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Diwali Picks | HDFC Securities bets on RIL, L&T, HPCL, Bharti Airtel for Samvat 2078

Equity as an asset class will continue to do well in the market, while PSU stocks still have steam left in them to watch out for, and banks are likely to make a comeback, it says. Auto and capital goods can also do well after a few quarters of subdued performance.

November 02, 2021 / 03:06 PM IST
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According to HDFC Securities, most stocks are discounting a bright future over the next two years. Hence, the broking house has to shortlist stocks where it think the street is yet to give full value to the future potential. Having said that, equity as an asset class will continue to do well in a market like India. Sectorally, PSU stocks still have steam left even after the Air India sell-off and some progress on BPCL and SCI divestment. Banks (both PSU and private) could come back in the reckoning. Auto and capital goods can also do well after subdued performance over the past few quarters, it said.
Bharti Airtel | Strong market position in the domestic mobile and non-mobile segment, diversification across businesses, healthy operations in Africa, high financial flexibility makes Bharti Airtel attractive for investment. Investors can buy the stock at LTP and add on dips to Rs 623 for a target of Rs 810.
Bharti Airtel | Strong market position in the domestic mobile and non-mobile segment, diversification across businesses, healthy operations in Africa, high financial flexibility make Bharti Airtel attractive for investment. Investors can buy the stock at LTP and add on dips to Rs 623 for a target of Rs 810.
Petrol and diesel prices differ from state to state depending on the incidence of local taxes. (Representative image)
HPCL | Economic slowdown, volatility in oil and gas prices and regulatory changes in the oil and gas industry could impact its growth story. On the refining side, HDFC Securities expects margins to bottom out and GRMs are likely to recover H2FY22 onwards. Successful divestment of government holding in BPCL could lead to rerating of other oil marketing companies, including HPCL. Investors can buy the stock at LTP and add on dips to Rs 280 for a target of Rs 385.
Larsen and Toubro | Broking firm remain comfortable on L&T, given its (1) strong order book (Rs 3.2 lakh crore), (2) healthy balance sheet, and (3) robust services business. L&T can deliver high-teens PAT CAGR over FY2020-23 and pay out high dividends. Investors could look at buying the stock at the LTP and add on dips to Rs 1,598 for a target of Rs 2077 by next Diwali.
Larsen and Toubro | Broking firm remain comfortable on L&T, given its (1) strong order book (Rs 3.2 lakh crore), (2) healthy balance sheet, and (3) robust services business. L&T can deliver high-teens PAT CAGR over FY2020-23 and pay out high dividends. Investors could look at buying the stock at the LTP and add on dips to Rs 1,598 for a target of Rs 2077 by next Diwali.
Source: Reuters
Reliance Industries | The broking firm remains optimistic on company's revenue and profitability trajectory with robust execution capabilities, robust balance sheet, steady growth momentum going forward. Long-term prospects and dominant standing of RIL in each of its product and service portfolio, provide comfort for value creation. Investors can buy the stock at LTP and add on dips to Rs 2336 for a target of Rs 2986. (Disclaimer: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.)
Adani Ports | The company reported lower consolidated profit at Rs 951.7 crore in Q2FY22 against Rs 1,387 crore in Q2FY21, revenue increased to Rs 3,532 crore from Rs 2,902.5 crore YoY.
Adani Ports | Gradual opening of the world economy will provide much awaited impetus to the demand scenario (led by steel industry) and augment operations across its ports. The management expects to handle 350-360 MMT of cargo volumes for FY22 (with a target of 500 MMT by FY25) and has provided revenue guidance of Rs 18,000-18,800 crore. EBITDA is expected to be in the range of Rs 11,500-12,000 crore. Investors can buy Adani Ports at LTP and add more at Rs 695 for the target price of Rs 936 till next Diwali.
Bank of Baroda | We expect BoB to grow its loan book at 8% CAGR while NII and Net profit are expected to grow at 9.5% and 255% (due to lower base) CAGR respectively over FY21-23E. ROAA is estimated to improve to 0.8% in FY23E from current 0.1% in FY21. We expect healthy recoveries and upgrades in next two years. Asset quality trend of corporate and MSME would be crucial monitorables. Investors can buy BoB at LTP and add more at Rs 83.3 for the target price of Rs 113.5 (0.85xFY23E ABV) till next Diwali.
Bank of Baroda | We expect BoB to grow its loan book at 8% CAGR while NII and Net profit are expected to grow at 9.5 percent and 255 percent (due to lower base) CAGR respectively over FY21-23E. ROAA is estimated to improve to 0.8 percent in FY23E from 0.1 percent in FY21. We expect healthy recoveries and upgrades in next two years. Asset quality trend of corporate and MSME would be crucial monitorables. Investors can buy BoB at LTP and add more at Rs 83.3 for the target price of Rs 113.5 (0.85xFY23E ABV) till next Diwali.
CESC | We currently like the stock due to its minimal Capex requirement, existing distribution businesses generating high RoEs, consistent dividend payout, turnaround in all segments, healthy FCF, post-election tariff finalisation and monopoly in Kolkata. Improvement in subsidiary (Dhariwal & Haldia) performance coupled with decline in T&D losses augurs well for the future. CESC could be one of the key beneficiaries of impending distribution sector privatization. Investors can buy CESC at LTP and add more at Rs 84.5 for the target price of Rs 113 till next Diwali.
CESC | We currently like the stock due to its minimal Capex requirement, existing distribution businesses generating high RoEs, consistent dividend payout, turnaround in all segments, healthy FCF, post-election tariff finalisation and monopoly in Kolkata. Improvement in subsidiary (Dhariwal & Haldia) performance coupled with decline in T&D losses augurs well for the future. CESC could be one of the key beneficiaries of impending distribution sector privatisation. Investors can buy CESC at LTP and add more at Rs 84.5 for the target price of Rs 113 till next Diwali.
Cyient | The company reported higher consolidated profit at Rs 121.3 crore in Q2FY22 against Rs 115 crore in Q1FY22, revenue jumped to Rs 1,111.6 crore from Rs 1,058.2 crore QoQ.
Eris Lifesciences | The broking house positive on Eris, given its focus on the domestic market (chronic area), robust operating and net margin profile, strong return ratios, and net cash balance sheet. It is a pure domestic play with little regulatory or currency risks. Also its dependence on Chinese APIs/KSM is very limited. We recommend buy on Eris Lifesciences at LTP and add further on dips at Rs 725 for target of Rs 966.
Max Healthcare Institute | Veritas Funds Plc on behalf of Veritas Asian Fund acquired 52 lakh shares in the company at Rs 350 per share, SBI Mutual Fund bought 4,28,57,000 shares at same price, and HDFC Mutual Fund purchased 57 lakh shares at same price. However, promoter Kayak Investments Holding Pte Ltd sold 6,02,19,498 equity shares in the company at Rs 350 per share, and 2,42,30,377 equity shares at Rs 350.13 per share on the NSE, the bulk deals data showed.
Gati | We expect the company to gain from (1) its longstanding experience in the logistics sector, (2) Allcargo as its new promoter, (3) diversification of customer base, (4) restructuring measures and (5) revenue offering from different segments. Allcargo’s focus on restructuring the business will improve return ratios and financials and transform the business to an asset-light model.
Gati | We expect the company to gain from (1) its longstanding experience in the logistics sector, (2) Allcargo as its new promoter, (3) diversification of customer base, (4) restructuring measures and (5) revenue offering from different segments. Allcargo’s focus on restructuring the business will improve return ratios and financials and transform the business to an asset-light model.
Indian Bank | Broking firm expect healthy recoveries and upgrades in next two years. Asset quality trend of corporate and MSME would be the crucial monitorables. Most of the concerns arising out of pending write-offs out of restructured/SMA accounts are already in the price. We have assumed higher recoveries and lower slippages going forward. Investors can buy Indian bank at LTP and add more at Rs 152.5 for the target price of Rs 213.5 till next Diwali.
Indian Bank | Broking firm expect healthy recoveries and upgrades in next two years. Asset quality trend of corporate and MSME would be the crucial monitorables. Most of the concerns arising out of pending write-offs out of restructured/SMA accounts are already in the price. We have assumed higher recoveries and lower slippages going forward. Investors can buy Indian bank at LTP and add more at Rs 152.5 for the target price of Rs 213.5 till next Diwali.
Mahindra & Mahindra Financial Services | Broking firm is betting on a revival in the rural economy in the next two quarters and when that happens, MMFS will be one of the key beneficiaries. Positive news flow could follow performance in the stock price. Investors can buy the stock at LTP and add more at Rs 167 for the price target of Rs 227 till next Diwali.
Mahindra & Mahindra Financial Services | Broking firm is betting on a revival in the rural economy in the next two quarters and when that happens, MMFS will be one of the key beneficiaries. Positive news flow could follow performance in the stock price. Investors can buy the stock at LTP and add more at Rs 167 for the price target of Rs 227 till next Diwali.
Network18 Media | Network18’s consolidated free cash flow turned positive for the first time in the last four years, driven by the increase in profitability and favourable working capital changes, leading to the decrease in debt. We expect the company to further pare down its debt levels in the coming years which would aid in profitability improvement. Investors can buy the stock at LTP and add on dips to Rs 68 for a target of Rs 106. (Disclaimer: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.)
Network18 Media | Network18’s consolidated free cash flow turned positive for the first time in the last four years, driven by the increase in profitability and favourable working capital changes, leading to the decrease in debt. We expect the company to further pare down its debt levels in the coming years which would aid in profitability improvement. Investors can buy the stock at LTP and add on dips to Rs 68 for a target of Rs 106.
Network18 Media | Network18’s consolidated free cash flow turned positive for the first time in the last four years, driven by the increase in profitability and favourable working capital changes, leading to the decrease in debt. We expect the company to further pare down its debt levels in the coming years which would aid in profitability improvement. Investors can buy the stock at LTP and add on dips to Rs 68 for a target of Rs 106.
Rakesh Patil
first published: Oct 29, 2021 01:01 pm

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