Britannia, Sula, Five Star, HEG, JB Chem among 6 stocks that saw brokerage initiations

Select popular stocks such as Britannia Industries, Sula Vineyards, Five-Star Business Finance, HEG, JB Chemicals and Pharmaceuticals and Mahindra Holidays & Resorts have seen fresh interest from the various domestic and global brokerage firms, who have recently initiated their coverage on the said companies.

The host of brokerages including Kotak Securities, ICICI Securities, Emkay Global, InCred Equities, Jefferies and Kotak Institutional Equities have launched their maiden reports recently with an upside target of up to 45 per cent. Here's why these brokerages are positive on the stocks:

Emkay Global on Britannia Industries
Rating: Buy | Target Price: Rs 5,700 | Upside: 13%
Britannia Industries is well-placed in the core biscuits segment and is promptly addressing adjacency gaps, to evolve into a total foods company. Britannia aspires to clock mid-teen growth, with double-digit growth in biscuits which, we believe, is possible only post requisite action towards establishing its adjacencies, said Emkay Global.

"Given the relentless rural slowdown, we model-in a low 10 per cent revenue CAGR over FY23-26E. We initiate coverage on Britannia with a 'buy' and June 24E target price of Rs 5,700 based on 50 times PER. With a solid brand price straddle in place, it has been widening product availability with improved distribution, and has bolstered sourcing with an amplified capex cycle," it said.

Kotak Institutional Equities on Sula Vineyards
Rating: Add | Fair Value: Rs 500 | Upside: 7%
Sula, a category creator for wines in India, commands over 50 per cent share in the domestic grape wine market. Strong brand equity, operational and financial discipline, a wide distribution network, secured raw material sourcing contracts and robust manufacturing footprint position it well to benefit from rising wine consumption in India, said Kotak Institutional Equities.

"We initiate coverage on Sula with an 'add' rating and a fair value of Rs 500, valuing it at 37 times June 2025E PE; we ascribe a 15 per cent valuation discount to United Spirits and United Breweries owing to the weaker return profile and high dependence on two states, where it enjoys favorable regulations. Sula can re-rate if it consistently outperforms its alcobev peers," it added.

ICICI Securities on Five-Star Business Finance
Rating: Buy | Target Price: Rs 765 | Upside: 20%
Five-Star is a direct play on the increasing formalization of credit, especially in the small-ticket business loan segment. Barring SCUF and Repco, key players in similar ticket-size SME loans reported over 30 per cent AUM CAGR during FY18-FY23 while Five-Star delivered an industry-leading 47 per cent during the same period.

We expect 25 per cent AUM CAGR for Five-Star over FY23- FY25E on the back of one of the most extensive branch networks of 370 as of March 2023; deep understanding of the customer segment it serves; and focus on deepening presence in existing geographies, it added while initiating with 'buy' and a target price of Rs765.

InCred Equities on HEG
Rating: Add | Target Price: Rs 2,462 | Upside: 45%
"HEG is a manufacturer of graphite electrodes which are used as a raw material in steel production via the EAF route, significantly less polluting versus the more traditional blast furnace or BF route. We value HEG at 1.8x P/BV, 0.5 SD from the historical mean of 1.3 times, and initiate coverage on it with an 'add' rating and a target price of Rs 2,462," said InCred Equities.

"The beginning of inventory cycle decline for US steel mills, new EAF capacity addition in the US and HEG’s foray into making graphite anodes for lithium-ion batteries makes it a strong bet in the next 12 to 18 months. The graphite electrode business is one such industry which has significant entry barriers, mainly because of the technology required," it added.

Kotak Securities on Mahindra Holidays & Resorts
Rating: Buy | Target Price: Rs 370 | Upside: 26%
Mahindra Holidays & Resorts is into vacation ownership business and has a unique business model, which differentiates it from any traditional hospitality player. The differentiated business model ensures revenue and earnings predictability with strong cash flows across economic cycles and hence it has outperformed peers in hospitality business during pandemic, Kotak said.

There are early signs of inflection seen across various growth levers. Factoring the same, we expect its standalone revenue and PAT to grow at a CAGR of 13.7 per cent and 20.7 per cent, respectively in FY23-25E. European business has shown early sign of revival after taking a hit for the last several years, it added while re-initiating coverage on the stock with 'buy' and fair value at Rs 370.

Jefferies on JB Chemicals & Pharmaceuticals
Rating: Buy | Target Price: Rs 2,680 | Upside: 12%
"JB Chemicals is the fastest growing domestic pharma company with therapy dominance in cardiac and gastro. Life cycle management of key brands, synergistic acquisitions and targeted new launches should allow it to outperform industry growth. Export growth will be led by contract manufacturing of Lozenges where it has strong customer relationships and technology," said Jefferies.
 

"We initiate coverage with a Buy rating and Rs 2,680 target price. Like Torrent Pharma, we value JB on EV-EBITDA basis as its financials have contributed to acquired brands which inflates the D&A. Our target EBITDA adjusts for the non-cash ESOP charge of Rs 400 million in FY25. Our target price is based on 20x June-25 EV-EBITDA which is at a premium due to superior EBITDA growth and ROIC profile," it added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)