From RIL to Berger Paints: Brokerages bet on these stocks for Samvat 2078

Here's a list of stocks recommended by top brokerage and research firms that can help you build your portfolio this Diwali

Samvat 2077 has been historic for more than one reason, the benchmark indices logged path-breaking gains and rallied to never before levels. The BSE benchmark index, the Sensex, surged past the 60,000-mark, while the NSE Nifty pierced the 18,000-mark on the back of a strong liquidity driven rally, with rising participation by retail investors. Hopes of strong corporate earnings, economic recovery and government led-reforms were some of the major triggers that aided the bullish sentiment.

There were walls of worries which the markets climbed on its way up, like the second-wave of Covid-19 and the threat of a possible third-wave, high commodity prices mainly oil, slowdown in foreign fund inflows in the backdrop of US stimulus withdrawal and possible change in interest rate cycle back home given the inflation concerns.

Going forward, Samvat 2078, analysts say, will all be about the right stock selection at a time when corporate earnings may come under pressure due to rising input costs, and foreign flows may face headwinds due to a change in policy stance of major central banks, especially the US Fed.

BS Special :: Samvat 2078

What does Samvat 2078 have in store for Indian equity markets? Which sectors look investment-worthy? Leading market experts answer these questions and help you better understand what lies ahead. WATCH VIDEO

Meanwhile, here are some of the stocks that leading brokerages have recommended for Samvat 2078.

HDFC Securities

HPCL – Add on Dip     |     Add on Dip to: Rs 280     |     Target: Rs 385

HPCL’s strong operation profile driven by dominant market position supported by established marketing and distribution network and scale-up in refining capacity provides comfort despite headwinds such as economic slowdown, volatility in oil prices and regulatory changes. On the refining side, HDFC Sec expects margins to bottom out and GRMs are likely to recover H2FY22 onwards. Successful divestment of Govt’s stake in BPCL could lead to re-rating of other OMCs including HPCL.

Adani Ports & SEZ – Add on Dip     |     Add on Dip to : Rs 695     |     Target: Rs 936

APSEZ’s superior port handling capabilities, strong Q1FY22 performance with growth across all the ports, lined-up acquisitions, railway consolidation, EXIM trade etc., together instill faith in the functioning capabilities of the company. Further, gradual opening of the world economy will provide much awaited impetus to the demand scenario and augment operations across its ports.

Bank of Baroda – Add on Dip     |     Add on Dip to: Rs 83.30     |     Target: Rs 113.50

The brokerage expects BoB to grow its loan book at 8 per cent CAGR while NII and Net profit are expected to grow at 9.5 per cent and 255 per cent CAGR respectively over FY21-23E. ROAA is estimated to improve to 0.8 per cent in FY23E from current 0.1 per cent in FY21. Most concerns arising out of pending write-ups are already priced-in, hence the brokerage expects higher recoveries and lower slippages going forward.

Eris Lifesciences – Add on Dip     |     Add on Dip to : Rs 725     |     Target: Rs 966

HDFC Sec believes that Eris focus on lifestyle related-disease therapies will continue to drive growth in its chronic category. In the last five years, Eris has clocked a steady revenue and PAT CAGR growth of 15 per cent / 21 per cent. The brokerage estimate 14 per cent CAGR in revenue over FY21-23E driven by strong growth in chronic area.

Anand Rathi

Hindalco     |     Reco Price: Rs 470     |     Target: Rs 578

Hindalco remains on its guided strategy with deleveraging underway and overall operations getting stronger by each passing period. The valuations are still not stretched considering the solid operational performance and ongoing balance sheet deleveraging together with strong opportunities for pursuing growth capex at a comfortable leverage position.

CoForge     |     Reco Price: Rs 5,420     |     Target: Rs 6,465

The order book for the next 12 months stood at $560 million (+20.4 per cent YoY). Robust deal pipeline along with strong deal wins momentum and particularly consistency in large deal wins, value creation from SLK Global acquisition and strong FY22 guidance from management.

Rossari Biotech     |     Reco Price: Rs 1,434     |     Target: Rs 1,840

The company’s newly commissioned Dahej unit ramp-up is also going as planned. The company is initially targeting asset turnover of about 4-5x this fiscal year while post stabilization it could reach 5-6x. In terms of strategy, management continues to focus on leveraging its R&D capability and introducing new business lines within core chemistries.

Angel One

Federal Bank     |     Reco Price: Rs 102     |     Target: Rs 135

The bank posted a good set of numbers for Q2FY22 as NII/ advances increased by 7.2 per cent/ 9.5per cent YoY. Overall asset quality for the quarter improved which was better than the brokerage’s expectations. They expect asset quality to improve further in H2FY22 given continued opening of the economy and expect the bank to post NII/ PPOP/ PAT CAGR of 22.8 per cent/ 23.7 per cent/ 23.2 per cent between FY20-23.

HDFC Bank     |     Reco Price: Rs 1,663     |     Target: Rs 1,859

Q2FY22 numbers were better than expected as GNPA/ NNPA reduced by /8 bps QoQ to 1.35 per cent and 0.40 per cent of advances. The management has indicated that there will be maximum impact of 10-20 bps on asset quality from the restructure pool. Given the best in class asset quality and expected rebound in growth, the brokerage is positive on the bank given reasonable valuations at 3.2x FY23.

Amber Enterprises     |     Reco Price: Rs 3,450     |     Target: Rs 4,150

Amber is a market leader in the room air conditioners (RAC) outsourced manufacturing space in India. The company plans to increase revenues from component business and exports. The company has made acquisitions that will help them foray into different categories like railway, metro and defense. Angel foresees healthy profitability for the company on the back of entry into export market and participation in the PLI scheme.

ICICI Direct Research

Bank of Baroda     |     Reco Price: Rs 90 - Rs 100     

The brokerage firm believes that credit growth will pick with unlocking and speedy economic recovery. Transfer of NPAs to bad bank would lower broad NPA numbers and aid recovery. Margins are expected to remain stable despite reduced lending rates due to benign funding costs, lesser reversals due to moderation in stress formation from here on. A shift in tax regime should also aid profitability.

Gateway Distriparksc (GDL)     |     Reco Price: Rs 255 - Rs 275

GDL has been actively reducing its gross debt position, which reached a high of around Rs 740 crore in FY19 to Rs 480 crore in FY21. A strong balance sheet along with strategically located infrastructure will help GDL to capitalise on future growth opportunities and improve its return ratios.  

Mahindra Lifespace     |     Reco Price: Rs 255 - Rs 280

The company has outlined five year plans wherein it aims to achieve a sales value of Rs 2,500 crore by FY25. We like the company for its strong parentage, the management’s focus on expanding its overall scale of operation and a comfortable balance sheet. The change in management and execution has started to show signs of transformation, which drives our conviction.

Nirmal Bang

Acrysil     |     Reco Price: Rs 735     |     Target: Rs 950

Acrysil is the only company in Asia and one of the four worldwide having the license to manufacture quartz kitchen sinks using the Schock Technology. The company has a global market share of 11 per cent and the segment constitutes 76 per cent of its sales. There is a global migration happening from stainless steel to quartz sinks, thus there is tremendous room for growth.

Can Fin Homes     |     Reco Price: Rs 656     |     Target: Rs 900

With early signs of revival in residential real estate visible, Can Fin has guided for an acceleration in loan growth from the current 13 per cent to around 18-20 per cent by Q4FY22. The brokerage firm believes that the stock shall re-rate from the current valuation of 2.2x September 2023 BV to 3.0x, translating into a target of Rs 900.

Sanghi Industries     |     Reco Price: Rs 67     |     Target: Rs 84

Gujarat-based Sanghi an integrated manufacturer of cement and clinkers, seems better placed than its peers to mitigate higher input costs. Demand recovery in H2FY22 along with increasing volumes to aid to its revenues. Nirmal Bang expects revenue & EBITDA CAGR of 21 per cent and 23 per cent over FY20-FY23E driven by robust infra demand.

IDBI Capital

Valiant Organics     |     Reco Price: Rs 1,427     |     Target: Rs 2,170

Diversification to newer products and strategic expansions are the two key triggers for Valiant Organics. The company has incurred capex of around Rs 4.4 billion during FY19-21 and the enhanced capacities should steer revenue growth for the next couple of years. The company is focused on maintaining 20-25 per cent EBITDA margins on long-term basis.

Surya Roshni     |     Reco Price: Rs 679     |     Target: Rs 950

The company has been the largest exported of GI pipes, is now also focusing on high margin API pipes. LED prices seems to have bottomed-out, and the company is poised to gain market share. The company shall be leveraging its strong distribution network with entry into consumer durables and home appliances. The brokerage expects EPS to grow at CAGR of 48 per cent over FY21-23E.

DLF     |     Reco Price: Rs 401     |     Target: Rs 580

The company has a robust pipeline ahead; it plans to launch 6.6 msf in 2HFY22, and around 35 msf projects over the next few years. The company has been reducing its net debt in the last 5 quarters and the trend is expected to continue. It generated a positive cash flow of Rs 15 billion in FY21, and the stock trades at an attractive valuation at PER of 42x FY24E Bloomberg EPS estimates.

JM Financial

Jindal Steel & Power     |     Reco Price: Rs 423.75     |     Target: Rs 515 – Rs 550

JM Financial believee that long products demand should be more resilient as construction activity is likely to improve faster. Divestment of non-core businesses, de-leveraging of balance sheet and growth capex will drive earnings trajectory going forward.

Max Financial Services (MFS)     |     Reco Price: Rs 958.35     |     Target: Rs 1,120 – Rs 1,150

MFS currently holds majority stake in Max Life, the latter has been delivering strong performance on new business, its market share has increased by 63 bps to 11 per cent. Max can continue to out-perform peers with Axis Bank tie-up aiding continued market share gains and resultant operating leverage support margins.

Gail India     |     Reco Price: Rs 148.25     |     Target: Rs 175 – Rs 180

Higher crude price has increased earnings visibility for Gail’s gas trading due to rise in competitiveness of its US LNG portfolios v/s crude linked LNG contract; it also improves profitability of its downstream Petchem and LPG businesses. The gas trading and downstream business constitutes 40-50 per cent of Gail’s overall EBITDA. Management re-iterated expectation of 6-8 per cent CAGR in gas transmission volume while expects gas trading margins to continue to be robust.

Motilal Oswal (2-3 month picks based on derivative data observation)

SBI     |     Reco Price: Rs 503 – Rs 490     |     Target: Rs 600     |     Stop Loss: Rs 450

Rollover has been intact at 93 per cent from the last 2 months which indicates longs are upright in the stock with more than 10 per cent price increase in the October series. One can look for Bull Call Spread opportunity here by buying 510 Call and selling 540 Call of the November series at a net premium cost of around 10 points.

Bata India     |     Reco Price: Rs 2,022 – Rs 1,980     |     Target: Rs 2,450     |     Stop Loss: Rs 1,800

Short covering is seen with increase in price by almost 18 per cent in the October series and increase in implied volatility indicating bulls to be in action.

Tech Mahindra     |     Reco Price: Rs 1,517 – Rs 1,480     |     Target: Rs 1,850     |     Stop Loss: Rs 1,350

Open Interest shedding by almost 9 per cent with increase in price which suggests shorts are covering their position and rollover of 97 per cent in the previous series indicating positive sentiment and strong hands at the counter.

Religare Broking

Berger Paints – Buy     |     Reco Price: Rs 738     |     Target: Rs 900

Berger is one of the largest players with 18-19 per cent market share in the organized sector. The positive view on the stock is based on the strong brand recall value, consistent growth in the decorative segment, revival in the industrial segment and market share gains. Also, price increase will help mitigate risk of rising raw material prices.

JK Lakshmi Cement – Buy     |     Reco Price: Rs 610     |     Target: Rs 758

The company is one of the strong players in India, except for South. It’s strategy for the next 2-3 years will be to maximize sales by increasing utilization levels and expanding capacity, improve realizations by focusing on value-added products, enhancing margins by cost optimization measure and reducing debt.

Whirlpool of India – Buy     |     Reco Price: Rs 2,291     |     Target: Rs 2,998

Religare likes Whirlpool given the positive industry growth prospects coupled with its strong parentage, the constant focus on innovation, wide product portfolio and expanding distribution reach. We expect revenue to grow at a CAGR of 16.5 per cent over FY21-24E.

Kotak Securities

ACC – Add     |     Reco Price: Rs 2,208     |     Target: Rs 2,550

ACC is well-placed ahead of its capacity extension in attractive Central India and new WHRS (Waste Heat Recovery Systems) capacity commissioning in CY22E. The company’s Q3CY21 operating profit was ahead of our estimate led by higher-than-expected prices more than offsetting weak volumes. ACC has impressively kept costs under control despite commodity cost headwinds in 9MCY21.

BPCL – Buy     |     Reco Price: Rs 432     |     Target: Rs 550

BPCL’s auto fuels volume growth was ahead of domestic consumption in Q1FY22. We are bullish owing to expected recovery in refining margins, robust marketing margins and potential value unlocking from privatization. We expect EPS to increase by 18.3 per cent in FY23E to Rs 39.90.

Hindustan Unilever – Add     |     Reco Price: Rs 2,456     |     Target: Rs 2,950

The company witnessed market share and penetration gains in 75%+ of the portfolio in Q2FY22. The company is confident of consistent double digit EPS growth partly aided by modest margin expansion. HUL has reiterated its strategy of growing the core, premiumization and market development. On valuing the stock on discounted cash flow (DCF) basis, we arrive at a fair value of Rs 2,950.

Reliance Industries – Add     |     Reco Price: Rs 2,602     |     Target: Rs 2,800  

Reliance remains on track to produce first gas from the MJ field by Q3FY23. Guidance remained unchanged on achieving cumulative peak production of around 3 crore scm/d in CY23 from the three KG D6 projects. The key triggers for the stock are – recovery in refining, launch of JioPhone Next, plausible hike in telecom tariffs and anticipated strong growth in retail business.

SMC

ICICI Bank     |     Reco Price: Rs 747.20     |     Target: Rs 874

Business performance of the bank such as domestic loan growth, overall corporate advances, retail loan growth, CASA ratio are continuously improving. The bank is focusing on growing the core operating profit in a risk calibrated manner instead of loan growth. The stock will see a price target of Rs 874 in 8-10 months’ time-frame on current P/BVx of 3.24x and FY23 BVPS (Book Value Per Share) of Rs 269.67.

Prestige Estates     |     Reco Price: Rs 441.15     |     Target: Rs 529

Prestige clocked the highest quarterly sales and collections backed by healthy response to its newly launched project. Prestige Great Acres was sold out within one day of launch. Thus, it is expected that the stock will see a price target of Rs 529 in 8-10 months’ time-frame on current P/BVx of 2.65x and FY23 BVPS of Rs 199.67.

Welspun India     |     Reco Price: Rs 152.10     |     Target: Rs 193

The company remains committed in its long-term aspiration of delivering sustainable and profitable volume led growth, building on strong brand equity and accelerated focus on emerging businesses and implement of government’s PLI scheme for the textile sector. The stock is expected to see a price target of Rs 193 in 8-10 months’ time-frame on current P/BVx of 4.7x and FY23 BVPS of Rs 41.17.