market opportunities even in the face of worsening macro concerns given our strong clients, strong capabilities and solid execution capability.”
“We believe that TCS has a strong business model that will leverage both G&T’s opportunities and operations transformation program given its strong capabilities and end-to-end service capabilities. We expect the company to generate US dollar revenues. And earnings will witness 10%/11% CAGR in FY2022-24E. In the CMP, the stock trades at a valuation of 28x/25x its FY2023E/FY2024E earnings, with a 5-year average 1-year forward PE multiple. We continue to value TCS’s superior supply-management capability, best-in-class execution, deep expertise, full-service model and excellent payout ratio.In addition, a stock price improvement of approximately 14% on a YTD basis is expected over the long term. Provides good entry opportunity for investment. Hence, we maintain buy on TCS with a revised PT of Rs. 3,650,” Sharekhan said.
Mahindra & Mahindra Limited (M&M)
According to the brokerage “Mahindra & Mahindra Limited (M&M) and British International Investment (BII) have entered into a binding agreement to invest Rs. 1,925 crore ($250 million) each in wholly owned subsidiaries of M&M will soon be incorporated to spin up its passenger electric vehicle (EVCO) business. BII is a UK government development finance institution and a leading impact investor with a focus on climate change and ESG. BII is expected to acquire 2.75-4.76% stake in M&M’s subsidiary EVCo at a valuation of US$ 5.1-8.8 billion (Rs 40,441-70,070 crore). The investors as well as the promoters will be paying ~Rs. 10,000 crore in new EVCo between FY22 to FY27 to launch five electric vehicle models. The company targets to take its electric SUV penetration to 20-30% of its overall SUV portfolio by FY2027 and expects EV volumes of ~200,000 per annum in the best case scenario. EVCO will be asset light and will leverage the ecosystem of M&M’s suppliers, dealers and financiers.”
“M&M will provide manufacturing support, design, product development, technology and sourcing services at arm’s length. We firmly believe that M&M is on track with its growth roadmap. In addition to its aggressive plans for the farm equipment and ICE passenger car segment, the company is looking to build a strong product portfolio for passenger electric vehicles. In the ICE segment, M&M has become No. 1 in SUV revenue market share in H2FY22 with 16.8% market share. We expect the Scorpio-N to further consolidate its share in the SUV market. Successful new launches will continue to help M&M increase its market share in the SUV and LCV segment. M&M has guided to strengthen the SUV segment through product launches of 13 new products by FY2027E, including EV launches. In addition, the management continues to focus on the farm equipment segment and maintains its guidance to achieve 10x revenue growth by FY2027E. M&M has maintained its FY25E guidance to deliver 18% RoE and 15-20% EPS growth,” Sharekhan said.
The brokerage further claimed that “We expect M&M to benefit from its leadership position in the tractor segment, strengthen its position in the LCV segment and gain its market share in the highly competitive SUV segment. M&M is on track with its growth roadmap. The company plans to grow its agri business 10-fold by FY2027E, while strengthening its SUV segment by adding 13 new products by FY2027E, including EV launches. The US$250 million investment commitment by Impact Investor, British International Investment (BII) in M&M’s passenger electric vehicle arm is a positive development and will help M&M attract additional sources of private capital into the EVCO venture. In EVCo business Rs. 132 per share to our SOTP based PT. In addition, M&M continues to benefit from the turnaround of loss-making subsidiaries, expansion of digital platforms and strong performance of its listed entities, which will improve the company’s FCF going forward. We expect to post standalone earnings at 22.5% CAGR during FY22-FY24E, driven by 16.7% revenue CAGR and 190 bps growth in EBITDA margin. We reiterate the Buy Rating on the stock with a revised PT of Rs. 1,390. The stock trades at a P/E multiple of 17.6x and EV/EBITDA multiple of 11x its FY24E estimates.”
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.