India Meteorological Department (IMD) has forecasted a strong summer and there will be an increase in the demand and usage of fans, ACs, refrigerators, and similar appliances. Global brokerage Jefferies sees a huge upside in companies that manufacture and sell these appliances.
“In our coverage, key sectors which could benefit from a good summer are fans, ACs, refrigerators, pipes (mainly Agri), air coolers and pumps. Q4 (Jan-Mar) sales are usually 30-35 per cent of their annual mix. Also, construction activity (pipes, tiles) usually peaks pre-monsoons. Margins tend to expand QoQ, given better op-leverage (volumes,” the brokerage said in a note.
Here are five stocks in which Jefferies sees an upside of up to 67%:
Dixon Technologies (India) Ltd
It is one of the largest home-grown design-focused solutions companies engaged in the manufacturing of products in the consumer durables, lighting and mobile phones/smartphones markets in India. It has a market capitalization of ₹ 17,285 crores and is a mid-cap company.
Jefferies has a buy call on the company’s shares with a target price of ₹ 4840.00 apiece, which translates to an upside of 66.89% as compared to its current share price of ₹ 2900.05 apiece as of Wednesday
The company has a good return on equity of 21.93% and an ideal debt-to-equity ratio of 0.55. Its shares were trading at a price-to-earnings ratio of 73.00, which is significantly higher than the industry P/E of 18.62, indicating that the stock is overvalued as compared to its peers.
Amber Enterprises India Ltd
The company is mainly engaged in the business of room air conditioners and it is a prominent solution provider for the OEM/ ODM industry in India. It has a market capitalization of ₹ 6,297 crores and is a small-cap company.
Jefferies has a buy call on the company’s shares with a target price of ₹ 2870.00 apiece, which indicates an upside of 51.74% as compared to its current share price of ₹ 1,891.35 apiece as of Wednesday.
Amber Enterprises has a low return on equity of 6.54% and an ideal debt-to-equity ratio of 0.75. Its shares were trading at a price-to-earnings ratio of 57.09, which is significantly higher than the industry P/E of 18.62, indicating that the stock is overvalued as compared to its peers.
Crompton Greaves Consumer Electricals Ltd
It is one of the leading consumer companies in India and has two business segments– lighting and consumer durables. It is a mid-cap stock with a market capitalization of ₹ 18,587 crores.
Jefferies has a buy call on the company’s shares with a target price of ₹ 430 which implies an upside of 47.01% as compared to its share price of ₹ 292.50 apiece as of Wednesday.
Crompton Greaves has a good return on equity of 26.38% and an ideal debt-to-equity ratio of 0.67. Its shares were trading at a price-to-earnings ratio of 35.57, which is significantly higher than the industry P/E of 18.62, indicating that the stock is overvalued as compared to its peers.
Finolex Industries Ltd
The company is a leading manufacturer of PVC resin and the largest producer of PVC pipes & fittings in India. It is a small-cap company with a market capitalization of ₹ 9,893 crores.
Jefferies has a buy call on the company’s shares with a target price of ₹ 220 which suggests an upside of 31.97% as compared to its share price of ₹ 167.25 apiece as of Wednesday.
Finolex Industries has a good return on equity of 29.75% and an ideal debt-to-equity ratio of 0.01. Its shares were trading at a price-to-earnings ratio of 17.76, which is slightly higher than the industry P/E of 13.22, indicating that the stock is overvalued as compared to its peers.
Polycab India Ltd
Polycab is among the leading manufacturers of wires and allied products such as uPVC conduits and lugs and glands in India. It is a mid-cap company with a market capitalization of ₹ 42,891 crores.
Jefferies has a buy call on the company’s shares with a target price of ₹ 3630 which suggests an upside of 25.52% as compared to its share price of ₹ 2892.00 apiece as of Wednesday.
Polycab India has an ideal return on equity of 16.25% and an ideal debt-to-equity ratio of 0.03. Its shares were trading at a price-to-earnings ratio of 36.82, which is slightly higher than the industry P/E of 36.30, indicating that the stock is slightly overvalued as compared to its peers.
Written by Simran Bafna
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