Samvat 2080: Stock picks by HDFC Sec, Kotak Sec, ICICI Direct, JM Financial

Here's a list of Diwali picks recommended by top brokerage and research firms that can help you build your portfolio for Samvat 2080.

In the second and concluding part for stock picks this Diwali, here’s a list of stock recommendations from brokerage firms – HDFC Securities, Kotak Securities, ICICI Direct Research and JM Financial.

JM Financial

Titan 

Reco Price: Rs 3,116

Target: Rs 3,650

With the company aggressively ramping up its network and with regulatory tailwinds, Titan is expected to continue to gain market share in its key jewellery business. Ahead of strong festive and auspicious marriage season, JM Financial expects strong earnings momentum likely in upcoming 2nd Half of this FY. Titan wedding jewellery segment with sizeable market share. 2) Driving stronger growth in the high-value diamond jewellery space. 3) Focusing on Expansion. The brokerage firm remains confident of the high-teens earnings trajectory continuing for the Bengaluru-based company in the medium term, given strong execution.

 

Ashok Leyland

Reco Price: Rs 167.95

Target: Rs 200

Ashok Leyland is likely to be the key beneficiary of the expected traction in the domestic CV industry, driven by traction in the macro economy. Management indicated that demand momentum is expected to improve going ahead and the outlook for MHCV demand remains strong (FY24: 8-10% YoY) led by government infra spends and healthy replacement demand. Given the company’s market share in north and eastern markets is relatively low, the company is focusing on the northern and eastern markets via expanding its dealership network and launching suitable products to expand its market share.

CoForge

Reco Price: Rs 4,988.65

Target: Rs 5,920

Coforge aims to become one of the fastest growing companies in the sector over the years to double its annual revenue run-rate within next five years. Coforge is becoming a credible challenger in its focus areas - Risk and compliance, card and payments in BFS. This shows up in deal wins against larger incumbents. Our FY24-25E EPS is down by 14 per cent/ 6 per cent, due to higher ESOP expenses and expectations of a more gradual uptick in margins. Notwithstanding these moderations, Coforge’s earning visibility (24% EPS CAGR over FY23-26E) remains one of the highest in the sector, in JM Financial’s view.

SJVN

Reco Price: Rs 69.65

Target: Rs 80

SJVN is fast expanding its footprint in the field of renewables and aims to add 1.0-1.5GW capacity annually to give a thrust to its renewables endeavours. Its renewables portfolio at present stands at 3.74GW, which includes operational (103.2MW), under construction (1,270MW), pre-construction (850MW), survey & investigation (1,489MW) and pre-award (33MW) projects. Along with a stable portfolio of hydro assets (installed + upcoming) SJVN, has set an ambitious target of achieving 19GW of solar capacity by 2040, which will constitute 39 per cent of its total installed capacity.


 

Go Fashion India

Reco Price: Rs 1,249.60

Target: Rs 1,540

Better mix & lower A&P to aid Go Fashions’ margins in near term: While input cost has moderated and recent purchases have been at lower prices, the full benefit is still not visible given that the company is utilising high-cost inventory. Higher ASP growth due to favourable product mix and better channel mix (higher growth in EBO channel) will the brokerage believes continue to drive gross margins. Also, A&P spend in the base quarters was high (1HFY23 A&P as per centage to sales was c.4.5 per cent) while it was sub-2 per cent in 1QFY24 and is likely to remain at that level in 2Q too, thereby driving EBITDA margin.

HDFC Securities

Dr.Reddys Laboratories 

Reco Price Range: Rs 4,850 – Rs 5,400

Target: Rs 6,250

HDFC Securities expects US business to grow at CAGR of 11 per cent over FY23-25E including gRevlimid sales. Overall, the brokerage firm estimates 10 per cent CAGR in sales led by strong growth from US and domestic formulation business. Operating margin are expected to remain at around 26.5 - 27.5 per cent on the back of niche opportunities in the US piece. Net proft is expected to see 16.5 per cent CAGR led by healthy revenue and strong operating performance over the same period. 

Equitas Small Finance Bank 

Reco Price Range: Rs 82– Rs 92

Target: Rs 112

The brokerage firm has envisaged 24 per cent CAGR in NII and 31 per cent in net proft over FY23-25E, while the loan book is estimated to grow at 27 per cent CAGR over same time frame. As the collection efciencies have improved and economic activities have picked momentum, the asset quality has seen immense improvement. ROAA is estimated to improve to 2 per cent by the end of FY25E. It could display steady improvement in return ratios driven by growing advances and contained slippages.

Gujarat Alkalies & Chemicals 

Reco Price Range: Rs 638– Rs 718

Target: Rs 875

While the standalone business faces some pressure in the near term, its cement and fnancial services subsidiaries are doing well and the outlook remains healthy. The company’s expedited expansion in paints is likely to provide it the next leg of growth and can lead to rerating of the stock as it brings down the share of commodity business in favour of branded paints business. 

Kalpataru Projects International 

Reco Price Range: Rs 580 – Rs 660

Target: Rs 795

HDFC Securities expects Revenue/ EBITDA/ PAT to grow at CAGR of 18 per cent/ 27 per cent/ 36 per cent over FY23-26E. The stock trades at an attractive valuation of ~9x FY26E EPS, which is at a signifcant discount to Indian peers. Such a discount could be due to lower contribution from India region. Kalpataru has reiterated its target of revenue growth by 30 per cent YoY with a scope of improvement in its current margin level in EPC business in range of 8 per cent - 8.5 per cent on the back of its prudent bidding discipline. As of June 2023, the order book stood at Rs 47,332 crore indicating a robust visibility of 3.3x of FY23 revenue. 

United Spirits 

Reco Price Range: Rs 915 – Rs 1,040

Target: Rs 1,195

United Spirits will continue to focus on driving proftable growth, led by (1) double-digit topline growth; (2) sustained A&P investments; (3) improving pricing and premium mix; and (4) productivity gains. HDFC Securities values the stock at 56.5x P/E on FY25E EPS (standalone).

Kotak Securities

Canara Bank

Reco Price: Rs 384

Target: Rs 425

Canara Bank is trading at a discount to PSU bank peers. RoE (Return on Equity) has improved over the past few quarters, driven by declining credit cost. Asset quality too continued to improve, as NPL (Non-Performing Loan) ratios declined and slippages were at a modest level. Also, the credit cost has further room to decline.

Cyient 

Reco Price: Rs 1,589

Target: Rs 2,000

Cyient has progressed well to increase mix of high growth services (digital & embedded engineering) & diversifying industry and geo exposure. The company expects sustained demand in aerospace, sustainability and automotive. Shift in revenue mix coupled with operating efficiencies improved profitability. Valuations are attractive at 19x FY25E PE. The company will continue to return 50 per cent of net profit as dividends.

Dalmia Bharat 

Reco Price: Rs 2,104

Target: Rs 2,350

We expect Dalmia Bharat’s volumes to see strong growth led by a combination of organic and inorganic expansions over FY23-26E. The company’s key markets, East and South, both have seen strong price hikes in recent months, which should result in strong margin expansion in H2FY24.  We estimate EBITDA of Rs 1,135/ Rs 1,250/ ton in FY24/ 25E vs Rs 955/ ton in Q2FY24.

PCBL

Reco Price: Rs 199

Target: Rs 260

PCBL reported highest-ever volumes in Q2 at 1,30,111 MT. EBITDA was in-line with expectations while revenue was marginally below estimates. PCBL commissioned, final phase i.e. 84,000 MTPA of 1,47,000 MTPA in Chennai facility. The management has guided for 12 - 13 per cent volume growth CAGR over 5 – 6  years.

Reliance Industries 

Reco Price: Rs 2,288

Target: Rs 2,725

The outlook for each of Reliance’s segment remains robust. We believe focus will shift to 5G monetization, given R-Jio’s 5G rollout is nearing completion. With rising subscriber base & consumer engagement on 5G, tariff hike can be expected soon. The company’s KG-D6 production was up to around 2.6 – 2.7 cr mscmd in June 2023, it is likely to ramp up to 3 cr mscmd. 

ICICI Direct Research

Coromandel International 

Reco Price Range: Rs 1,020 – Rs 1,080

Target: Rs 1,330

In FY23, Coromandel International developed a new tech product Nano DAP, for which it is setting up a plant in Andhra Pradesh and is expected to introduce in H2FY24. The product has a potential to replace 50 per cent of the traditional DAP in the next five to seven years. Further, the company’s foray into drone business represents significant opportunity as it plays a dominant role in precision agriculture. Moreover, the global agriculture drone market is estimated to be $ 0.6 billion in CY22 and projected to reach $ 2.5 billion by CY27, growing at a CAGR of 32 per cent.

SBI

Reco Price Range: Rs 565 – Rs 585

Target: Rs 725

Large customer base and diversified product mix is seen to aid credit growth expected to be in-line with industry at 14 - 15 per cent in FY24E. Asset quality remained resilient with GNPA/ NNPA at 2.76 per cent/ 0.71 per cent while restructured book stood at around 70 bps of advances. Healthy PCR stands at 76.4 per cent for advances and around 30 per cent coverage on restructured book provides comfort on continued benign credit cost expected at around 30-50 bps ahead.

Spandana Sphoorthy Financial 

Reco Price Range: Rs 840 – Rs 890

Target: Rs 1,100

Redefining of business model with focus on customers and employees, collection has led to improvement in business metrics. Continued expansion through branch addition (at 1,502 as of September 2023), addition of loan officers (at 8,504 as of September 2023) has led to strong accretion of customer (at around 27 lakhs). Management remained confident of 35 – 40 per cent growth in AUM, with continued focus on customer addition and steady average ticket size.

Bharat Dynamics 

Reco Price Range: Rs 970 – Rs 1,030

Target: Rs 1,260

The government’s strong focus on indigenization of defence platforms will directly benefit domestic layers including defence PSUs in terms of significant order inflows in the coming period. Order backlog stands healthy at around Rs 23,500 crore (11.3x TTM revenues) gives strong visibility in terms of future revenue growth and profitability. Moreover, countermeasures over the next 3-5 years; provides more comfort on future earnings.

TV Today Networks

Reco Price Range: Rs 185 – Rs 200

Target: Rs 260

As we embark on festival season, key election in Hindi speaking states like MP, Rajasthan Q4FY24/Q1FY25, we expect sharp recovery in ad revenue growth from H2FY24, onwards. We highlight that last general election quarter had seen high growth of around 31 per cent in election quarter. We have baked in around 9 per cent revenue CAGR over FY23-25 to Rs 1,040 crore, with around 15 per cent growth likely after flattish H1FY24.