Mahindra Lifespaces, Crisil among HDFC Securities’ top bets

Domestically, India Q3 GDP data will be announced next week and is expected to be on the lower side. But experts believe there are plenty of opportunities amid the overall investor sluggishness.

Here are three stock picks by HDFC Securities with an investment horizon of 2-3 quarters:

Mahindra Lifespace Developers

Recommendation: Buy 382-390 range | Target: 438

Mahindra Lifespaces Developers Limited (MLDL) is the real estate and infrastructure development arm of the Mahindra Group.

Mahindra Lifespace Developers is well poised to take advantage of the upcycle in the industrial real estate business and plug-and-play infrastructure across several corridors and the residential business with strong additions to the land bank for residential projects. MLDL is one of the few organized players to benefit from strong balance sheet and attractive cost of capital which enhances its competitive position.

With presence in both residential and industrial segments, prudent financial and professional management, track record of execution, healthy collections and strong business development pipeline; The company looks set to improve its reported revenue and earnings. Given the minimal inventory, negligible debt (considering deferred land payment); The company is well positioned to acquire new projects to drive upcycling.

We are positive on the company and have hit NAV based base case target price 438 and Bull Case Target 459 over the next two-three quarters. Investors can buy shares in the band of add more on 382-390 and dips 330-337 band.

Crisil

Recommendation: Buy 3,160-3,210 Band | Target: 3,510

CRISIL is India’s oldest and leading domestic credit rating agency. It is principally owned by S&P Global, the world’s leading provider of transparent and independent ratings, benchmarks, analytics, data, research, commentary and ESG solutions.

We expect CRISIL’s Revenue/EBITDA/PAT to grow at 11/11/14% CAGR over Calendar Year 21-24E, led by improving macros, market share gains, cost rationalization and synergies from acquisitions . It is likely to trade at a premium to its peers given its strong parentage, return ratios and diversified revenue mix. We believe investors can buy into the stock Add on 3,160-3,210 band and fall 2,840-2,890 band (32.5x CY24E EPS) for a reasonable price for a base case 3,510 (40x CY24E EPS) and a fair price for the Bull Case 3,775 (43x CY24E EPS) over the next 2-3 quarters.

Nature

Recommendation: Buy 1001-1020 Band | Target: 1125

Ethos Limited (Ethos) is India’s largest luxury and premium watch retail player with a market share of ~20% in the luxury watch retail segment and ~13% in the premium and luxury watch retail segment in India.

Going forward, we expect Ethos to report revenue/EBITDA/PAT CAGR of 30%/39%/62% during FY 22-25E. Growth is expected to be driven by improving realization and same store sales growth (SSG) rates, new store additions and increasing contribution from the CPO business.

Long-term growth tailwinds for the luxury watch industry in India, combined with Ethos’ dominant position in the luxury retail watch market, make Ethos an attractive long-term bet in our opinion. Given the aggressive store additions (~40) and expected inventory build-up over the next two years, Ethos’ return profile may appear modest in the near term. However, favorable long-term macroeconomic factors, best-in-class portfolio of brands and management’s strong execution track record should lead to higher operating efficiencies over the medium to long term.

We assume that the base case fair value of the stock is Rs. 1125 (28x Dec’24E EPS) and the bull case is reasonably priced 1227 (30.5x Dec’24e EPS). Investors can buy shares in Add more on 1001-1020 band (25x Dec’24E EPS) and fall in Rs. 872-886 (22x Dec’24e eps).