Diwali Picks | Bank of India, NCC, Reliance Industries, SBI among HDFC Securities' top bets

Bank of India | HDFC Securities highlights Bank of India's strong capital adequacy ratio, improved net interest margins (NIMs), and enhanced asset quality, calling its valuation of 0.6 times FY26 adjusted price-to-book value an "attractive entry point." The brokerage recommends buying the state-run lender within the Rs 96 - 106 price band, with a target price of Rs 132 by the next Diwali. Key risks include a potential deterioration in asset quality in the Agri and SME segments, lower-than-expected resolutions of stressed assets, and the impact of implementing the old pension scheme for employees.

Jyothy Labs | HDFC Securities commended Jyothy Labs' evolution from a promoter-driven, southern-focused, single-product company to a professionally managed, multi-product entity with nationwide operations. The brokerage highlighted a better product mix and improved operational efficiencies as key drivers of margin growth. HDFC Securities projects a revenue, EBITDA, and profit CAGR of 12%, 15%, and 17% respectively between FY24 and FY26. It recommends buying the stock within the Rs 480 - 533 range, with a target price of Rs 600 by next Diwali. Key risks include adverse monsoon conditions, prolonged inflation, a decline in household insecticides, rising raw material costs, and heightened competition.

NALCO | HDFC Securities believes NALCO is well-positioned to capitalize on strong alumina prices, anticipating a robust aluminum price outlook driven by global supply constraints and recovering demand. The brokerage projects NALCO's revenue, EBITDA, and profit to grow at compounded annual growth rates (CAGR) of 9.7%, 32.8%, and 29.2%, respectively, between FY24 and FY26. It recommends buying the stock within the Rs 198 - 220 range, with a target price of Rs 270 by next Diwali. Key risks include volatility in aluminum and alumina prices, potential regulatory changes, and inflation in raw material costs.

Navin Fluorine International | HDFC Securities projects that Navin Fluorine's revenue will grow at a robust 23.5% CAGR, driven by significant growth in the CDMO and Specialty Chemical segments between FY24 and FY27. The brokerage also anticipates a 750 basis points expansion in margins over the next three years, fueled by an improved product mix and scaling up of the Specialty Chemicals business. Management expects margins to approach 25% by the end of the current financial year. This revenue growth and margin enhancement could lead to a net profit CAGR of 35% over the same period. HDFC Securities recommends buying Navin Fluorine within the Rs 3,059 - 3,396 range, targeting Rs 3,948 by next Diwali. Key risks include fluctuations in raw material prices, competition from Chinese firms, business cyclicality, and potential delays in the ramp-up of expansions and CDMO scaling.

NCC | HDFC Securities highlights that NCC, a stock in which Rekha Rakesh Jhunjhunwala has a stake, stands to benefit from positive tailwinds due to the government's focus on infrastructure development through various schemes. With an all-time high order book, a ramp-up in execution, and a robust balance sheet, the brokerage anticipates healthy medium-term growth for NCC. It projects a revenue, EBITDA, and profit CAGR of 16%, 21%, and 39.6%, respectively, between FY24 and FY26. HDFC Securities recommends buying the stock within the Rs 273 - 303 range, with a target price of Rs 363 by next Diwali. Key risks include potential cost and time overruns, as well as volatility in raw material prices.

PNB Housing Finance | HDFC Securities forecasts an 18% CAGR in PNB Housing's loan book from FY24 to FY26, with Net Interest Income and net profit expected to grow by 16% and 15%, respectively, during the same period. The brokerage anticipates an improvement in Return on Assets, projecting it to reach 2.2% by FY26. HDFC Securities recommends buying the stock within the Rs 893 - 991 range, targeting Rs 1,160 by next Diwali. Key risks include unfavorable regulatory changes, intense competition, lower-than-expected loan growth, and declining net interest margins (NIMs).

State Bank of India | HDFC Securities asserts that State Bank of India (SBI), India's largest lender, is well-positioned to sustain growth due to its liquidity surplus and comfortable loan-to-deposit ratio (LDR). However, the brokerage anticipates a compression in SBI's net interest margins (NIMs) between FY24 and FY26, driven by a potential shift in the rate cut cycle in the latter half of the current financial year. HDFC Securities recommends buying SBI within the Rs 733 - 813 range, with a target price of Rs 960 by next Diwali. Key risks include higher-than-expected deterioration in asset quality, unfavorable regulatory changes, and a slowdown in credit growth.

Reliance Industries | HDFC Securities recommends buying Reliance Industries stock within the Rs 2,447 - 2,716 range, with a target price of Rs 3,243 by next Diwali. The brokerage expects Jio's Average Revenue Per User (ARPU) to rise to Rs 205 per month by the end of FY25, driven by growth in retail, telecom, and new energy sectors over the next two to three years. Additionally, Reliance aims to double its EBITDA in the next five years, leveraging opportunities in 5G technology. Key risks include an economic slowdown, the capital-intensive nature of the telecom business, lower-than-expected production, and declining natural gas prices.

JK Lakshmi Cement | HDFC Securities anticipates a boost in cement demand during the second half of the financial year, and expects JK Lakshmi Cement to deliver strong operational performance, particularly with its ongoing capacity expansion plans. The brokerage forecasts the company's revenue, EBITDA, and net profit to grow at a compounded annual growth rate (CAGR) of 7.6%, 15.7%, and 13.9% respectively between FY24 and FY26. It suggests buying the stock within the Rs 738 - 819 price range, with a target price of Rs 936 by next Diwali. Key risks include softer-than-expected cement demand and potential delays in the company's capacity expansion. This mirrors the cyclical nature of infrastructure growth in India, where demand often surges post-monsoon, especially as major projects pick up pace.

L&T Finance | HDFC Securities projects that L&T Finance, a non-bank lender, may achieve an 18% growth in advances between FY24 and FY26. The brokerage considers the stock's valuations "reasonable," despite potential asset quality challenges in wholesale lending, which is experiencing a decline in focus. It recommends purchasing the stock within the Rs 153 -170 range, with a target price of Rs 219 by next Diwali. Key risks include stress in microfinance or farm equipment sectors, an increase in the share of retail loans by competitors, and rising borrowing costs.