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Reliance Securities bets on these 10 stocks for Diwali Muhurat trading

UltraTech Cement, Larsen & Toubro and Infosys are among the top 10 picks of Reliance Securities for Samvat 2078.

November 02, 2021 / 03:06 PM IST
Samvat 2077 has been a rewarding year for equity investors in India and globally, despite headwinds from the COVID-19 pandemic. However, sustainability of earnings recovery will be a key tailwind for the market for Samvat 2078. We expect the Nifty 500 earnings to GDP ratio to improve from a low of 2.5% in FY20, to 3.4% in FY23E (the highest after FY15). Further, Nifty can potentially deliver ~12-15% returns over Samvat 2078.
Samvat 2077 has been a rewarding year for equity investors despite headwinds from the COVID-19 pandemic. However, sustainability of earnings recovery will be a key tailwind for the market, going ahead in Samvat 2078. Reliance Securities expects Nifty500 earnings to GDP ratio to improve from a low of 2.5% in FY20 to 3.4% in FY23E (the highest after FY15). Further, Nifty can potentially deliver ~12-15% returns over Samvat 2078. Here are 10 stock picks from the brokerage house:
Ashok Leyland | Rating: Buy | Target Price: Rs 170 | Broking firm expect company's volume to record a healthy double-digit growth in FY22E and FY23E. It expect a stable market share for the company, while estimate its EBIDTA margin of 10.8% in FY22E and 12% in FY23E (close to the previous peak, aided by a turnaround in LCV business). As the worst phase of the current down-cycle for M&HCV segment and Ashok Leyland seems to be over now, it believe an upcycle in FY22 and FY23 would bring back high earnings growth and valuation expansion, which would lead to a sharp upside from the current level.
Ashok Leyland | Rating: Buy | Target Price: Rs 170 | The broking firm expects the company's volume to record a healthy double-digit growth in FY22E and FY23E. It expects a stable market share for the company, and estimates an EBIDTA margin of 10.8% in FY22E and 12% in FY23E (close to the previous peak, aided by a turnaround in LCV business). As the worst phase of the current down-cycle for M&HCV segment and Ashok Leyland seems to be over now, it believes an upcycle in FY22 and FY23 would bring back high earnings growth and valuation expansion, which would lead to a sharp upside from the current level.
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Gujarat Gas | Rating: Buy Target Price: Rs 967 | With an increasing focus on gas over other alternate fuels and relative price advantage of gas over alternate fuels, broking firm estimate 16% volume CAGR over FY21-FY24E. Its expect company’s earnings to clock 23% CAGR over FY21-FY24E. Its RoCE is expected to expand by 254bps to 30.8% over FY21-FY24E and it has the potential to become the first USD 10bn CGD company in India.
HCL Technologies | Rating: Buy | Target Price: Rs 1,480 | Going ahead, Reliance Securities expect company to report a significant revenue recovery over FY21-FY24E, driven by consistent transformational deal wins, multi-decade experience in IMS/cloud services offerings and a rising share of Mode 2 business.
HCL Technologies | Rating: Buy | Target Price: Rs 1,480 | Going ahead, Reliance Securities expect company to report a significant revenue recovery over FY21-FY24E, driven by consistent transformational deal wins, multi-decade experience in IMS/cloud services offerings and a rising share of Mode 2 business.
Infosys | Rating: Buy | Target Price: Rs 2,120 | The stock deserves multiple re-rating considering the industry-leading EPS CAGR of 18% in FY21-24E, expanded EBIT margin and attractive cash return policy. Broking house expect the company to reach a market capitalization of USD 120bn in the next 1 year.
Infosys | Rating: Buy | Target Price: Rs 2,120 | The stock deserves multiple re-rating considering the industry-leading EPS CAGR of 18% in FY21-24E, expanded EBIT margin and attractive cash return policy. Broking house expect the company to reach a market capitalization of USD 120bn in the next 1 year.
Kalpataru Power | Rating: Buy | Target Price: Rs 678 | Going forward, broking house expect company to be one of the key beneficiaries of the strong transmission capex in both domestic and global markets. Strong revenue visibility led by healthy order flows, sustained earnings momentum and a likely improvement in return ratios augur well for the company. Broking firm believe the healthy order book and strong order inflow from railways to support 13% revenue CAGR during FY21-FY24E, while the debt reduction is expected to support earnings CAGR of 20% over the same period.
Kalpataru Power | Rating: Buy | Target Price: Rs 678 | Going forward, broking house expect company to be one of the key beneficiaries of the strong transmission capex in both domestic and global markets. Strong revenue visibility led by healthy order flows, sustained earnings momentum and a likely improvement in return ratios augur well for the company. Broking firm believe the healthy order book and strong order inflow from railways to support 13% revenue CAGR during FY21-FY24E, while the debt reduction is expected to support earnings CAGR of 20% over the same period.
Larsen & Toubro | Rating: Buy | Target Price: Rs 2,303 | The management is optimistic on healthy order inflows in the next couple of years. With strong order prospects, L&T scouts for opportunities of Rs 6.83 tn during 2HFY22. Cash burns in Hyderabad metro project and higher input costs are seen as the key near-term overhangs. However, an expected healthy pick-up in ordering activities and sharp improvement in order inflow may drive the stock’s performance in the medium-to-long-term.
Larsen & Toubro | Rating: Buy | Target Price: Rs 2,303 | The management is optimistic on healthy order inflows in the next couple of years. With strong order prospects, L&T scouts for opportunities of Rs 6.83 tn during 2HFY22. Cash burns in Hyderabad metro project and higher input costs are seen as the key near-term overhangs. However, an expected healthy pick-up in ordering activities and sharp improvement in order inflow may drive the stock’s performance in the medium-to-long-term.
Nippon Life India AMC | Rating: Buy | Target Price: Rs 526 | In our view, Nippon Life India AMC is set to witness a decent traction in business and profitability, going forward with its strategic focus on the retail segment, and aided by its strong presence in B30 cities and a vast distribution network. Due to operating synergies, economies of scale with higher AUM, investment in digitization and cost rationalization measures, we expect its APAT to clock 8% CAGR in FY21-24E, which would translate into an average RoE of 23%.
Nippon Life India AMC | Rating: Buy | Target Price: Rs 526 | In our view, Nippon Life India AMC is set to witness a decent traction in business and profitability, going forward with its strategic focus on the retail segment, and aided by its strong presence in B30 cities and a vast distribution network. Due to operating synergies, economies of scale with higher AUM, investment in digitization and cost rationalization measures, we expect its APAT to clock 8% CAGR in FY21-24E, which would translate into an average RoE of 23%.
RK Forgings | Rating: Buy | Target Price: Rs 1,700 | Broking firm believe the company will continue to win more new orders in the auto and non-auto segments over the coming years on the back of launch of new products and an expanding overseas reach. It estimate company’s volume to clock 27% CAGR over FY21-FY24E.
RK Forgings | Rating: Buy | Target Price: Rs 1,700 | Broking firm believe the company will continue to win more new orders in the auto and non-auto segments over the coming years on the back of launch of new products and an expanding overseas reach. It estimate company’s volume to clock 27% CAGR over FY21-FY24E.
UltraTech Cement | Rating: Buy | Target Price: Rs 9,400 | The company has been witnessing a better-than-industry growth over the years, which is expected to sustain, going forward as well, owing to the huge capacity addition plan by FY23 (19.5mnT). Further, OCF generation has been quite healthy in the recent years, mainly supported by steady realization and operating efficiencies, which enabled the company to deleverage its balance sheet meaningfully.
UltraTech Cement | Rating: Buy | Target Price: Rs 9,400 | The company has been witnessing a better-than-industry growth over the years, which is expected to sustain, going forward as well, owing to the huge capacity addition plan by FY23 (19.5mnT). Further, OCF generation has been quite healthy in the recent years, mainly supported by steady realization and operating efficiencies, which enabled the company to deleverage its balance sheet meaningfully.
Varun Beverages | Rating: Buy | Target Price: Rs 1,141 | While CY20 was a wash-out year, we expect company’s volume to revive from CY21 onwards. Covid-19 pandemic has disrupted the soft drinks market, with consumption shifting towards healthier drink alternatives. company’s alliance with PepsiCo India is mutually beneficial for both in terms of market share gain and geographic consolidation. We expect this to result in debt reduction (0.9x to 0.3x) and return ratios of +20% by CY23E, resulting in a PE re-rating of VBL (from the historic average 1-yr PE of ~25x) to 30x.
Varun Beverages | Rating: Buy | Target Price: Rs 1,141 | While CY20 was a wash-out year, we expect company’s volume to revive from CY21 onwards. Covid-19 pandemic has disrupted the soft drinks market, with consumption shifting towards healthier drink alternatives. company’s alliance with PepsiCo India is mutually beneficial for both in terms of market share gain and geographic consolidation. We expect this to result in debt reduction (0.9x to 0.3x) and return ratios of +20% by CY23E, resulting in a PE re-rating of VBL (from the historic average 1-yr PE of ~25x) to 30x.
Rakesh Patil
first published: Oct 31, 2021 11:19 am

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