Broker’s call

| Updated on November 15, 2019 Published on November 15, 2019

HDFC Securities

Symphony (Buy)

CMP: ₹1,214.80

Target Price: ₹1,812

Symphony continued its strong momentum in the second quarter after a sharp recovery in the summer of 2019. The Q2 performance was in-line with expectations and further builds our confidence for a robust 2HFY-20 show.

We remain bullish on Symphony, given its sharp recovery in domestic business and scope to tap new opportunities (industrial and commercial cooling, portable coolers in Australia and the US). We maintain estimates and value Symphony at 45x Sep-21 EPS. We believe the stock will re-rate owing to consistent outperformance vs appliances companies.

Anand Rathi

Natco Pharma (Buy)

CMP: ₹564.65

Target: ₹729

Despite Natco Pharma’s earnings expected to decline over FY19-21 on Tamiflu’s high base, we believe this is likely to be counter-balanced to some extent by the Copaxone ramp-up in the US. However, beyond FY21, the strong contribution from key launches in India, Brazil and Canada would drive earnings growth. Thus, we retain our Buy, with a lower target of ₹729 (earlier ₹763).

Post-Q2 FY20, considering the lower-than-expected domestic formulations revenue, we cut our FY20e/FY21e revenue 7 per cent and 11 per cent; and factoring in the lower gross margin, we cut our EBITDA estimates 15 per cent and 19 per cent respectively, and PAT 14.8 per cent and 19 per cent.

Geojit Financial Services

KEC International (Buy)

CMP: ₹278.65

Target: ₹330

KEC International is a global infrastructure engineering, procurement and construction (EPC) major. It has presence in the verticals of Power transmission & distribution (T&D), cables, railways and water & renewables. Q2-FY20 revenue grew by 17 per cent year-on-year, led by improved execution in T&D (21 per cent), SAE towers (95 per cent) & Railway (35 per cent) year-on-year.

EBITDA margin was stable at 10.5 per cent despite higher employee cost and other expenses. H1-FY20 order inflow de-grew by 41 per cent year-on-year due to domestic headwinds on T&D orders & deferment of international tenders but order book remains strong at ₹23,000 crore.

Profit after tax (PAT) grew by 44 per cent year-on-year supported by rise in other income and drop in effective tax rate to about 23 per cent.

Management guided 15-20 per cent revenue growth in FY20 given large tender pipeline for H2FY20 and strong order book.

Published on November 15, 2019
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