HDFC Securities has recommended investors to buy Gati Ltd and Quick Heal Technologies at the current market price and further advises investors to continue to add them on dips with a six-month horizon.
Here is the domestic brokerage's investment rationale into the two stocks:
HDFC Securities expects the company to gain from its longstanding experience in the logistics sector, Allcargo as its new promoter, diversification of customer base, and revenue offering from different segments. Also, Allcargo’s focus on restructuring the business will improve return ratios and financials and transform the business to an asset-light model.
Further, it is pertinent to note that the logistics sector is highly underpenetrated and has a high share of unorganised players (~95 percent). The brokerage believes this presents a structural growth opportunity that can be harnessed with limited investment.
“Huge opportunity size (large unorganised market), long operating experience in a stable industry, and improving return ratios with new promoters provides comfort. Alcargo has a longstanding relationship with customers across the globe and, with the acquisition of Gati, it would be well-placed in the domestic express distribution segment to offer a wide range of logistic solutions to its international customers,” HDFC Securities said.
With the increasing share of rail in the EXIM container trade and relatively better positioning of stronger players in the organized sector, road transporters like Gati stand to benefit. This benefit could sustain and increase with the arrival of Dedicated Freight Corridor (DFC), it added.
HDFC Securities believes the base case fair value of the stock is Rs 157 and in the bull case the fair value of the stock is Rs 187. Investors willing to take some risk can buy on dips at Rs 136.5 and add more on dips to Rs 118.5.
Quick Heal Technologies
Quick Heal is one of the leading providers of security software products and solutions in India with a market share of around 30 percent in the retail segment. The company’s proven track record of execution over two decades has contributed to its reputation and leading market position in India as a security software solutions provider.
The company’s business works an asset-light model whose current ratio stands at more than 8x. Taking into consideration future growth, healthy cash balance, debt-free balance sheet, robust dividend pay-out and consistent buy-back offers to shareholders, we have a positive view on the stock, HDFC Securities said.
It believes the base case fair value of the stock is Rs 265 and the bull case fair value is Rs 287 over the next two quarters. Investors could Buy at LTP and add more on dips to Rs 218-222.
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