The Indian stock market indices, Sensex and Nifty 50, traded higher on Thursday led by gains in auto and banking stocks. Broader markets outperformed the fronts, as the mid-cap and small-cap indexes gained half a percent each.
The market trades in a range and needs a strong trigger to break out of this range. Investors are now awaiting US inflation data for further indications of Federal Reserve rate action.
On the home front, Q3 results season begins today with IT majors Tata Consultancy Services (TCS) and Infosys announcing their December earnings.
Market is expected to react to the corporate earnings and macroeconomic data going forward.
Meanwhile, HDFC Securities’ Retail Research added three stocks in its Fundamental Picks. These stocks are Heritage Foods, Bank of India and Sharda Motor Industries.
The brokerage believes that investors can buy these shares at current market price and add more for a time horizon of two to three quarters.
Read also: Day trading guide for stock market today: Six stocks to buy or sell Thursday – January 11
Heritage Foods | Buy | TP: ₹333
Heritage Foods has a strong balance sheet with low debt, improving margins and operating cash flows. While the EBITDA margins are marginally lower than its closest peers, analysts believe that the inflationary pressure on milk procurement appears to be bottoming out. This coupled with a growing share of the margin accretive value added products, should drive margin expansion, forward.
“Management has a long-term goal of ₹6,000 crore in revenue. Also, it believes it can sustain EBITDA margin levels of 7-8% in the long term. At a current P/E of 20x FY25E EPS, Heritage Foods’ attractive valuation relative to its peers makes it a strong candidate for re-rating,” HDFC Securities said.
It believes that the base case fair value of the shares is ₹333 (22.5x FY25E EPS) and the bull case fair value is ₹355 (24.0x FY25E EPS). Investors can buy the shares in ₹294-301 group (20.0x FY25E EPS) and add more on dips in ₹255-263 (17.5x FY25E EPS) band, the brokerage firm added.
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Bank of India | Buy | TP: ₹132
Bank of India expects to grow its loan book at 13% CAGR while net interest income (NII) and net profit is expected to grow at 14% and 36% CAGR respectively over FY23-26E. ROAA is estimated to improve to 1% in FY26E from the current 0.5% in FY23.
“Bank of India is trading at 0.69x Dec25 ABV, which is at a considerable discount to its peers. Looking at the growth opportunities we believe the discount will gradually narrow. We feel investors can buy the stock in the band of ₹117-119 (0.69x Dec-25E ABV) & add more dips to ₹102-104 band (0.6x Dec-25E ABV). We expect the basic fair value of ₹132 (0.77x Dec-25E ABV) and the bull case fair value of ₹146 (0.85x Dec-25E ABV) over the next 2-3 quarters,” HDFC Securities said.
Read also: Polycab India share price cracks over 22% on reports of IT attack
Sharda Motor Industries | Buy | TP: ₹1 547
Revenue and net profit of Sharda Motor Industries are expected to grow at 12 and 19% CAGR over FY23-FY26, led by increased content per vehicle in both the PV and CV segment, improvement in JV profitability and operating leverage.
The company is debt free, holds substantial cash and cash equivalents with healthy return ratios and is available at an attractive valuation given the strong growth prospects, HDFC Securities said.
“We believe investors can buy the stock ₹1,385-1,410 band and add dips in ₹1,245-1,270 band for base case fair value of ₹1,547 and bull case fair value of ₹1,654 over the next 2-3 quarters,” the brokerage added.
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Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 11 Jan 2024, 10:34 IST