Diwali Picks | Titagarh Railsystems, Coal India, Bharti Hexacom among SBI Securities' top bets
SBI Securities sees Samvat 2081 as the year of consolidation and base formation for Indian equities, suggesting investors to conserve profits rather than taking leveraged bets.
Coal India | SBI Securities sees an over 20 percent upside potential in Coal India, as it assigned a price target of Rs 593 cor the stock. The brokerage remains impressed with Coal India's ambitious production targets for FY25/FY26, aiming for 838 million tonnes (mnt) and 1 billion tonnes, respectively, after achieving record production/offtake of 773.6 mnt/753.5 mnt in FY24. The company has made strides in infrastructure development through its First Mile Connectivity (FMC) projects, with 72 projects underway to enhance mechanized coal transportation, supported by a capex of Rs 24,750 crore. CIL is also working on cost control by phasing out unviable underground mines, and diversifying into non-coal minerals like graphite, a key material for electric vehicles and energy storage. "At its current valuation, the stock trades at FY25E/FY26E EV/EBITDA multiples of 5.7x/5.2x with a 5.2% dividend yield, providing some downside protection," SBI Securities said.
2/12
Macrotech Developers | SBI Securities highlights Lodha as a leading real estate developer with a strong brand and over 95 million sq. ft. delivered. The company has a diversified portfolio across residential, commercial, and warehousing, and is building a growing annuity income pool, targeting Rs 500 crore by FY26. Lodha has reduced its debt significantly, from Rs 23,363 crore in FY19 to Rs 7,680 crore in FY24, supported by strong cash flows. With a pre-sales growth target of 20% CAGR by FY26 and a robust launch pipeline, SBI values the stock at Rs 1,398, while noting risks like project delays and high debt.
3/12
Bharti Hexacom | SBI Securities highlights Bharti Hexacom's strong presence in Rajasthan and North East telecom circles, serving 28 million customers as of March 2024. The company benefits from a solid infrastructure network, with 25,704 towers and 79,835 mobile broadband stations. Its relationship with Bharti Airtel provides synergies, including access to digital infrastructure and management expertise. Bharti Hexacom's acquisition of 15 MHz spectrum for Rs 1,000 crore strengthens long-term service offerings. With 13.6% revenue growth in 1QFY25 and robust ARPU, the company is expected to see a revenue CAGR of 18.9% through FY26, helping the stock touch Rs 1,747 in the coming year, SBI Securities believes. Key risks include high capex and regulatory challenges.
4/12
Nippon Life AMC | SBI Securities highlights Nippon Life AMC's strong growth in equity and ETF AUM, which rose to 49.8% and 26.8% in June 2024, alongside a 64% rise in SIP AUM. The company expects double-digit AUM growth at 20%+ CAGR through FY24-26, driven by its retail franchise and low mutual fund penetration in India. Investments in distribution, especially in smaller cities and rural markets, are expected to further boost growth. The firm is also focusing on launching new products and expanding internationally. At current levels, SBI securities sees the stock's valuations as reasonable and anticipates it touch Rs 825 in the coming 12 months.
Escorts Kubota | The company boasts a diversified product portfolio, offering tractors ranging from 12 HP to 120 HP, with three manufacturing plants and a capacity of over 1.2 million units annually. It also leads the domestic market for hydraulic mobile cranes. "With a pan-India distribution network of 1,200+ dealers, Escorts Kubota is expanding its presence in Southern and Western markets. Its partnership with Kubota Ltd aims to boost exports, targeting 63 countries, and plans for export-specific products in Europe by 3QFY25," SBI Securities said. The brokerage also expects a cyclical recovery in the domestic tractor industry in 2HFY25, driven by favorable agricultural conditions. At current levels, the stock trades at a reasonable P/E of 29.6x/25.8x FY25E/FY26E with a projected earnings growth of 16% CAGR over FY24-26E, prompting SBI Securities to assign a price target of Rs 4,408.
6/12
GSK Pharma | SBI Securities highlights GSK's leadership in the vaccine market, with Boostrix and Infanrix commanding 89% and 50% market share, respectively, as of FY24. Despite an 8% YoY slowdown in 1QFY25, key brands like Havrix and Boostrix posted strong growth, while Shingrix saw a 17% QoQ rise, reaching 7,000 patients monthly. GenMed, contributing 79% of revenue, grew 10%, driven by brands like Augmentin and Calpol. Future growth is expected from oncology brands Zejula and Jemperli. GSK's digital transformation and omnichannel strategy have doubled engagement with healthcare professionals. With plans for double-digit growth, the company aims to maintain EBITDA margins at 28%-29%. Factoring these in, SBI Securities assigned a price target of Rs 3,195 for the stock. Key risks include regulatory changes and rising raw material costs.
7/12
Chalet Hotels | SBI Securities highlights that Chalet Hotels boasts a diversified asset portfolio encompassing hospitality, commercial space, and residential real estate, with the hospitality segment generating the majority of its revenue. SBI Securities believes CHL's robust pipeline will increase its hospitality keys by approximately 28% and office space by 37% by FY27, supported by a total capex plan of Rs 1,500 crore. Furthermore, the firm notes CHL's healthy financial track record, with a CAGR of 9.6% in revenue and significant improvements in EBITDA margin and debt-equity ratio, reinforcing its operational strength and growth potential.
8/12
Newgen Software Technologies | SBI Securities highlights that the company is an R&D-focused organization with 32 years of experience in software product development across 17 verticals, primarily in Banking & Financial Services, Insurance, and Government. With 45 patents filed and 24 granted, it operates in a competitive market, with deal sizes ranging from $0.7 to $2 million. SBI Securities believes the strong performance in 2QFY25—where Revenue, EBITDA, and PAT rose 23.2%, 45.1%, and 47.1% YoY—underscores its robust growth across key markets. The brokerage is optimistic about the company’s ambitious target of achieving $500 million (~Rs 4,000 crore) in revenue within the next 3-4 years, projecting a 20-25% CAGR during this period. It has given a price target of Rs 1,475 for the stock.
Titagarh Railsystems | SBI Securities emphasises the company's robust outlook in freight rail and passenger rolling stock (PRS), noting that despite a slow start in 1QFY25 due to adverse weather and the election season, management is targeting production of 950-1,000 freight wagons per month for the remainder of FY25. In the PRS segment, SBI Securities projects significant growth in FY26 and FY27, bolstered by Vande Bharat orders, aiming for production of 15-20 cars per month by 3QFY25 and scaling up to 72 cars monthly over the next three years. The current order book stands at Rs 14,117 crore, representing 3.7 times FY24 sales. SBI Securities also views the stock as reasonably valued, underpinned by strong growth potential from increasing demand and favorable policy support, thereby assigning it a price target of Rs 1,510.
10/12
PG Electroplast | SBI Securities notes strong demand trends in the domestic RAC industry, with a 41% YoY volume growth in 1HCY2024, benefiting companies like PG Electroplast through higher capacity utilization and low inventory levels. The company's successful diversification into air coolers, washing machines, and TVs reduces seasonality impacts. The formation of a joint venture, Goodworth Electronics, enhances TV manufacturing capabilities. Backward integration, covering around 70% of materials, along with the PLI scheme, supports margin stability. With a growing customer base expanding from 12 to 30 brands, the company has reduced customer concentration risks. Further, SBI Securities believes the company's premium valuation is warranted by its high growth potential and expansion plans and sees the stock testing Rs 735 in the near future.
11/12
Kilburn Engineering | SBI Securities emphasizes that the company stands as a market leader in the industrial dryer sector, leveraging over 40 years of experience and boasting more than 3,000 installations across 15 industries, including chemicals, pharma, oil and gas, and FMCG. The recent acquisition of ME Energy, a specialist in energy-saving heating and cooling systems, further solidifies the company’s market position and broadens its product offerings. SBI Securities notes that the company raised approximately Rs 300 crore through a mix of warrants and a preferential share issue at Rs 425 per share to finance this acquisition and manage its debt. This funding will also support capital expenditures, investments in subsidiaries, and working capital requirements. SBI Securities highlights the company's robust financial outlook, citing a consolidated order book of Rs 371 crore, which gives the brokerage confidence of the stock touching Rs 532 in the coming time.
12/12
Arvind Fashions | SBI Securities highlights that AFL operates with an asset-light business model, sourcing products from third-party vendors, which allows it to leverage its extensive scale and strong supplier network to negotiate better margins. The company primarily follows the Franchise Owned Franchise Operated (FOFO) model for expansion, requiring minimal capital investment. It further notes that the company's premiumization strategy, focusing on five key brands to achieve Net Sell Values (NSV) exceeding Rs 1,000 crore, in addition to U.S. Polo Assn. has surpassed Rs 2,000 crore NSV. The company aims to increase its retail share from 44% to 50% by FY27 and diversify into adjacent categories such as kidswear, footwear, womenswear, innerwear, and accessories. Buoyed by these growth prospects, SBI Securities assigned a price target of Rs 725 for the stock.
