Pick of the week (April 4)

Dixon Technologies—BuyRecommendation by ICICI Direct We believe significant future growth potential in domestic electronic manufacturing coupled with DTLs plan to increase backward integration can bring in more customers and would lead to a revenue & earnings CAGR of 56% & 66%, respectively, in FY20-23E.

We believe DTL may continue to command premium valuation due to its significant future growth opportunities, high return ratios and lean working capital days.

We assign a BUY rating to the stock with a target price of Rs 4270/share, valuing the company at 45x FY23E earnings.Pricol Ltd—Buy We are enthused by the sale of loss-making subsidiaries and prospects of substantial deleveraging, going forward.We believe Pricol offers a turnaround play.

With favourable risk-reward at hand, we ascribe a BUY rating to the stock with a target price of Rs 95.Piramal Enterprises—Buy Recommendation by Axis Capital While DHFL integration and retail scale-up is the key theme for financial services business, the pharma division is expected to sustain its growth momentum led by capacity expansion and acquisitions.Stake sale of 20% in Pharma business to Carlyle in Jun20 has set the benchmark for its valuation at EV of USD 2.78 bn (equity valuation of USD ~USD 2.45 bn).Initiate coverage on PEL with BUY and SoTP-based TP of Rs 2,300.Computer Age Management Services Ltd (CAMS)—Buy CAMS is a structural growth story with opportunity to participate in relatively under penetrated and high potential Indian asset management market.

It is a proxy to the growing mutual fund industry with high RoE.Technological expertise, long standing client relation and leadership in duopoly RTA market with entry barriers remain key business strengths.Power Mech Projects—Buy Recommendation by Geojit Financial Services Power Mech Projects Ltd is a leading infrastructure-construction company based in Hyderabad with global presence.Company has an order backlog of Rs.7,353Cr (as on 16th Feb 2021), which shows revenue visibility for next 3 years.Diversification of business to non power segment, especially civil (including railway, petro chemical, water etc) has helped the company to be in the growth track.We initiate coverage on POWERMECH with a BUY rating based on 6x FY23E earnings with a target price of Rs.727.Narayana Health Ltd—Buy Recommendation by Geojit Financial Services NH operates 47 healthcare facilities including hospitals, clinics and heart centres with 6,656 capacity beds and 30+ specialities.The company has a strong track record of providing quality healthcare services at an affordable cost.

Over the last 5 years, NH has focused on increasing its presence at tier-1 cities by setting up premium multispecialty hospitals in New Delhi, Gurugram and Mumbai.We initiate coverage on Narayana Health with a BUY rating based on 20x FY23E EV/EBITDA with a target price of Rs.517.Reliance Industries—Buy Recommendation by JM Financial Though downstream margin outlook continues to be subdued, recovery in crude price has improved visibility of strategic stake sale in RILs O2C business, which could help put a floor to valuations.We re-iterate BUY (TP of INR 2,500) as RIL is entering a strong FCF generation phase with major capex completed and expectation of strong 17-18% EPS CAGR over the next 3-5 years led by Digital and Retail businesses.

Sheela Foam Limited—Buy Recommendation by Anand Rathi Share and Stock Brokers Sheela Foam is amongst the top 3 players in the industry and is expected to be big beneficiary of the shift in taste following urbanization and changing lifestyle.Given its history of proven performance, focused management, huge product profile and market share gain makes Sheela Foam is worth Exploring for Long term.

Hence, we recommend with a Buy rating with a target price of Rs 2,430 per share.Maruti Suzuki—Buy Recommendation by Motilal Oswal Institutional Equities The MSIL stock has underperformed (27% v/s Nifty and 23% v/s NSE Auto Index) in the last six months, impacted by market share loss and pressure on margin, despite a strong volume recovery.

We see both these concerns abating as: a) product life cycle improves, and b) price increase/discount moderation drives a recovery in profitability.We expect 30% volume growth in FY22E and positive evolution of margin.

We see 27% upside at our TP of Rs 8,700/share.MSIL is our top Auto pick.

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