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Long-term bets: HDFC and HUL among 10 stocks that analysts prefer

The market is likely to be stock-specific and experience sector rotations. Therefore, investors should adopt a buy-on-dips strategy only in quality names, said Umesh Mehta, Head of Research, Samco Group.

October 21, 2020 / 09:06 PM IST

The Indian market took a break last week as the benchmark lost over a percent after rising for two successive weeks.

Analysts attributed the pause of the market to the muted economic data along with global cues.

If we look at the trend, barring occasional correction, the market has been on an upward trajectory since March.

Even though the market appears to be bullish, it is important to keep in mind that it remains a sector and stock-specific market.

"Domestic institutional investors (DIIs) continued their selling spree in the second week of October. The market is likely to be stock-specific and experience sector rotations. Therefore, investors should adopt a buy-on-dips strategy only in quality names," said Umesh Mehta, Head of Research, Samco Group.


Based on the recommendations of several analysts, here are 10 stocks that you can bet on for a one-year timeframe. Take a look:

Analyst: Siddharth Sedani, Vice President, Equity Advisory, Anand Rathi Shares and Stock Brokers.

HDFC | Buy | Target price: Rs 2,215

We believe the company remains well-positioned to navigate through the challenges, given its strong market position in the housing finance sector, healthy spreads, sturdy capital position, conservative provisioning and strength from its subsidiaries.

Hindustan Unilever (HUL) | Buy | Target price: Rs 2,452

HUL is the largest FMCG company with one of the largest footprints in terms of products and distribution networks.

Continued focus on strategy to target volume growth and decline in material and other costs should drive outperformance in both growth & profitability in the medium to long-term.

BASF India | Buy | Target price: Rs 1,867

The company has been achieving strong sales growth due to a change in business model from agency to merchandise, since April 2019.

The transition to a merchandising business model along with a strong focus on margins, operational costs and working capital management led to improved profitability and cash flow.

SBI Card | Buy | Target price: Rs 1,021

Its robust business model and structural growth story keep us positive about SBI Cards’ long-term prospects.

Its rising market-share trend and strong financial profile over the past few years are reassuring. Also, the company is well-capitalised and has consistently maintained a positive ALM balance in the shorter duration (less than 1 year).

Aarti Industries | Buy | Target price: Rs 1,200

On the back of the coming NCB, APIs and intermediate capacities along with revenue from many-year deals from Q4 FY20, the analyst expects revenue and PAT to clock 19 percent and 21 percent CAGRs, respectively, over FY20-22.

Also, the analyst expects revenues from the specialty chemicals division to grow at a 14 percent CAGR over FY20-22 driven by expansions, better utilisation and the rising share of products.

Analyst: Rusmik Oza, Executive Vice President (Head of Fundamental research - PCG, Kotak Securities

Axis Bank | Buy | Target price: Rs 600

Axis Bank is well-positioned, given its lower exposure in the SME and self-employed segment.

The analyst expects loan growth of 13.6 percent along with NII growth of 14.2 percent in FY22E.

NIM could remain stable at nearly 3 percent by FY22E due to marginally better pricing.

"We are valuing the bank at 1.9 times book and nearly 15 times March 2022E EPS for RoEs of nearly 12 percent," said the analyst.

"Our one-year fair value works to Rs 600. The near-term outlook is hazy for all banks but clarity should emerge after the final verdict of Supreme Court on the moratorium case," the analyst added.

A healthy asset mix, superior customer profile, liability strength and capital comfort should help Axis Bank to ride this challenging period.

Petronet LNG | Buy | Target price: Rs 300

Petronet’s utilisation at the Dahej and Kochi terminal has increased. However, there has been no material progress on the Tellurian MoU or Sri Lanka/Bangladesh projects for now.

Petronet is evaluating long-term LNG sourcing contracts, which may be structured to be always competitive with spot LNG prices.

The analyst expects a gradual ramp-up in volumes driven by an increase in utilisation of Kochi post commissioning of pipelines.

The analyst expects earnings to grow by 3.6 percent in FY21 and by 18.6 percent in FY22.

"We have a constructive view on the stock seeking comfort from prudence on capital allocation, limited risks to volumes/tariffs/earnings and attractive valuations. Expect the company to deliver a healthy 10-11 percent CAGR in earnings over the next 3-5 years driven by higher volumes and tariffs," said the analyst.

Dalmia Bharat | Buy | Target price: Rs 1,075

Dalmia is progressing as per plan to reach 370 lakh tonnes per annum capacity and become the third-largest in India by FY22E.

It has completed the acquisition of Murli Industries having an integrated 30 lakh tonnes per annum cement capacity.

Dalmia’s 78 lakh tonnes per annum organic expansions would complete in FY22E. With access to 20 states, the company is gradually elevating from the stature of a regional player.

The company continues to consolidate its position in the East and is increasing its presence in the West.

Dalmia would be spending Rs 2,500 crore in FY21-22E towards expansion. Strong operating cash flows should drive strong free cash flows and help reduce net debt in FY22E.

In the absence of new projects, the company can become debt-free (on net debt level) in FY23E.

"The company is well-poised for a re-rating given growth visibility, improving balance sheet and attractive valuation. IEX divestment and/or resolution of mutual fund case has strong re-rating potential," said the analyst.

CESC | Buy | Target price: Rs 820

The standalone business enjoys a very high predictability of cash flows and profitability (more than 20 percent return on equity).

The analyst expects EPS to grow by 9.9 percent in FY21 and by 14.8 percent in FY22.

High operating cash flows leads to healthy free cash flow generation. Valuations offer increased comfort with a fair value of Rs 820. At the current levels, the stock trades at 4.7 times FY22E.

BPCL | Buy | Target price: Rs 480

The analyst expects downstream PSUs to retain marketing margins on auto fuels at elevated levels in order to offset the ongoing weakness in refining and/or volatility in crude prices.

Privatization, although delayed, may lead to an improvement in earnings/FCF profile and unlock value for minority shareholders as and when it goes through.

After reporting adjusted earnings growth of 128 percent in QFY21 on a YoY basis, the analyst excepts the company to report adjusted YoY earnings growth of 62 percent in Q2FY21.

After the recent sharp correction, the stock now trades at nearly 9 times FY22E and 1.7 times FY22E book value.

"The dividend yield has now gone above 5 percent. In the future, as and when the strategic divestment process starts we can expect re-rating in the stock," said the analyst.

Disclaimer: The views and investment tips expressed by investment experts on are their own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.
Nishant Kumar
first published: Oct 19, 2020 03:10 pm
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