HSBC has initiated coverage on Polycab, with a target price of Rs 3,000, suggesting a 30 percent upside potential from current levels. HSBC has also initiated coverage on KEI Industries, with a target price of Rs 1,250.
Unlike the last cycle, HSBC believes, this time the earnings growth will be backed by very strong cashflows. In fact, the firm expects companies to convert 60 percent of the profit into cashflows over FY23 and FY24.
These stocks have rallied pretty hard year-to-date (YTD) but even at current valuations, they underappreciate the strong cash-backed growth for such companies and a strong return on invested capital (ROIC) going forward.
On back of this, the brokerage house has initiated a coverage on both these stocks with a 'buy' rating.
Watch the accompanying video of CNBC-TV18’s Nimesh Shah for more details.
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