Stocks

2 Small & Micap Cap Stocks To Buy, Where Sharekhan Sees Good Upside Potential

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Broking firm Sharekhan has a buy call on the stocks of Hitech Pipes and Nippon Life India, where it sees a good upisde potential in both these stocks.
Buy the stock of Hitech Pipes, says Sharekhan According to Sharekhan, Hitech Pipes reported a healthy beat on consolidated revenues (up 30% y-o-y to Rs. 598.5 crore) led by strong volume growth of 32% y-o-y to 0.86 lakh tonnes.”The operating margins at 3.9% (lower 132bps y-o-y) and EBITDA/tonnes of Rs. 2758 were marginally better than expectation (our estimate of Rs. 2700/tonnes). The company made Rs. 6.51 crore provision towards expected credit loss on an OEM customer leading to 57% y-o-y dip in net profit at Rs. 4.3 crore. However, adjusting for the same, net profit was up 8% y-o-y to Rs. 10.9 crore (better than our expectation). It retained its volume guidance of 3,75,000 tonnes (a 36% y-o-y growth) for FY2023 while expects EBIDA/tonnes to revert to Rs. 3500-400/tonne in two to three quarters,” the brokerage has said.   Retain positive view with upside potential of 20%, says Sharekhan Hitech has been suffering on the operational profitability front, led by sharp correction in steel prices, higher spreads between primary and secondary pipe manufacturers and channel de-stocking. “However, post Q2, the steel price correction is expected to be limited with expect channel inventory re-stocking from December 2022 onwards. The upcoming value-added capacities in H2FY2023 would aid in volume growth and better operational profitability,” Sharekhan has said. Nippon Life: Long-term prospects intact According to Sharekhan, long-term prospects of the Indian AMC industry remain intact given the low penetration levels in India vis-à-vis developed countries and is a play on the financial inclusion of savings in India. Nippon Life India Asset Management is focused on the passive side and is looking forward to introducing new products in the said category with a robust pipeline. Increasing marketing initiatives will aid Nippon Life India Asset Management in customer acquisition as well as in cross-sell,” the brokerage has said. Nippon Life: Price target of Rs 305 “However, we believe the overall yields could remain slightly compressed in the near term due to a change in the composition of the AUM mix and new competitors entering the marketplace. Higher volatility in the capital market, higher intensity of competition in the industry, and yield compression going forward pose a challenge to Nippon Life India Asset Management, Hence, we maintain our Hold rating with an unchanged price target of Rs. 305,” the brokerage has said.
According to Sharekhan, Hitech Pipes reported a healthy beat on consolidated revenues (up 30% y-o-y to Rs. 598.5 crore) led by strong volume growth of 32% y-o-y to 0.86 lakh tonnes.
“The operating margins at 3.9% (lower 132bps y-o-y) and EBITDA/tonnes of Rs. 2758 were marginally better than expectation (our estimate of Rs. 2700/tonnes). The company made Rs. 6.51 crore provision towards expected credit loss on an OEM customer leading to 57% y-o-y dip in net profit at Rs. 4.3 crore. However, adjusting for the same, net profit was up 8% y-o-y to Rs. 10.9 crore (better than our expectation). It retained its volume guidance of 3,75,000 tonnes (a 36% y-o-y growth) for FY2023 while expects EBIDA/tonnes to revert to Rs. 3500-400/tonne in two to three quarters,” the brokerage has said.
Hitech has been suffering on the operational profitability front, led by sharp correction in steel prices, higher spreads between primary and secondary pipe manufacturers and channel de-stocking. “However, post Q2, the steel price correction is expected to be limited with expect channel inventory re-stocking from December 2022 onwards. The upcoming value-added capacities in H2FY2023 would aid in volume growth and better operational profitability,” Sharekhan has said.
According to Sharekhan, long-term prospects of the Indian AMC industry remain intact given the low penetration levels in India vis-à-vis developed countries and is a play on the financial inclusion of savings in India. Nippon Life India Asset Management is focused on the passive side and is looking forward to introducing new products in the said category with a robust pipeline. Increasing marketing initiatives will aid Nippon Life India Asset Management in customer acquisition as well as in cross-sell,” the brokerage has said.
“However, we believe the overall yields could remain slightly compressed in the near term due to a change in the composition of the AUM mix and new competitors entering the marketplace. Higher volatility in the capital market, higher intensity of competition in the industry, and yield compression going forward pose a challenge to Nippon Life India Asset Management, Hence, we maintain our Hold rating with an unchanged price target of Rs. 305,” the brokerage has said.