Stock picks for Q2FY27 by Monarch Networth Capital
Top Picks
1) Pricol Ltd.
What we like in the company
* Pricol is a leader in 2W domestic cluster industry with a 40% market share. It also enjoys a market leadership in clusters for CV. The other two divisions which form ~50% of the total revenue consists of pumps, switches and 2W plastic component.
* Pricol is diversifying and enjoying the value growth from premiumization (shift to LCD and TFT from analog) in cluster business with addition of new customers and programs in PV segment reducing the high 2W dependency.
* Pricol is undertaking a large Rs 4.5bn capex to expand the capacities at the P3L plastic components business which is expected to grow swiftly.
Earnings Outlook
* We expect the company to deliver 17%/16%/19% Revenue/EBITDA/PAT CAGR over FY26-28E due to the compounding of revenue in DIS business and robust growth in the P3L business.
* The near-term pressure on margins will iron out from 2QFY27E, once the price pass on comes into effect, thereby protecting margins for FY27E
Near-term triggers
* With new programs from Tata Motors like the Sierra and Punch and several more platform launches for Tata Motors, we expect revenue growth to continue exceeding underlying industry growth.
* We expect sharp growth for the P3L business due to new orders from non-TVS customers and capacity expansion, with a target to double the revenue for this segment over FY25-FY28E.
* The announced demerger should help unlock much more value for the DIS segment which enjoys very high barriers to new entrants due to its technology excellence.
Valuation and view
* We value Pricol at 25x FY28E PE to arrive at a TP of Rs 724 and a BUY rating.
* At CMP, Pricol trades at a very attractive valuation of ~21x FY28E P/E.
* Key Risks: Deep downcycle in 2W, weakness in exports, margin pressure due to cost inflation.
2) Redington Ltd
What we like in the company
* Leading technology distributor with diversified presence across IT, Mobility, Cloud and Lifestyle products across India, Middle East, Africa and Turkey.
* Strong OEM partnerships and an extensive channel network provide scale, vendor access and execution advantages.
* Increasing focus on cloud, software and value-added solutions is improving business quality and margin profile.
* Asset-light business with disciplined working capital management, healthy cash generation and consistently strong return ratios.
Earnings Outlook
* We We factor in Revenue/EBITDA/PAT CAGR of 15.7%/16.9%/7.3% over FY25-FY28E
* EBITDA margins are expected to improve gradually, driven by an increasing contribution from higher-margin cloud, technology solutions and services. We value the company at 12x FY28E EPS, arriving at a Target Price of Rs 340
Near-term triggers
* Recovery in enterprise IT spending and the upcoming PC/server refresh cycle should support growth.
* Rising adoption of cloud, AI infrastructure and cybersecurity solutions will drive higher-margin technology solutions revenue.
* Improving product mix towards cloud and software, along with premium mobility demand, should aid margin expansion.
Valuation and view
* We ascribe 12x multiple to FY28 EPS and arrive at a target price of Rs 340 an upside of 21.8%
* At CMP of Rs 279 stock trades at 11.9x Mar’28E P/E.
3) Sundram Fasteners
What we like in the company
* Sundram Fasteners (SFL) is an industry leader in manufacturing of fasteners, for both auto and non-auto industries with a 40% share in Auto fasteners in domestic market. It also manufactures other components like pump assemblies, cold extruded & sintered powder parts and powertrain components.
* We think the company is at the point of inflection where overseas demand for CV and PV is improving and there are several new contract wins on the wind energy and aerospace fasteners which should drive the revenue growth. Resumption of the EV export program should accelerate scale up of the export business.
Earnings Outlook
* We expect a 12%/ 17%/ 19% CAGR for Revenue/ EBITDA/ PAT over FY26-FY28E led by pickup of exports, strong domestic demand and non-auto orders.
* We expect margins to reach 17% and return ratios to cross 15%, triggered by ramp up of high margin exports, non-auto fastener order and price hikes.
Near-term triggers
* Strong demand both from domestic and export auto markets along with rising demand from non-auto fasteners is expected to rebound revenue growth for SFL.
* Scale up of revenue from wind energy, aerospace and railways will act as key triggers in medium term to reduce the auto cycle risk. This along with a gradual pick up of the large Rs 40bn EV order will be a major trigger for the margin expansion thesis in this company.
* Price hikes expected in 2QFY27E should also help revive the margins and augmenting the PAT growth.
Valuation and view
* We ascribe 26x PE to FY28E EPS and arrive at a TP of Rs1060/share and a BUY rating. At CMP, stock trades at very attractive valuation of 28x/ 23x FY27/ FY28 PE.
* Key risks: Poor exports recovery and delay in new EV orders
4) Travel Foods Services Ltd
What we like in the company
* TFS is India’s largest player in the airport travel food and beverage (F&B) and lounge segment, with ~30% market share in travel QSR (FY26 revenue) and ~45% in lounges.
* TFS operates a travel-focused concession-led model through long-term agreements with airport operators, including AAI and BIAL, along with JV partnerships with Adani Airports and GMR Airports. These JVs cover ~50% of India's passenger traffic.
* The company has resence across 20 airports, including 14 of India's top 15, covering 74% of India's domestic & international air traffic.
Earnings Outlook
* Revenue/EBITDA/PAT is projected to grow at 13%/10%/12% CAGR over FY26-FY28E.
* We expect EBITDA margins to normalize at ~37%, from the peak of 39.4%, due to elevated input costs and expenses associated with the ramp-up of newly commissioned units.
Near-term triggers
* Operational scale-up across new airports to drive growth – TFS is expanding its presence across key airports with the ramp-up of operations at Navi Mumbai International Airport following its Dec'25 launch, alongside new operations at Cochin International Airport (11 Travel QSR outlets and one lounge) and Noida International Airport. These additions are expected to support network expansion and drive future growth.
* New concessions to support future expansion – TFS has secured the concession to operate Travel QSR outlets at the upcoming Bhogapuram International Airport through its JV with GHL. In addition, the co. has signed an agreement with BIAL to operate a F&B outlet at Terminal 1 of Bengaluru, further strengthening its presence across key airport hubs.
Valuation and view
* At CMP, the stock is trading at 35.8x FY27e and 31.6x FY28E EPS of Rs 37.1 and 42.1, respectively.
* We value the stock at 40x FY28E EPS Rs 42.1 and arrive at a TP of Rs 1,680 an upside of 40%.
5) Viyash Scientific
What we like in the company
* Viyash is the combined business of animal and human healthcare with very strong capabilities on leadership, R&D, backward integration on API, patent filing and regulatory approvals for its worldwide manufacturing facilities.
* Formulation contributes 55% of business and API is the rest, along with equal focus on branded and generics. It has a very strong formulation business in animal health spread across the globe.
* Viyash aims to achieve strong growth through three major levers: scale up of companion animal and CDMO business post genericization, expansion of farm animal business and addition of new products on human healthcare.
Earnings Outlook
* Revenue/EBITDA/PAT to grow at 17%/20%/41% CAGR over FY26-FY28E, driven by a strong launch pipeline.
* EBITDA margins expected to range between 20-22% over FY26-28E, supported by merger synergies and scale up of high margin companion animal and human health business.
Near-term triggers
* The Acquisition of Bio For Life companion animal business will aid Viyash with a ready coverage of 85% of vet clinics in Italy and replicate the same in other European countries.
* Strong addition in Albendazole business provides growth visibility with innovators in near term.
* Continued synergies from R&D, procurement, backward integration (API), corporate expenses, cut down of low margin business and cost efficiencies across the merged entity should keep margins buoyant.
Valuation and view
* We value Viyash at 15x FY28E EV/EBITDA to arrive at a TP of Rs 330/sh and a BUY rating. At CMP, the stock trades at an attractive valuation of 12.5x FY28E EV/EBITDA.
* Key Risks: Failure to scale up companion animal business, high competition in API CDMO, slowdown in overseas demand
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