Happy Holi everyone!
In the three weeks leading to Holi, the Indian market has been in the red. While this appears concerning, analysts are positive about the long-term prospects of the market and see this correction as healthy.
As the market seems to have the comfort of valuation now, it is time to lap up quality stocks, analysts point out.
At this juncture, when the mood of the market looks sombre, time is right to add quality stocks to your portfolio to make it more colourful and vibrant.
We have collated a list of 15 stocks that you can add to your portfolio this Holi as recommended by various analysts. Take a look:
Recommendations by Jyoti Roy - DVP- Equity Strategist, Angel Broking
HCL Tech is one of the top four IT services companies based out of India. It provides a vast gamut of services like ADM, enterprise solutions, infrastructure management services, etc.
While Q3FY21 revenues were marginally ahead of our estimates in terms of revenue growth, the expansion in margins despite wage hikes during the quarter was a pleasant surprise.
Management has guided for 2-3 percent QoQ growth in revenue in constant currency terms for the rest of the year providing visibility.
At the current market price, the stock is trading at a P/E multiple of 16.8 times FY22 EPS estimate which is at a significant discount to the other large-cap IT companies like Infosys and TCS. It offers tremendous value at current levels given the market leader status in infrastructure management.
IDFC First Bank is progressing well in its transformation journey under the leadership of V. Vaidyanathan.
His past record of building successful retail business at both ICICI Bank and Capital First provides comfort in terms of execution and should aid the bank in achieving its retailization goal (already evident in retail loans share rising from 35 percent to 60 percent over the past two years).
The Bank has steadily run down its legacy infra book and CASA now forms more than 48.31 percent, showing strong growth on a QoQ basis, thus providing stability to earnings.
IDFC First Bank has made progress from earlier raising capital to provide for bad loans to now raising capital to fund growth.
At the current market price, the stock is trading at nearly 1.8 times FY22E adjusted P/BV which is reasonable given future growth prospects. We believe that the asset quality issues are behind for the company which should lead to a decline in credit costs and improvement in RoEs, going forward.
Galaxy Surfactants is a market leader in oleochemical-based surfactants, which are used in personal and home care products including skincare, oral care, hair care, cosmetics, toiletries and detergent products.
The company has been increasing its share of high-margin specialty care products in its portfolio which now accounts for about 40 percent of its revenues while the balance is accounted for by the performance surfactant business.
The company has a very strong relationship with MNC clients like Unilever, P&G, Henkel, Colgate-Palmolive and supplies raw materials to them not only in India but also in the US, EU and MENA region.
The stock looks attractive given the improving margin profile of the company due to the increasing share of specialty chemicals in the portfolio.
Carborundum Universal is part of the Murugappa group and is a leading manufacturer of abrasives, industrial ceramics, refractories, and electro minerals in India having applications across diversified user industries.
The company is expected to benefit from improving demand scenarios across its end-user industries such as auto, auto components, engineering, basic metals, infrastructure, and power.
While demand from the auto sector has been robust we expect demand from the metal industry to pick up given increased economic activity.
At the current levels, the stock is trading at a P/E multiple of 25.2 times FY22 EPS estimates which we believe is reasonable given strong growth prospects.
Recommendations by Vineeta Sharma, Head of Research, Narnolia Financial Advisors
Tech Mahindra having the edge of servicing the telecom sector is expected to be a major beneficiary of the 5G rollout.
The company is already working with 12 out of 20 top wireless CSPs globally and helping transform the 3 top CSPs in Europe as well as 2 out of 4 CSPs in India.
The deal pipeline in Telecom appears strong and there is the visibility of margin gains due to Product portfolio mix, offshoring/onshoring and automation.
The company recently successfully closed QIP of Rs 375 crore wherein the money is expected to be utilised towards digitization and expansion.
The company’s growth strategy towards store expansion without taking leverage has kept the books in shape.
The company is looking to add a warehouse in the eastern region in order to improve inventory efficiency. Stores expansion will pave the way for higher growth going ahead.
The company has been focused on improving the supply chain of milk vendors which will make the higher-margin dairy business of curd and cheese grow faster and also price competitive.
Also, change in capital allocation by increasing the payout has led to the betterment of RoE demands higher valuation.
Whirlpool's market share in India is around 18 percent. The industry is witnessing premiumisation and this will bode well for the company as it one of the top players in refrigeration and home laundry appliances. Acquisition of stake in Elica has started proving beneficial.
Recommendations by Gaurav Dua, SVP, Head Capital Market Strategy, Sharekhan by BNP Paribas.
MLDL has formed a formidable core management team over a year handpicked from leading peers to drive sales and execution.
The company targets to achieve the pre-sales target of over Rs 2,000 crore per year over the next 2-3 years from Rs 500-1,100 crore during FY16-FY20.
The company is likely to benefit from the government’s affordable housing focus, inorganic opportunities, and favourable state government policies to name a few.
The stock trades at a higher NAV discount to peers, where Godrej Properties trade at a premium while DLF and Sobha near NAV.
Gland Pharma is an established player in the high entry barriers, Injectables with vertical integration, strong R&D and robust manufacturing capabilities and established strong customer relations.
Gland has a very unique B2B business model, which enables the company to achieve economies of scale at the product level leading to cost leadership and enable market share gains.
Gland has a strong compliance track record reflected in nil observations to date across all its plants. This augurs well from a growth perspective as the US accounts for 67 percent of overall sales.
At the current market price, the stock trades at 33 times/26.5 times its FY22E/FY23E EPS.
Strong domain expertise and growth prospects, sturdy earnings track record, healthy return ratios and cashflow make Gland an ideal long-term investment pick.
Dalmia is on an expansion spree in the medium to long-term and aims to double its capacity and become a larger pan-India player.
Despite aggressive expansions, it is likely to achieve a net cash position by FY23E led by free cash flows of almost Rs 1,200 crore per annum during FY2021-FY2023E.
The government’s infrastructure investment plan, impetus on affordable housing and India’s structural growth drivers for cement consumption present strong growth tailwinds.
The stock is currently trading at an EV/EBITDA of 9 times FY2023E earnings, which we believe should re-rate owing as it gains size, geographical diversification and higher operational profitability.
The analyst has a buy rating on Gabriel India (Gabriel) owing to its leadership position and brand recall in the suspension components of the domestic automotive industry and a key beneficiary of improving automotive demand.
Gabriel is well-positioned to gain from the government’s push on the rapid adoption of EVs, especially in two-wheeler and three-wheeler segments, where it is developing products with leading players.
Net earnings set to clock a 55.2 percent CAGR over FY21E-23E, driven by an 18 percent CAGR during FY2021E-23E and a 270 bps rise in EBITDA margins.
The stock is attractively valued, below its historical average at a P/E multiple of 12.1 times and EV/EBITDA multiple of 6.4 times its FY2023 estimates.
Recommendations by Ashish Biswas, Head of Technical Research at CapitalVia Global Research
Dixon plans to raise business volumes by scaling up the mobile vertical with the approval of the PLI scheme and has set aside Rs 150 crore in annual capex for FY22 and FY23 to support the company's growth.
The electronics and consumer durables industry in India is approximately worth Rs 4,00,000 crore and is rapidly expanding.
Manufacturing has the potential to be a significant growth engine in the medium to long term, owing to the change in manufacturing bases away from China and the government's incentives to improve manufacturing through the Make in India initiative, such as the PLI scheme, which aims to kick-start the process with strong industry participation.
Dixon is expected to maintain a strong growth trajectory over the next 3-5 years, delivering strong net earnings growth, thanks to strong financials and the company's efforts to scale up its operations both domestically and internationally.
We have witnessed the overall recovery in the FMCS Sector, led by smaller urban centers.
Over the past three months, the metro and modern trade center sales have witnessed an upward trend. We expect the company's EBITDA margins to improve YoY from both a standalone and consolidated basis.
The inclusion of the GSKCH business is positive for the company. Earnings growth has gained momentum in recent years (17 percent EPS CAGR in the three years ended FY20 versus a nearly 12 percent CAGR over the last 10 years).
Hindustan Unilever demonstrated capabilities of implementing cost-saving plans based on best-of-breed analytics and execution. Introduction of herbals range of product is key factors that will drive the earning growth.
HCL Technologies remains one of the most lucrative stocks, trading at 15 times FY23E P/E (38 percent/26 percent discount to TCS/Infosys) while delivering 20 percent earnings growth in FY21 YTD.
Media and telecom announced a significant sales increase due to a one-time contract operation (12.1 percent QoQ in CC terms).
Manufacturing rebounded with a strong 5.6 percent year-over-year growth, while Tech Services rose 6.8 percent YoY (in CC terms) (in CC terms).
In FY22E, higher IMS exposure (over 30 percent of sales) coupled with strong demand for cloud services could help drive revenue growth of over 14 percent.
In addition to having a solid base in the industry, Divi's Labs is extending its product offerings in the generic API segment, developing 16 additional APIs to lead the next phase of growth and the subsequent DMF filing.
Despite the iodine-based drug's complexity, Divi's good chemistry skills and experience in the contrast media room have enabled it to take the Iohexol API through the validation phase.
Divi's has more than doubled its capacity and is poised to take advantage of carotenoid's growing market.
Divi is well-poised to take advantage of the carotenoid opportunity, with a 21 percent revenue CAGR to Rs 800 crore forecast over FY20–23, attributes to solid demand, product offerings, and advanced manufacturing.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.