Ajanta Pharma, Ashok Leyland, Aurobindo Pharma, Bharat Electronics, Bharat Forge, Mahindra & Mahindra Finance, Shriram Finance and Thermax are also among its high-conviction ideas for March.
Overall, the brokerage firm listed 19 stocks as its high-conviction ideas for the month with an “add” recommendation on all of them.
On the other hand, Pure Science, InterGlobe Aviation (IndiGo), Tata Steel and SBI Cards and Payment Services are the four stocks on which the brokerage firm has a “reduce” call.
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Ajanta Pharma | Recommendation: Add | Target price: ₹2,400
“We are currently building relatively slower growth in the US in FY26 assuming higher price erosion. If the current US dynamics prevail, in a bull case, there may be an improvement to US numbers as well as margins. This may lead to target price. of ₹3,000 in the next two years at 30 times PE (price-to-earnings ratio),” the brokerage firm said.
Also Read: Tata Motors demerger: Will shareholders witness value unlocking? Analysts assess impact
Ashok Leyland | Recommendation: Add | Target price: ₹208
The brokerage firm maintained an ‘add’ rating on the stock due to the sustainability of the commercial vehicle upcycle of the government’s infrastructure spending, market share gains in recent quarters and easing ASP discounts in the industry.
Aurobindo Pharma | Recommendation: Add | Target price: ₹1,178
At 12.7 times FY26F earnings, Aurobindo Pharma’s valuation is reasonable. Strong earnings selectivity from the MSD deal and margin upside should improve the valuation, the brokerage firm said.
Bharat Forge | Recommendation: Add | Target price: ₹1 366
According to the brokerage firm, the conclusion of final tests for artillery guns and the government’s push towards its “Make in India” initiative could lead to a withdrawal of orders. Improved order inflow in the defense segment and the traction gained in electric two-wheelers should reduce the consolidated profitability drag of these two segments.
The brokerage firm pointed out that the increase in aluminum forging operations in the coming quarters, supported by a good order book, should drive the profitability of foreign subsidiaries. Management plans to double sales in the next 3-4 years, driven by the industrial division, which can be margin-accretive and less capital-intensive.
Also read: CLSA cautious on steel companies amid higher valuation, margin pressure; lowers Tata Steel, JSW Steel
Bharat Electronics (BEL) | Recommendation: Add | Target price: ₹235
At 36 times one-year forward EPS (earnings per share), BEL’s valuation is in line with our estimate. Strong order booking in the next two-three quarters may further improve the valuation, the brokerage firm said.
Camlin Fine Sciences | Recommendation: Add | Target price: ₹300
“We are building 3,000 t of vanillin sales in FY24F, and consequently, the loss of catechol sales will decrease to $5 million (versus $9.9 million in FY23) and lead to an increase in gross profit of ₹3 billion,” InCred said.
“In the recent past, the stock has traded at nearly 20 times current year earnings and we assign the same multiple ie 20 times FY24F EPS to arrive at our higher target price of ₹300 of ₹180 earlier,” the brokerage firm added.
Container Corporation of India (Concor) | Recommendation: Add | Target price: ₹1 083
The brokerage firm expects the share of rail container cargo at the three ports (JNPT, Mundra and Pipavav or GPPV) to rise from 25 percent (FY23) to 36 percent (FY26F).
It finds Concor well placed to benefit as 81 percent of its FY23 originating EXIM cargo is from JNPT, Mundra and GPPV combined.
“We factor in sales, cargo origination and EBITDA growth of 51 percent, 47 percent and 61 percent, respectively, over FY24F-26F,” the brokerage firm said.
Cyient DLM | Recommendation: Add | Target price: ₹1,049
InCred expects Cyient DLM’s EBITDA margin to increase from 10.6 percent in FY23 to 11.5 percent in FY26F led by an improvement in the product mix from Build-2-Print (B2P) to Build-2-Specification (B2S).
“Currently, the B2S margin is close to 5 percent and the company expects an improvement in the margin, which will help in margin improvement. Therefore, an increase in capacity utilization at the Hyderabad facility will also help margins due to the play of operating leverage.” said InCred.
Data Templates (India) | Recommendation: Add | Target price: ₹3,000
“In a bullish scenario, we see the scope for higher sales of production contracts, driven by export opportunities, leading to higher revenue growth of more than 50 percent against our current estimate of nearly 40 percent, with a constant EBITDA margin of nearly 40 percent This that may raise our FY25F/26F EPS estimates to ₹60/ ₹80, respectively, which are almost 15 percent above our current estimates,” InCred said.
Also read: Top 5 quality stocks trading near 52-week lows. Should you buy?
Globe Spirits | Recommendation: Add | Target price: ₹2,519
According to the brokerage firm, key trading triggers to watch out for in the coming months are:
(i) Expansion in the gross profit margin due to increase in selling prices of Indian Made Indian Liquor (IMIL) and softening of broken rice and energy costs.
(ii) The stabilization of its recently commissioned plant in Jharkhand.
(iii) The completion of expansion projects in Bihar and West Bengal.
(iv) Foray into new markets in the Indian Made Foreign Liquor (IMFL) segment.
(v) The launch of new products in the IMFL segment.
(vi) Benefits of the higher corn ethanol prices.
HDFC Bank | Recommendation: Add | Target price: ₹2,000
The brokerage firm believes that with the merger of HDFC approaching and new branches being set up in semi-urban and rural areas, the next phase of growth will lead to a revaluation for HDFC Bank.
Mahindra & Mahindra Financial Services (MMFS) | Recommendation: Add | Target price: ₹370
The brokerage firm pointed out that with a well-capitalized balance sheet and the ability to raise money (amidst a strong promoter), MMFS is able to sufficiently participate in the growing credit demand.
“We factor in nearly 22% CAGR in AUM supported by nearly 18% CAGR in disbursements over FY23-26F. We believe the margins have already bottomed out for the company (like many NBFCs) given the repricing of new vehicle loans and consistent mode from its portfolio to better performing assets. We project constant margins in the range of nearly 7.5 percent over FY23-25F,” InCred said.
Maruti Suzuki | Recommendation: Add | Target price: ₹12,554
The brokerage firm pointed out that Maruti Suzuki was in a 17-year ascending channel pattern on the monthly charts. The stock has been consolidating since it bounced back from the channel support in 2020.
“The stock has confirmed a five-year consolidation break on the monthly charts and entered a fresh zone. This break may push the stock to the ₹12,000 level in the coming months. The price is expected to receive a strong push from the Relative Strength Index or RSI, once it moves above the 70 level, which will also confirm a major break in the RSI,” InCred said.
Reliance Industries (RIL) | Recommendation: Add | Target price: ₹3,369
The brokerage firm upgraded RIL to ‘add’ from ‘reduce’.
For the consolidated entity of RIL, InCred Equitie forecasts EBITDA CAGR of 33 percent over FY22-24F and profit CAGR of 35 percent. The revenue growth will be largely delivered by the refining segment. Net debt reduction is an added benefit as the company will be able to get extra cash flow generated from refineries, the brokerage firm said.
Shriram Finance | Recommendation: Add | Target price: ₹2,800
The brokerage firm observed that better profitability and market share gains led by product availability increasing in Shriram Credit Union Finance or SCUF branches is a key positive. Also, better price of used vehicles due to phase II implementation of BSVI norms from April 2023 is positive.
Som Distilleries & Breweries | Recommendation: Add | Target price: ₹446
Som Distilleries and Breweries (SDBL) has obtained the required clearances from the Karnataka liquor industry regulator, as it moves towards increasing capacity by nearly 67 percent at its Karnataka plant. Faster market shares in Karnataka are key positives, according to the brokerage firm.
State Bank of India (SBI) | Recommendation: Add | Target price: ₹800
Strong asset quality in personal loans and other retail loans, despite the downsides in small-ticket unsecured personal loans, is the key positive. A lower CD ratio will support margins in an aggressively competitive environment for deposit acquisition, the brokerage firm said.
Tech Mahindra | Recommendation: Add | Target price: ₹1,625
“Moderation in subcontractor spending (11.5 percent of revenue in Q3FY24 vs. an average of 15 percent / 15.6 percent in FY23/FY22, respectively), increased focus on higher margin business and operating efficiency could surprise FY25F margin,” InCred said. .
Thermax | Recommendation: Add | Target price: ₹3,675
According to the brokerage firm, Thermax is a key beneficiary of the green shoots witnessed in the private sector in multiple industries. The company has a healthy order book of ₹107 billion with a strong pipeline of small ticket size orders from the cement, biomass, food and beverage, and sugar/distillery sectors.
“We expect higher return ratios in the solutions business, including green utilities such as solar and wind-based opex. Solar energy business and subsidiary Thermax Onsite Energy Solutions (TOESL) has good long-term profit potential with higher margin and return ratios. . We expect its EBITDA margin will expand from 7.4 per cent in FY23 to 8.8 per cent in FY26F,” the brokerage firm said.
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Published: 05 Mar 2024, 11:41 IST
(tagsTo Translate)stocks to buy