Buy this diversified mid-cap stock, stocks are likely to rise 16%, recommended by ICICI Securities

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Stock market outlook

On NSE, the current market price (CMP) of 3M India is Rs 22,850 each. Its 52 week low is Rs 17,273 each recorded on 27 May 2022, and the 52 week high is Rs 27,800 each recorded on 08 November 2021.

    Returns on investments

Returns on investments

The stock over the past 1 and 3 months has yielded positive returns of 1.69% and 12.68%, respectively. Over the past year, it has yielded a negative return of around 9.82%. Over the past 3 and 5 years, it has given positive returns of 12.27% and 55.34%, respectively.

Highlights from 3M India’s FY22 Annual Report

(1) The company expands its local manufacturing capacity for respirators, masks, hand sanitizers, etc. ; it will also supply industrial consumables to mobile phone manufacturers benefiting from PLI programs.

(2) 3M India regularly invests in increasing its offline and online reach for Scotch Brite.

(3) It introduced four products in the automotive and consumer segments. We expect additional product launches as the economy normalizes.

(4) Royalty as a percentage of sales reduced from 5.3% in FY21 to 5.2% in FY22.

Highlights of the President's speech

Highlights of the President’s speech

(1) The company is a net beneficiary of increased infrastructure spending on roads and highways in India.

(2) It launched several new products and solutions to meet new emerging demands.

(3) It has partnered with several medical bodies to upgrade their paramedical staff and improve their clinical practices.

Increasing local manufacturing prowess

Increasing local manufacturing prowess

3M India is expanding its manufacturing capacity for respirators and masks, to meet growing demand. It has also completed a project to manufacture disinfectants and hand sanitizers. The company will provide materials to mobile phone manufacturers investing under the PLI programs. “We anticipate that the increased localized production will lead to a reduction in 3M India’s sourcing of raw materials from related parties,” the brokerage said.

Regular launch of new products

Regular launch of new products

During the year, 3M India introduced two new products in the automotive segment (paint spray gun and ceramic coating). It also launched a star ribbon for all-weather reflectivity and a consumer respirator for comfortable protection. “We expect the number of new launches to increase as the economy normalizes,” the brokerage said.

Reduced advertising spend and working capital

Reduced advertising spend and working capital

3M India’s advertising spend as a percentage of net sales decreased from 2.0% in FY21 to 1.6% in FY22 due to the impact of covid. Net working capital days also reduced YoY to 38. However, we model both ad spend and working capital days to reach pre-pandemic levels in fiscal years 23E-24E.

Brokerage keeps BUY with target price of Rs 26.5000

Brokerage keeps BUY with target price of Rs 26.5000

ICICI Securities said, “We model 3M India to report revenue and CAGR PAT of 16.6% and 39.4% respectively in FY22-24 with steady improvement in RoE. Hold long with a target price based on the DCF of Rs 26,500. the weak economy and the failure of new products.”

Disclaimer

Disclaimer

The security was selected in the brokerage report of ICICI Securities. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.

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