Adani Power, ITC Hotels, PCBL: Foreign brokerages initiate coverage on these 3 stocks

Overseas brokerage firms including UBS and Jefferies have initiated coverages on select stocks including Adani Power, ITC Hotels and PCBL in the current month with up to 60 per cent upside potential, amid the rising volatility in the broader markets. Jefferies has recently released its notes on Adani Power and ITC Hotels, while UBS has picked PCBL. Here’s what the brokerage firms said about these stocks:

Jefferies on Adani Power

Rating: Buy | Target Price: Rs 660 | Upside Potential: 32%

Adani Power (APL) is India’s second-largest thermal power generation company after NTPC, on its journey to raise capacity by 1.7 times from 17.6 GW to 30.7 GW by 2030. Land requirements and financing plans are in place. Close coordination with BHEL for equipment delivery and inhouse EPC are ensuring capex is on schedule. Thermal capacity in an overall peak deficit scenario with merchant exposure is a positive, said Jefferies

“We estimate 10 per cent Ebitda CAGR for APL in FY24-27E, rising to 19 per cent CAGR over FY27E-30E as new capacity becomes operational. We value APL at 15 times EV/Ebitda, vs 17 times for JSW Energy given 50 per cent renewable energy exposure for JSWE,” it said, initiating with a ‘buy’ rating and a target price of Rs 660. Jefferies has cited past PPA issues returning and impacting Ebitda ; lower merchant realisations; demand disappointment; payment delays for 1.6 GW Godda power plant as key risks.

UBS on PCBL

Rating: Buy | Target Price: Rs 600 | Upside Potential: 58%

PCBL is transforming into a chemical technology platform and should re-rate, said UBS. “During FY24-29E we expect it to deliver 27 per cent earnings CAGR and expand ROCE from 18 per cent to 29 per cent. The base business is a steady compounder and cash generator. We expect growth from diversification into newer phosphonate chemistry will positively surprise the market. The sophisticated nano-silicon technology offers substantial optionality but is not fully appreciated by the market.”

USB initiated coverage on PCBL with Buy and target price of Rs 600. It values PCBL using SOTP on FY27E, at10 times EV/Ebitda for core carbon black, 15 times EV/Ebitda for Aquapharm and price-to-sales of 10 times for the nano-silicon business given its nascent stage and substantial optionality. Among Indian chemical stocks, it remains the cheapest on a PEG basis. “We believe it deserves a re-rating given diversification and nano-silicon optionality,” it said.

Jefferies on ITC Hotels

Rating: Buy | Target Price: Rs 280 | Upside Potential: 60%

ITC Hotels is the second listed hotelier, which has an owner/operator model, a net cash balance sheet with diversified brand/geo presence. It is currently ramping up recent greenfield projects and now adding rooms via management contracts, said Jefferies. “We peg ITC Hotel’s earning to grow at 19 per cent CAGR over FY24-FY27e, also aiding improvement in ROCE’s to 12 per cent by FY27e. ITC Hotels trades at 20 times FY27 EV/Ebitda, a 25 per cent discount to 27 times for Indian Hotels company,” it said.

ITC Hotels is seeing the continuation of long tenured hotels management team and post demerger, we believe that the independent new existence will help improve focus on return/growth. Company has also recently constituted a board with 50 per cent independent directors. We peg ITC Hotel’s Ebitda and PAT to grow at 16 per cent and 19 per cent over FY24-FY27e. “We initiate on ITC Hotels with a buy, valuing overall Hotel Ebitda at 30 times FY27 EV/Ebitda,” Jefferies said with a target price of Rs 240.