Diwali Picks | RIL, Canara Bank, Godrej Consumer among Kotak Securities top bets
Analysts at Kotak Securities like Reliance Industries, PCBL, Cipla and Cyient, among 8 other stocks that serve as investment opportunities for the Diwali season of 2023.
Reliance Industries: Kotak Securities has given a ‘buy’ rating for the RIL stock with a target price of Rs 2725 as against the current market price of Rs 2288. Analysts anticipate a shift in focus towards the monetization of 5G as the rollout of R-Jio's 5G technology nears completion, as evidenced by the recent launch of Jio AirFiber (FWA). The growing number of subscribers in Q2FY24 and active participation in 5G indicate an imminent increase in tariff rates. Reliance's expansion in the retail sector continues, with the addition of 471 new stores in Q2, resulting in a YoY growth of 12 percent. Additionally, it is expected that KG-D6 production will reach approximately 3 crore mscmd. Reliance's reported net debt has decreased by approximately Rs. 8,900 crore compared to the previous quarter, aided by a receipt of Rs. 10,350 crore from the RRVL stake sale.
2/7
Canara Bank (CBK): Kotak Securities has issued a 'buy' rating for Canara Bank with a target price of Rs 425, surpassing the current market price of Rs 384. Canara Bank has exhibited commendable results, recording a remarkable 43 percent YoY growth in earnings. This growth can be attributed to a 10 percent YoY rise in operating profit and a substantial 28 percent YoY decline in provisions. The bank has achieved a healthy 20 percent YoY increase in net interest income (NII) while maintaining a strong net interest margin (NIM). It has made significant improvements in its asset quality, demonstrating historically low non-performing loan (NPL) ratios and moderate slippages. With a 12 percent YoY and 4 percent QoQ expansion in loans, the bank is well-positioned for continued positive growth.
3/7
Cipla Ltd.: Kotak Securities reiterates its 'add' rating on Cipla Limited, with a target price of Rs 1320, while the stock is presently trading at Rs 1200. Cipla has demonstrated strong performance for the third consecutive quarter in Q2FY24, prompting the company to revise its EBITDA margin guidance from 23 percent to a range of 23-24 percent. Despite encountering regulatory challenges, Cipla is forecasted to achieve a robust 20 percent EPS CAGR from FY23 to FY26, driven by its strategic emphasis on domestic prescription drugs and US generics, as well as efficient cost management. The potential divestment of shares by the promoter group is a notable point of interest for investors. Kotak Securities' revised assumptions for US sales and margins have resulted in a 1-3 percent enhancement in Cipla's FY24-26E EPS, leading to their optimistic outlook on the stock.
4/7
Cyient Ltd. (CYL): Kotak Securities upholds a ‘buy’ rating on Cyient Limited with a target price of Rs 2000, as against the current market price of Rs 1589. Cyient lays a strategic emphasis on high-growth services, such as digital and embedded engineering along with diversification across various industries and geographies. The company also foresees sustained demand in the aerospace, sustainability, and automotive sectors. In order to maintain continuous growth and profitability, Cyient has restructured its sales incentives, organizational framework, enhanced capabilities, and shifted its focus towards high-growth segments, while benefiting from operational efficiencies and addressing market gaps. Its order intake also experienced an increase of 40 percent YoY in Q2FY24, and Cyient is committed to distributing 50 percent of its net profits as dividends as it trades at a valuation of 19x FY25E PE.
Godrej Consumer Products Ltd. (GCPL): Kotak Securities upholds a rating of 'add' for GCPL with a target price of Rs 1135 compared to the CMP of Rs 992. During Q1FY24, the company exhibited commendable performance, achieving a volume growth of 10 percent in its domestic business. In Q1FY24, the company witnessed double-digit volume growth, particularly in the Household Insecticide segment, while its operations in Indonesia and GAUM also demonstrated improvements. With a consolidated gross margin of 53.7 percent and a consistent high-teen EBITDA growth forecast for FY24, GCPL plans to invest Rs 900 crore in capital expenditure over a period of 18-36 months to augment its capacity by approximately 20 percent. Despite encountering two consecutive DD prints, the stock is currently valued at a price-to-earnings ratio of 45X in September 2025E.
6/7
Macrotech Developers Ltd. (Lodha): Kotak Securities upholds an 'add' rating for Macrotech Developers (Lodha) with a target price of Rs 840, surpassing the current market price of Rs 788 in a span of 12 months. Lodha is positioned to expand its market share further as a result of its diverse geographical presence and robust performance in new business development. Analysts have observed advancements in the Palava area's land monetization, while the company's H1FY24 pre-sales have reached Rs 6,880 crore, signifying progress towards FY24 guidance. Macrotech aims to sustain a 20 percent compound annual growth rate in pre-sales from FY23 to FY26 and is committed to reducing net debt, thereby fortifying its financial position. These factors collectively contribute to the stock's appealing valuation through a Sum-of-the-Parts (SoTP) methodology for the Kotak Securities Analysts.
7/7
PCBL: Kotak Securities affirms its 'buy' rating for the PCBL stock, with the set target price of Rs 260, as against the current market price of Rs 199. The Q2FY24 performance of PCBL was in line with the analysts' expectations, displaying strong volumes and a growing demand for specialty black products. The recent expansion of the Chennai facility and the acquisition of 2 new patents showcase the company's emphasis on innovation and expansion. Additionally, PCBL's management foresees a 12-13 percent volume growth CAGR over the next 5-6 years. Taking into consideration these advancements, Kotak Securities perceives PCBL as an attractive investment opportunity.
