Revenue growth opportunity of 20 per cent is immense and far superior to peers. Also, the margin trajectory appears to be on an uptrend, as revenue is being driven by SSSG. We expect 25 per cent earnings per share (EPS) compound annual growth rate (CAGR) over FY18-20.
Indian Hotels | Target Price: Rs 163
Indian Hotel Company manages 17,145 rooms across India and international locations, around 85 per cent of which are in the domestic market.
Indian hospitality industry is set to enter into an upcycle, led by favourable demand-supply dynamics. Industry occupancy (67 per cent) has already breached the optimum level, allowing players to exercise pricing power.
The company also has an edge in terms of operating leverage, given its high fixed-cost proportion and efforts to rationalize expenses. We expect it to record revenue/ EBITDA CAGR of 9 per cent/ 25 per cent over FY18-20.
Marico | Target Price: Rs 465
There has been an evident step-up in the pace of new launches over the past 18 months with couple of notable successes. Strong performance of Parachute volumes continues in recent quarters along with healthy growth prospects in the VAHO (Value added hair oil) segment.
Marico is also among the pioneers on extensive use of technology in distribution and with augmentation of analytics is creating another sustainable moat for the future. We expect revenue/PAT CAGR of 15 per cent/17 per cent over FY18-20
Oberoi Realty | Target Price: Rs 574
Oberoi has one of the strongest balance sheets among real estate companies, with negligible net debt. As of FY18, the company had net debt to equity of 0.3x. With strong monetization visibility from its ongoing and upcoming projects, Oberoi is expected to generate healthy free cash flow over FY18-20.
We estimate revenue/EBITDA/PAT CAGR of 47per cent/45per cent/71 per cent over FY18-20.
ICICI Bank | Target Price: Rs 400
With challenges related to management transition getting addressed, ICICI Bank is now focusing on growing its core operating profits.
We expect ICICI Bank to gain from the current crisis in NBFC space, due to its strong franchise in deposits along with superior customer reach across business segments. We expect the bank to deliver 1.1 per cent RoA (return on assets) /11 per cent RoE (return on equity) by FY20.
Aurobindo Pharma | Target Price: Rs 920
The company has guided for 2x industry growth rate in EU market along with better profitability on account of transfer of 97 products from European Union to India.
We remain positive on Aurobindo on robust abbreviated new drug application (ANDA) filings rate, strong pace of approvals, minimal regulatory hurdles and the company outperforming the industry in the EU market.
We expect Aurobindo to record 24 per cent/22 per cent/18 per cent CAGR for revenue/EBITDA/Adjusted PAT over FY18- 20E, with RoE/RoCE (return on capital employed) of 22 per cent/16 per cent in FY20E.
Hindustan Unilever | Target Price: Rs 2,140
HUL offers the best earnings growth visibility in the large-cap Indian consumer space.
Four key trends that are helping HUL in elevating its earnings growth trajectory to around 20 per cent include rapidly improving adaptability to market requirements, recognition and strong execution on Naturals, strong trend toward premiumization and extensive plans to employ technology and create further entry barriers.
The acquisition of GSK Consumer healthcare business pushes HUL among the market leaders in the only key category where it did not have market leadership (Food and Refreshments).
Crompton Greaves Consumer Electricals
Crompton has undertaken multiple cost rationalization initiatives to combat the margin pressure in the lighting segment. We like Crompton for its strong product portfolio, established brand, market leadership, wide distribution network, and robust RoE/RoCE profile.
Infosys | Target Price: Rs 800
Infosys has built capabilities to match spend shifts in the past three years and Digital revenue now accounts for around 30 per cent of company’s revenue.
The acceleration in growth momentum, aided by a pick-up in verticals like Financial Services and Retail, and the visibility for its continual from recent deal wins provides confidence of improvement in the coming quarters. We expect Infosys to register a revenue/PAT of 8/13 per cent CAGR over the next three years largely driven by Digital segment.
Larsen and Toubro | Target Price: Rs 1,570
Key positive triggers for L&T include pick-up in private capex cycle supported by government capex, timely execution of strong order backlog, divestment of the non-core assets and net working capital cycle improvement.
Divestment of the non-core assets and net working capital cycle improvement is in line with Project Lakshya. We expect L&T to register a revenue /EBITDA/Adjusted PAT CAGR of 13 per cent/19 per cent/20 per cent with margin improvement of 130bps over FY18-20E.