2 multibagger stocks could rise up to 14% in 3 months of holdings: Buy?

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The brokerage company ICICI Direct Research has recommended buying two multibagger stocks, Persistent Systems Limited and Indian Hotels Company Ltd. With a target price of 4,240.00 for Persistent Systems, the brokerage firm sees potential upside of up to 13%, while with a target price of 388.00 for Indian Hotels, it sees potential upside of up to 14%. The brokerage company has specified a target period of three months for each of the multibagger stocks.

Persistent Systems

The research analysts of the brokerage firm ICICI Direct Research said “IT space has undergone significant price correction in CY22 and also underwent base formation in the past few months factoring in a host of negatives. Post Q2FY23 earnings, some IT companies are looking promising, Persistent is one of them, where price charts are shaping out well for further gains in coming quarter. Thus, it provides a favourable risk-reward setup at current juncture.”

They further said “Persistent’s share price has formed a potential double bottom bullish reversal pattern around 3100 wherein it retraced CY21 rally (1477- 4987) by 50% in equal time indicating corrective nature of price decline within structural uptrend on longer degree. We expect share price to resolve above 3865, which will accelerate further upsides in coming months.”

“We expect the share price to head towards 4240 as it is 61.8% retracement of entire CY22 decline (4987-3092). Weekly RSI, has given a breakout above year long down trend line and started forming higher high-low indicating positive momentum building in the stock. Persistent indicated that demand remains strong helping it achieved US$1 billion (bn) revenue on a quarterly annualised basis and is now aiming at US$2 bn annual revenue in the medium term by FY23-28,” said the research analysts of the brokerage firm ICICI Direct Research.

“Persistent has acquired five companies in FY22 building capabilities in payments, cloud, etc. The company indicated that integrations of all companies is largely completed and it is now actively looking at acquisitions in the Europe region. Persistent’s TCV remains robust. It will help the company to post revenue growth at 23.7% CAGR in FY22-25E along with EBIT margin expansion of ~70 bps to 14.6% over FY22-25E. Persistent’s share price has grown by ~5.7x over the past five years (from ~ 655 in November 2017 to ~ 3,762 levels in November 2022). We value Persistent at 4,370 i.e. 26x P/E on FY25E,” claimed the research analysts.

They have recommended the stock to buy at a range of 3715-3767, with a stoploss of 3,390.00, and a target price of 4,240.00.

The shares of Persistent Systems Limited closed today at 3,713.90 apiece. In the last 5 years, the stock has given a multibagger return of 471.90%.

Indian Hotels

The research analysts of the brokerage firm ICICI Direct Research said “Hospitality sector has been a key outperforming sector in CY22 as stocks resolved out of multiyear underperformance as tourism picked up after two year Covid induced hiatus. Within the structural uptrend, hotel stocks have seen a higher base formation in the last one month and are currently seen resuming their primary up trend. Indian Hotel is our preferred pick within the hotel space. It has remained at the forefront as it continues to form a higher peak and higher trough in all time frames.”

“The stock is on the cusp of generating a resolute breakout above its last one month’s range ( 348- 305) and is expected to head towards 388 levels in the coming months as it is the measuring implication of the range breakout, thus offering fresh entry opportunity. In the last two years, on multiple occasions the stock has rebounded from the 10 week’s EMA, thus providing incremental buying opportunity. In the current scenario, also it has formed a higher base above 10 week’s EMA (currently at 316) highlighting inherent strength and a positive price structure,” said the analysts.

“Q1FY23 performance remained the best ever so far in the past 11 years in terms of margins with the company reporting EBITDA margin of ~30%. Average occupancy was at 70.4% vs. 58.4% last quarter. Average room rates were at 11,397 vs. 10569/room (up 8% QoQ). Compared to pre-Covid, occupancy, room rates both were up 700 bps, 24.7%, respectively. With strong performance in the seasonally weak quarter, H2FY23 (i.e. peak season) is now looking more promising. This season will also have an advantage of influx of foreign tourists who generally visit India for long haul vacation. They so far have not participated meaningfully in the current business performance,” said the analysts.

“Under AHVAAN 2025, the company plans to have 300+ hotel room portfolio with zero net debt status. IHCL also aims to achieve 33%+ margins (35% for new businesses) through cost efficiencies. We expect revenue CAGR of 40.9% during FY22-24E. Business to recover fully to pre-Covid levels while EBITDA to surpass pre-Covid levels in FY23E; margins seen at over 32% in FY24E, which has the potential to further expand by ~100 bps thereafter. In terms of b/s, the company raised net proceeds of 3943 crore via rights issue and QIP of which 3247 crore will be used for debt repayment and balance to fund the growth for expansion of Ginger hotels and Sea Rock expansion. With this fund raise, the company has now become a debt free company,” claimed the analysts.

The research analysts of the brokerage firm ICICI Direct Research recommended to buy the shares of Indian Hotels at a range of 335-341, maintaining a stop loss of 308.00 for a target price of 388.00.

The shares of Indian Hotels Company Ltd closed today at 335.00 apiece, down by 1.46% from the previous close of 339.95. In the last 5 years, the stock has given a multibagger return of 208.61% and in the last 1 year, the stock has gained 62.05%. On a YTD basis, the stock has gained 82.02% so far in 2022.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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