What analysts say on PVR, Aarti Industries, Indoco Remedies & Mishra Dhatu

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Some midcap and smallcap stocks such as PVR, Aarti Industries, Mishra Dhatu Nigam and Indoco Remedies have seen rating updates by domestic brokerages. Barring Mishra Dhatu Nigam, three others have ‘Buy’ rating by the brokerage. ICICI Securities has resumed coverage on Mishra Dhatu Nigam but with ‘Hold’ rating.

Indoco Remedies | Nirmal Bang Institutional Equities | purchase

Nirmal Bang Institutional Equities hosted Indoco Remedies management at the NBIE Annual Investor Conference to discuss the company’s future business outlook. Nirmal Bang said Indoco Remedies expects continued strong growth in the US and European markets driven by a strong order book of Rs 150 crore each and margin expansion. For India, management has guided for double-digit market growth since FY24, driven by deeper market penetration, market share growth in key segments, new launches and inorganic opportunities. Overall, Nirmal Bang said, the company aspires to achieve revenue of Rs 5,000 crore (Rs 1,500 crore in FY22) in less than five years, both organic and inorganic. On the margin front, Nirmal Bang said, the company expects 23-24 per cent EBITDA margin over the next three years.

“We remain positive about the company’s future growth prospects primarily due to high domestic contribution, strong complex products portfolio for export markets and reasonable valuations. We maintain Buy on Indoco with a revised target price of Rs. has grown its multiple to 16x (from 15x) price (TP) of Rs 452, valuing it at 16x Sep 24E earnings,” it said.

Alloy Metal Corporation | ICICI Securities | catch | target Rs 230

ICICI Securities said that Mishra Dhatu Nigam’s (Midhani) Q2 FY23 performance was stable due to higher scrap utilisation. EBITDA margin came down to 32.4 per cent despite strong raw material and power costs due to higher scrap usage. Orderbook grew to Rs 1,500 crore and H1FY23 value of production (VoP) increased by 41.8 per cent YoY to Rs 480 crore. The company introduced six new products at the DefExpo-22. In addition, the 8T Vacuum Induction Melt Furnace at Rohtak (in Haryana) for making armor plates has become fully operational.

“Going forward, while we see exciting prospects of Rs 500 crore from the expanded plate mill and Rohtak plant at steady state, near-term margin pressure is likely to constrain the stock performance. Also, revenue of Rs10bn for FY23 Target looks challenging. We resume coverage on Midhani, rate the stock at 14x FY24E EBITDA, capture potential upside from ramp up of Wide Plate Mill and Rohtak Armor Plant, resulting in target of Rs 230 price, which is 4 per cent more than the CMP. ICICI Securities said.

Aarti Industries | Yes Securities | buy | target Rs 845

Yes Securities said Aarti Industries’ second quarter adjusted EBITDA at Rs 270 crore (31.5 per cent growth) was largely in line with its estimates. The YoY increase was offset by adjustment for deficiency charges of Rs 52 crore in the base quarter. Higher raw material volatility, lower volumes due to maintenance shutdown at Jhagadia and higher operating expenses coupled with muted demand for discretionary products (dyes and dyes) resulted in a sequential decline in operating profit, it said.

“Going forward, while EBITDA for 2HFY23 may remain flat (vs H1), strong 25 per cent CAGR is expected in FY24-25, expansion in NCB and athleisure capabilities, ramp-up in LT-2 (revenue potential : Rs 550 crore), commissioning and ramp-up of LT-3 (Revenue potential: Rs 94 crore) and launch of 50+ molecules currently under R&D,” it said.

PVR | Nuwama Institutional Equities | buy | target Rs 2,161

Nuwama Institutional Equities said that after a good October, the highs in November took a step forward. But it is Ajay Devgn-starrer Drishyam 2 that has made the picture clear for the multiplexes with a possible collection of Rs 62 crore in the first three days. This raised hopes of Q3 FY22 followed by Q2 FY23.

“The viewership for Drishyam 2 has been good – broad based on good content as well. We highlight the strong pipeline: Bhediya on 25th November, Circus on 23rd December and Avatar on 16th December (high ATP)” said Nuvma , “Though given a false start to the Hindi box office, the trend’s stability. Keep ‘Buy’ on PVR.”

Nuwama said it would continue to track the PVR and Inox merger (expected by January), which would create synergies. It also expects a possible revival in footfalls owing to a strong pipeline: Bhediya (Varun Dhawan and good VFX) on November 25, Circus (Rohit Shetty’s film starring Ranveer Singh, Deepika Padukone) on December 23 and Avatar: The Way Off Waters Dec 16 (high ATP due to strong stretching). The consistency needs to be seen though the Hindi box office saw a false start earlier.

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