 "Samvat 2080: Stock picks from Anand Rathi, Nirmal Bang, Sharekhan, Axis Sec")
Samvat 2079 has been an eventful year in more than one ways as the key benchmark indices showed tremendous resilience and scaled fresh life-time highs despite multiple headwinds in the form of high interest rates, rising bond yields, volatile crude oil prices, the Middle-East crisis and India-Canada spat.
For the records, the S&P BSE Sensex hit an all-time high at 67,927 in September, and the Nifty registered a summit at 20,222. Even as the indices are on course to close Samvat 2079 off the record highs, they still hold strong gains of up to 10 per cent and 16 per cent on the Sensex and Nifty, respectively.
Going ahead, the outlook for Samvat 2080 looks promising with India’s economic growth projected to be higher, prospects of sturdy corporate earnings and hopes of a downturn in interest rate cycle. However, the markets may exhibit higher volatility in the year ahead owing to general elections scheduled in 2024.
Against this backdrop, here’s a list of top stock picks by select brokerages for Samvat 2080.
Nirmal Bang
Archean Chemical Industries
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Reco Price: Rs 550
Target: Rs 767
Upside Potential: 39%
During H1FY24, global headwinds in chemical industry led to downward pricing pressure on bromine. However, demand remained strong and many customers liquidated large part of their inventory. Thus, one can expect a good quarter with demand revival in the medium-term. Archean has delivered revenue growth of 39.5 per cent CAGR (Compound Annual Growth Rate) and improved EBITDA margin from 35 per cent in FY21 to 44 per cent in FY23. EBITDA margin guidance remained in the range of 37 per cent – 42 per cent in the medium-term. Our earnings forecast have been revised considering the expected weak performance for FY24E due to challenges faced by the overall industry.
Five Star Business Finance
Reco Price: Rs 740
Target: Rs 1,100
Upside Potential: 49%
Five Star’s strong return metrics (RoA/RoE of 8 per cent/ 18 per cent in FY25E) and high earnings growth of 30 per cent CAGR over FY23-25E shall be driven by strong AUM CAGR of 35 per cent; stable NIM and cost/ income; and subdued credit cost in the 0.6 per cent – 0.8 per cent range. The target price is based on 25x Sep 2025 EPS at 0.7x PE/ G (assuming FY23-26E earnings CAGR of 35 per cent).
Fusion Micro Finance
Reco Price: Rs 603
Target: Rs 820
Upside Potential: 36%
Good corporate governance having auditors from big 4 since inception; Warbug/ Creation stakes at 39 per cent/ 24 per cent. Fusion has been delivering industry leading metrics, identical to CreditAccess which is considered as the best in class MFI. On a conservative basis and due to limited listing history, we value Fusion at a 30 per cent discount to CreditAccess at 2.1x Sep 2025 BV.
Sai Silks (Kalamandir)
Reco Price: Rs 236
Target: Rs 323
Upside Potential: 37%
The organised apparel retail is expected to grow at CAGR of around 19.9 per cent over FY20 – 27. Other than this, south India is the top contributor to the saree market in India, accounting for 50 per cent of total saree sales in FY22. The organised saree market valued at Rs 11,369 crore is expected to reach Rs 39,324 crore by FY27. The company is among the top 10 retailers in south India. With growth and margins coming back, we feel stock is available at attractive valuation and is trading at EV/ EBITDA of 10.7x FY25E EBITDA.
Vishnu Prakash R Pungalia (VPRP)
Reco Price: Rs 186
Target: Rs 262
Upside Potential: 41%
VPRP is Rajasthan-based EPC company with focus on water supply projects. The company’s order book and revenue grew at a CAGR of around 50 per cent over FY21-23, while PAT grew at over 100 per cent. The company seems like a small fish in a big point - with revenue of just above Rs 1,000 crore, and total addressable market stands at Rs 6 lakh crore. The low revenue base and demonstrated track record of high growth with margin expansion makes the company attractive compared to listed peers.
Anand Rathi
IDFC First Bank
Reco Price: Rs 83
Target: Rs 114
Upside Potential: 37%
IDFC First Bank has undergone the first phase of its transformation from an infra financier to a granular retail lending bank. Investment in technology and building a scalable liability franchisee would keep costs high in the near term, despite strong granular loan growth. The bank expects the credit card business to breakeven by FY25. 24 - 25 per cent of the credit card mix are revolvers. The bank expects to reach 13 -15 per cent ROE by FY25 and 1.4 - 1.6 per cent ROA by FY25.
Syrma SGS Technology
Reco Price: Rs 612
Target: Rs 735
Upside Potential: 20%
The company has a total order book of approximately Rs 3,500 crore, with Rs 2,200 – Rs 2,300 crore expected to be delivered in the next 12 months. The company has done a capex of Rs 50 crore in Q1FY24 and plans to spend Rs 200 – Rs 250 crore in total of the year. The company can be a key player in the growing ESDM industry (especially in the ODM segment) if it grabs the opportunities available across end-user industries and executes well on the burgeoning order inflows.
MTAR Technologies
Reco Price: Rs 2,471
Target: Rs 2,970
Upside Potential: 20%
The company is expanding its product range, including valves and semi-cryogenic engines in the defence and space sectors. MTAR expects to secure defense contracts shortly, enabling direct supply to major OEMs and the Ministy of Defence. They are also considering new facilities in Europe and the US to enhance their supply chain and competitiveness. Their electrical and harness system is undergoing certification and is expected to qualify by Q2FY24.
Mahindra & Mahindra (M&M)
Reco Price: Rs 1,497
Target: Rs 1,770
Upside Potential: 18%
M&M has been the dominant market leader in the domestic tractor market, commanding a market share of 42.9 per cent in Q1FY24 (41.2 per cent in FY23). With its offerings across different brands of Mahindra, Swaraj, Trakstar and soon to be launched Oja and its well-entrenched sales and service network, it is expected to maintain its leadership position going forward as well. The introduction of new range of OJA tractors is expected to boost its topline in the future.
DLF
Reco Price: Rs 554
Target: Rs 640
Upside Potential: 16%
The company is re-entering Mumbai with a slum redevelopment project in Andheri West. This project is a joint venture with the Trident Group, with DLF investing Rs 400 crore for a 51 per cent stake. The planned development spans 3 - 3.5 msf, with the first 0.9 msf to be launched within 12 months. For FY24, management expects pre-sales to surpass Rs 12,000 crore, driven by significant inventory, upcoming launches, and strong demand. They plan to introduce msf of projects valued at Rs 19,700 crore, with the majority in Gurugram along with projects in Chennai, Chandigarh and Noida.
Sharekhan
Bank of India
Reco Price: Rs 103
The management has guided for a strong cash recoveries amounting to Rs 12,000 crore in FY24 vs Rs 7,233 crore in FY23 which would result in recoveries outpacing slippages in FY24 driven by resolution of some of the accounts under NCLT led by the power sector and OTS (One Time Settlement). We believe valuations are expected to inch higher as return ratio improves in the coming quarters on the back of uptick in loan growth, stable margins, further lower credit cost.
Birlasoft
Reco Price: Rs 550
Under a new CEO, the company has hired leaders with renewed focus on select geographies, verticals, and service lines. The strategic efforts continue to pay off as evident from consecutive quarters of strong revenue growth despite macro-economic overhang. The company’s deal pipeline remains healthy and outlook remains optimistic as management seeks to achieve $200 million of signings every quarter. Further, their renewed focus on key sectors such as BFSI and manufacturing verticals is expected to drive the overall performance of the company.
Hindustan Aeronautics (HAL)
Reco Price: Rs 1,954
HAL is one of the key beneficiaries of structural reforms in the defence sector. The company’s impending deal with GE and potential export tie-up with countries like Argentina can provide strong long-term growth opportunities. HAL has guided for order inflows of Rs 48,000 crore. Additionally, the company is expected to get R&O orders of around Rs 18,000 crore p.a. There are a few more orders wherein RFPs are likely to be floated and cost of these orders is expected to be around Rs 36,000 crore. It has healthy order book having more than three years of revenue visibility.
Kirloskar Oil Engines (KOEL)
Reco Price: Rs 557
KOEL is seeing strong demand for retrofit dual fuel kits and emission-control devices in CPCB – II gensets (post deadline extension for the implementation of CPCB IV+ norms to July 2024). Moreover, demand for CPCB-IV plus gensets is expected to pace up in H2FY24. The company is a leading player in the back-up power market and has a healthy balance sheet and a lean working capital cycle. We build in a Revenue/PAT CAGR of 9 per cent/ 18 per cent (FY23-FY25E).
Larsen & Toubro (L&T)
Reco Price: Rs 3,052
L&T’s order book stands at an all-time high of around Rs 4.1 lakh crore (2.1xTTM revenue). L&T has 12-15 per cent revenue and 10-12 per cent order intake growth guidance for FY24. Core business OPM is expected to be at around 9 per cent (up 40/ 50bps y-o-y). Working capital/ sales to be at 16-18 per cent. The company sees ample opportunities in the middle east region in hydrocarbon and renewables. The capex is large in this region and therefore all players would get a fair share of the pie. The company expects Rs 19,000-20,000 crore of orders to be awarded in the defence segment in the near to medium term. L&T remains at the forefront to reap benefits from the AtmaNirbhar Bharat scheme with its diversified businesses across sectors such as defence, infrastructure, heavy engineering and IT and is the best proxy for domestic capex.
Axis Securities
TVS Motors
Reco Price: Rs 1,569
Target: Rs 2,100
Upside Potential: 34%
We continue to like TVS Motors considering its strong focus on the EV product pipeline ahead of incumbent 2W OEMs, product premiumisation in the ICE category, and growth in export markets. Being well-placed among listed players, we expect the company’s Revenue/ EBITDA/ PAT to grow by around 16 per cent/ 21 per cent/ 23 per cent CAGR over FY24E-26E. FY24/ FY25 to be critical for the company as it executes its EV strategy for the domestic and export markets. We recommend a BUY rating on the stock, valuing it at a sustainable premium P/E multiple of 30x on Dec’25 core EPS, other investments at 1x P/BV, and TVS Credit Services at 2X P/BV.
Bharti Airtel
Reco Price: Rs 924
Target: Rs 1,155
Upside Potential: 25%
Bharti Airtel has the leading ARPU in the industry. The management expects ARPU to improve from the current level of Rs 203, due to a richer customer mix, to Rs 300 going ahead. The company's business fundamentals remain strong and continue to improve. The management foresees huge potential for continued strong revenue and profit growth, supported by expanding distribution in rural areas, investments in the network, and increasing 4G coverage. Furthermore, strategic investment opportunities are available in tower sales, minority, and IPO investments in mobile money, among others. The company's digital portfolio is gaining momentum along with market share gains. The management is confident of gaining industry-leading growth backed by strong rural penetration and a better service portfolio.
HDFC Bank
Reco Price: Rs 1,476
Target: Rs 1,800
Upside Potential: 22%
A key concern for the merged entity was the pressure on margins, which was visible in Q2FY24. A sharp margin compression was owing to the higher cost borrowing of erstwhile HDFC Ltd, ICRR (impact to be visible only in Q2FY24) and excess liquidity that the merged entity continues to carry. Going forward, NIM improvement will be led by (1) Substituting high-cost debt with deposits, (2) Skewing the portfolio mix towards retail loans and (3) Releasing excess liquidity. While near-term margins will continue to face headwinds, we expect recovery from FY25E onwards. NIMs are likely to gravitate to around 4 per cent over FY25-26E. We remain confident in the bank’s ability to sustain its growth momentum given the enormous opportunity post the merger in terms of a larger customer base, larger distribution network, and higher cross-sell opportunities to existing customers of HDFC Ltd. Moreover, we believe the current valuations, too, are reasonable and below the long-term average.
Jyothy Labs
Reco Price: Rs 358
Target: Rs 440
Upside Potential: 23%
We expect the company to deliver healthy Revenue/ EBITDA/ PAT growth of 13 per cent/ 25 per cent/ 25 per cent CAGR over FY23-26E respectively which will elevate the company’s overall return profile. We expect its ROE to increase from 15 per cent in FY23 to 21 per cent in FY26. At CMP, the company is currently trading at 32x/ 29x its FY25/ 26 EPS and with a better earnings growth visibility and return profile, the stock appears attractive in the Small to Midcap Consumer space.
SBI Life Insurance
Reco Price: Rs 1,345
Target: Rs 1,535
Upside Potential: 14%
SBI Life continues to maintain its leadership position with the best in the industry cost ratios. The company has been able to deliver strong APE growth over the past years and we expect the momentum to continue with a more balanced product mix. The company’s channel productivity continues to improve and the focus on improving productivity in the agency channel should yield results in the coming quarters. The company remains confident of achieving around 20 per cent APE growth in FY24 as against the growth of 17 per cent in H1FY24. We expect APE growth to remain strong at around 17-18 per cent over the medium term.