ICICI Securities Bullish on Debt-Free Stock and Sees Upside in 3 Months

With a market valuation of 42,078 crore, Bosch Ltd. is a large-cap company engaged in the automotive accessories industry. Bosch Ltd (Bosch) offers products and services in the areas of consumer goods, energy and building technology. The stock has gained 7.44% over the past five trading days and closed Friday at 14,300 on the NSE, up 3.46% from the previous close. The company is nearly debt free and the high promoter shareholding of 70.54% has been consistent for the company for the past 3 years. With a target price of Rs. 15,500 and a stop loss of Rs. 12,700, brokerage firm ICICI Securities is bullish on the stock. The stock has nearly 9% upside potential from the brokerage-defined buy range of 13,900-14,250 with a three-month target period.

According to ICICI Securities, “The automotive and automotive auxiliary space has been exemplary in its relative outperformance during the recent market correction phase. Within the ancillary stocks, Bosch has experienced a significant price/time correction over the past six years. Technically, right now, the stock offers an extremely favorable risk-reward setup from a medium-term perspective.”

Being bullish on Bosch shares, ICICI Securities said in a note that “the stock price halted its decline and formed a potential bullish double-bottom reversal pattern as the May 2022 low of 12900 moved lower. held again in June 2022, indicating the emergence of supportive efforts consistently at a 50% retracement of the entire 2020-21 rally (7850-19250) which also coincides with the major lows of May and June 2021 Structurally, the stock price retraced its 11-week rally (13412-19250) over eight months. A slower pace of retracement indicates that inherent strength is slowly returning to the stock.”

The brokerage further claimed that “The weekly RSI has formed a positive divergence from its own low in May and has also given a break above the downtrend line, which has been in effect since October. 2021, showing early signs of renewed upward momentum.We expect the stock price to initially head towards 15,500 over the next few months, a 38.2% retracement from the fall of the last eight months (19,250-13,000).

Building on the positives driven by the recovery in volumes in the automotive space, particularly the CV segment, we expect the company’s revenue to grow at a CAGR of 16.5% in FY22 -24E, with operating leverage gains expected to contribute to margin improvement to 13.5% by FY24E. PAT growth over the aforementioned period is placed at 18% CAGR with a consequent expected RoCE at 14% and base RoIC at 46%, ICICI Securities said valuing the stock at ~25x PE on FY24E.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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