The Nifty Smallcap 100 and Nifty Midcap 100 indices rallied 28% and 26%, respectively. Among sectors, PSU Bank index jumped 44% and Realty surged 37% while Oil & Gas index was the only one to end in the negative (-2%).
Going forward, HDFC Securities expects markets to be volatile till the first half of 2024 even as the outcome of state and Central elections will be watched closely as would be the repercussions of the two geo political events.
“Though the local fund inflows have remained robust, we would need resumption of FPI flows once the global risk appetite revives. We continue to favour domestic oriented businesses and favour opportunities in the sectors like Materials, Pharma, Oil & gas, Small Finance banks, Petrochemicals, consumption, Power EPC and restructuring plays for the next year,” HDFC Securities Retail Research said in a report.
With a focus on these themes, the brokerage has released its 10 Diwali stock picks for Samvat 2080.
HDFC Securities Diwali stock picks include Dr Reddy’s Laboratories, Equitas Small Finance Bank, GAIL (India), Godrej Industries, Grasim Industries, Gujarat Alkalies & Chemicals Ltd Chemicals, Indian Oil Corporation, Kalpataru Projects International, Reliance Industries and United Spirits.
These stocks have robust fundamentals and some margin of safety in their valuation to offer superior returns to investors, HDFC Securities Retail Research said.
Dr Reddy’s Laboratories | Buy Range: ₹4,850-5,400 | TP: ₹6,250
HDFC Securities expects Dr Reddy’s US business to grow at a CAGR of 11% over FY23-25E including gRevlimid sales. Overall, it estimates 10% CAGR in sales led by strong growth from US and domestic formulation business.
Operating margin is expected to remain at around 26.5-27.5% on the back of niche opportunities in the US piece. Net profit is expected to see 16.5% CAGR led by healthy revenue and strong operating performance over the same period.
The brokerage recommends ‘Buy’ on Dr Reddy’s Laboratories in the band of ₹4,850-5,400 for target price of ₹6,250 per share till next Diwali.
Equitas Small Finance Bank | Buy Range: ₹82-92 | TP: ₹112
The brokerage has envisaged 24% CAGR in net interest income (NII) and 31% in net profit over FY23-25E, while the loan book is estimated to grow at 27% CAGR over the same time frame. As the collection efficiencies have improved and economic activities have picked momentum, the asset quality has seen immense improvement.
ROAA is estimated to improve to 2% by the end of FY25E. It could display steady improvement in return ratios driven by growing advances and contained slippages, said the brokerage house.
It recommends investors to buy the stock in the ₹82-92 band for a target price of ₹112 per share.
GAIL (India) | Buy Range: ₹106-120 | TP: ₹140
GAIL’s leadership position in the natural gas transmission business, cost effective operations, experienced management, decent dividend yield, attractive valuations and sound financials are key advantages offered by the stock apart from a decent dividend yield. Strong domestic supply environment, improved margins for trading segments and favorable pricing scenario of LPG and petrochemical segments may improve consolidated EBITDA sharply over FY23-25E, HDFC Securities said.
It expects EBITDA and PAT to grow 48% and 46.4% for FY24E, and 13.5% and 13.4% for FY25E, respectively.
Investors can buy the stock in the ₹106-120 band for a target of ₹140 (10x FY25E EPS & 8.8x FY25E EV/EBITDA) till next Diwali, it said.
(Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!)
Godrej Industries | Buy Range: ₹555-624 | TP: ₹735
While the standalone business faces some pressure in the near term, its consumer product and real estate subsidiaries are doing well and the outlook remains healthy, Retail Research at HDFC Securities said. It expects value unlocking due to the split between the brothers and holding company discount could narrow too.
The brokerage recommends buying the stock in the ₹555-624 band for a target of ₹735 per share.
Grasim Industries | Buy Range: ₹1,700-1,925 | TP: ₹2,275
The brokerage believes while Grasim Industries’ standalone business faces some pressure in the near term, its cement and financial 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, it said.
It suggests investors can buy the stock in the ₹1,700-1,925 band for a target of ₹2,275 till next Diwali.
Gujarat Alkalies & Chemicals | Buy Range: ₹638-718 | TP: ₹875
With steady increase in caustic soda prices and lower energy costs, the brokerage house expects the company to register strong earnings growth in FY25E. At CMP, the stock trades at 13x FY25E EPS. Investors can buy the stock in the ₹638-718 band for target price of ₹875 (16x FY25E EPS) till next Diwali, it said.
Indian Oil Corporation | Buy Range: ₹78-90 | TP: ₹103
Indian Oil Corporation’s value of investments and non-core assets accounts for nearly its entire value. We expect IOCL’s strong earnings momentum to sustain in the coming quarters, supported by multiple drivers, HDFC Securities said.
It expects earnings to continue to improve as stable demand in the petrochemicals segment allows for a turnaround. With its broad and superior refining marketing mix, the brokerage firm believes continued demand for petroleum products and declining crude oil prices will continue to drive greater profitability.
It suggests buying the stock in the ₹78-90 band for a target price of ₹103 per share.
Also Read: Samvat 2080 picks: Kotak lists 8 stocks including RIL, Cipla that you can buy this Diwali
Kalpataru Projects International | Buy Range: ₹580- 660 | TP: ₹795
Kalpataru Projects International is expected to report Revenue, EBITDA and PAT growth at a CAGR of 18%, 27% and 36% over FY23-26E. The stock trades at an attractive valuation of ~9x FY26E EPS, which is at a significant discount to Indian peers. Such a discount could be due to lower contributions from the India region, said the brokerage.
As of June 2023, the company’s order book stood at ₹47,332 crore indicating a robust visibility of 3.3x of FY23 revenue. The company’s healthy bidding pipeline indicates further positive outlook on the business generation.
Investors can buy the stock in the ₹580- 660 band for a target price of ₹795 (10.5x FY26E EPS) till next Diwali, as per HDFC Securities Retail Research.
Reliance Industries | Buy Range: ₹2,075-2,32 | TP: ₹2,695
Reliance Industries’ Retail, Telecom, and new energy are poised to become the upcoming growth drivers over the next two-to-three years, given the large technological advancements and ambitious growth targets. The company is expected to report a consolidated revenue, EBITDA and PAT CAGR of 13.5%, 12.3% and 10% over FY23-25E, according to HDFC Securities.
It said investors can buy Reliance Industries shares in the ₹2,075-2,325 band for a target of ₹2,695 till next Diwali.
United Spirits | Buy Range: ₹915-1,040 | TP: ₹1,195
United Spirits will continue to focus on driving profitable growth, led by double digit topline growth; sustained A&P investments; improving pricing and premium mix; and productivity gains, the brokerage said.
Investors can buy the stock in the ₹915-1,040 band for a target of ₹1,195, it added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
Download The Mint News App to get Daily Market Updates.
Updated: 04 Nov 2023, 03:18 PM IST