Alkyl Amines, La Opala, Supreme Infra, United Spirits & Westlife: What analysts said of these 5 stocks

A host of companies have seen brokerage updates today. Motilal has a ‘Neutral’ rating on Alkyl Amines amid the capacity expansion, even as it feels entry into new segments could aid margins.  La Opala RG is a ‘Buy’ for Nirmal Bang given its consistent operational performance. Nuvama has a ‘Hold’ on United Spirits as it sees margin pressure ahead.  Motilal Oswal is neutral on Westlife Foodworld post the company’s Vision 2027. Meanwhile, Nuvama finds Supreme Industries attractive, given its strong growth and a positive outlook.

Alkyl Amines | Motilal Oswal | Neutral | Target Rs 3,025

Motilal Oswal said that the ongoing expansions (Rs 400 crore capex) at Alkyl Amines will boost the capacity of Aliphatic Amines by 30 per cent from 90-100ktpa at present. Entry into newer specialty products can aid margin as the management sees strong demand for these products. The brokerage has forecast a 20 per cent revenue CAGR over FY22-24, with a 31 per cent EPS CAGR over the same period. The downside risks could be an increased competition, wherein the market price is determined by the competitor, with little pricing power left for Alkyl Amines to command.

Motilal Oswal said the stock trades at 37 times FY24E EPS and 26 times EV/Ebitda.

"We value the company at 40 times FY24E EPS of Rs 76 to arrive at our target of Rs 3,025. We maintain our Neutral rating with a potential upside of 7 per cent," it said.

La Opala RG | Nirmal Bang | Buy | Target Rs 500

La Opala RG’s (LOG) operational performance has shown consistent improvement starting Q2FY22, with the company’s quarterly revenue run-rate improving without compromising profitability. The same has been driven by pent-up demand, but with the much-awaited distribution expansion and over 50 oer cent capacity addition, this positive trend is expected to continue, said Nirmal Bang.

While the Opalware industry’s growth over the last five years was mainly driven by growth and market share gains by Borosil & Cello, all the incumbents have not even scratched a surface. The contribution of Opalware in the overall Tableware market has been in single digits, Nirmal Bang noted.

"We believe that there is a long runway for growth in the Opalware market, but, our thesis does not suggest a meaningful shift from Steel to Opalware (China tableware market is also dominated by metalware market). We are banking on the shift from Porcelain, Bone China, Melamine etc. We also highlight that while the premium perception of Opalware is valid for the developed countries, the same does not hold true in  the Indian context considering the product pricing vis-à-vis other categories," the brokerage said.

United Spirits | Nuvama | Hold | Target Rs 870

As a part of channel checks, Nuvama Institutional Equities recently interacted with liquor distributors to gain deeper insight into the industry. Nuvama said the focus of alco-beverage companies on a premium portfolio will ensure that mix continues to improve. Events and big fat weddings are back to pre-covid levels and shall drive a spike in alcohol consumption. Non-whiskey drinks, such as gin and vodka, have done well owing to millennials increasingly preferring cocktails.

Although, alco-beverage players have taken price hikes in H1FY23, there is a possibility that they might refrain from further hikes due to intense competition, it said.

"In light of persistently high glass prices in H2FY23, we expect margin pressures to stick around. We continue to track price hikes by states, UK-FTA updates, ethanol policy and Delhi RTM change. Under the alco-bev umbrella, we have United Spirits in our coverage and we maintain a ‘HOLD/SN’ rating," it said.

Westlife Foodworld | Motilal Oswal | Neutral | Rs 805

Motilal Oswal said that the company's Vision 2027 indicated the management confidence on the prospects of healthy growth, led by opportunity in the QSR space and its own efforts over the next few years.  The strategy day, it said, highlighted that QSR, western fast food, and organised component of the food service industry in India are expected to grow at a very healthy pace of mid-teens CAGR over the next five years. The management is in talks with McDonald’s Corporation to stagger royalty rate increases beyond FY26.

"There is no material change in numbers. We maintain our Neutral rating, given fair valuations, scheduled increase in royalty rates to 2 times from its current levels eventually, and limited incremental gross margin levers. Our valuation at 30 times pre-Ind AS Sep’24 EV/Ebitda leads to a target of Rs 805," it said.

Supreme Infra | Nuvama | Buy | Rs 2,817

Supreme Industries (SIL) management’s outlook during Nuvama's recent interaction appeared more positive. It highlighted that volumes are driven by improving PVC affordability. The company has guided for 20 per cent-plus growth, with 25 per cent-plus growth in the pipes segment in FY23.

Inventory gain in Q4 may likely offset Q3’s inventory loss and that the management is confident of 12-12.5 per cent Ebitda margin in FY23.  Despite increase in capacity, utilisations are likely to surpass 65 per cent-levels in 1-2 years.

"Factoring in strong growth and a positive outlook, we revise up FY24E and 25E EPS by 6-7 per cent and target multiple to 37 times (from 35 times). We retain ‘BUY’; target revised to Rs 2,817 (Rs 2,491 earlier). We believe SIL is in a sweet spot to gain from increased affordability and revival in volumes," it said.

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