State Bank of India: Buy for a price target of Rs 680

According to the Alpha Portfolio report State Bank of India has one of the lowest gross non performing assets ratios among public sector banks at 5%.

“We believe that the bank could be a significant beneficiary of any re-acceleration in corporate resolutions. The impact of Covid-19 on SBI’s corporate portfolio will be fairly limited given the mortgage-heavy retail portfolio,” the brokerage has said.

The Alpha Portfolio report says it likes State Bank of India for its enviable liability profile, higher retail orientation, reasonable capital position and undemanding valuations post stripping-off subsidiaries’ valuations.

SBI will also be a key beneficiary of the formation of NARCL to take out stress from public sector banks, accelerating corporate lumpy resolutions and continued value un-winding in subsidiaries. Emkay Global has a buy call on the stock with a price target of Rs 680.

Shares of SBI were last seen trading at Rs 473.20 on the NSE.

Westlife Development

The company establishes and operates McDonald’s restaurants across West and South India, through its wholly owned subsidiary Hardcastle Restaurants Pvt. Ltd.

According to the Emkay Global report, Westlife Development has superior unit revenues (30-40% higher than peers’), supported by high-value proposition and brand/portfolio extensions.

“Dine in recovery on full unlocking, continued strong traction in convenience channels and sustained cost-savings post opening-up should drive out performance ahead. Current valuations at 32x/26x FY23E/24E EV/EBITDA (pre-IndAS) are at a discount to peers. We have a Buy rating on Westlife Development with a target price of Rs 680 (based on 34 times Dec’23E pre-IndAS EBITDA). Store closures upon occurrence of a third Covid-wave, remains a key downside risk to estimates,” the brokerage has said.

Shares of Westlife Development was trading at Rs 560 on the BSE.

Varun Beverages

The Alpha Portfolio report also has a buy kn the stock of Pepsi Franchisee, Varun Beverages. “Longer-term growth levers of low per-capita soft-drink consumption in India (18L vs. 80-150L in China/Brazil) and potential market share gains in under-penetrated regions, along-with modest price hikes provide confidence for sustained mid-teen EBITDA growth over the next decade,” the report has said.

“Improvement in asset turns, led by relatively lower capex in the near term, should drive healthy RoIC improvement to 20%+ from low double-digit currently. We have a Buy rating on Varun Beverages with a target price of Rs 1,120 (based on 35x Dec’23E EPS). Higher seasonality and volatility in international operations remain key downside risks to our estimates,” the brokerage has said.

Varun Beverages shares closed at Rs 883 on the BSE.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, and the author, are not liable for any losses caused as a result of decisions based on the article.