Diwali 2023 Stock Picks: Tata Power, Kajaria, Macrotech among top 6 buys from IDBI Capital

Samvat 2079 has been a favorable year Indian Stock market and investors with Nifty and Sensex gaining almost 11% in last one year. Amongst the Sensex and Nifty stocks, Tata Motors Ltd and Larsen & Toubro Ltd have been largest gainers have seen their share prices rise 55-61% during last on-year

As the Markets have turned volatile in the recent past, picking the right stocks holds key for future upside. IDBI Capital Markets & Securities Ltd has come out with its stock picks for this Diwali

IDBI Capital Markets & Securities Ltd Diwali 2023 stock pricks

Birla soft Ltd, Kajaria Ceramics Ltd, Macrotech Developers Ltd, Narayana Hrudayalaya Ltd. Tata Power Company Ltd and Union Bank of India are amongst top six Diwali 2023 stock picks of IDBI Capital Markets & Securities Ltd.

The Brokerage expects 24-43% upside potential in share prices of these 6 companies with Tata Power likely to give maximum returns.

Tata Power Company Ltd- CMP: ₹237, Target Price: ₹339

Tata Power together with its subsidiaries & joint entities, has a generation capacity of 14,384 MW of which 38% comes from clean energy sources. Tata Power is working to increase capacity to 17990MW and in this Clean & Green to account for 51% capacity.

Key triggers for upside in Tata Power’s share price as per IDBI Capital include strong Power Demand in the country and planned capacity additions by Tata powerwith focus on renewable power expansions. CGPL Mundra turning profitable is another ket=y trigger. In Mundra, losses are restricted due to cost pass-through benefits under Section-11 and thus need to watch for signing of long-term Power purchase agreement, which will resolve long pending concern for Tata Power.

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Birlasoft Ltd. CMP: ₹574 and TARGET: ₹781

BirlaSoft is another key pick by IDBI Capital where it sees upside potential of 36%

Key Triggers as per IDBI Include BirlaSoft aspiration to achieve S$1 billion in revenues from current $595 million. The company aims to achieve the same by increasing contributions from non-US markets. Biral Soft is on sustained growth path as Birlasoft reported 4.5% sequential constant currency growth in Q2FY24 excluding on off from Invacare which is better than large cap & mid cap peers. BirlaSoft aims to maintain 15.5%-17% margin for the medium term leading to Revenue and net profit compound annual growth of 10.5% & 22% over FY23-FY25. Hence, Birlasoft is IDBI’s high conviction Buy idea.

Kajaria Ceramics Ltd. It is the third high conviction idea of IDBI Capital where IDBI Capital expects 27% returns from CMP of Rs1,266 to Target price of ₹1,608.

Key Triggers include Wide range of product offerings by Kajaria Ceramics at varied price points to benefit over the peers. Further Kajari Ceramics has well entrenched dealership network to augur consistent business growth. Kajaria Ceramics Bathware segment will further boost earnings growth. IDBI Capital says that Kajaria Ceramics stock is trading at 49 times price to earnings ratio on FY23 EPS of Rs22. IDBI Capital likes Kajaria amongst the listed building material companies and we believe that it is poised to benefit from domestic demand uptrend, capacity expansion, extensive distribution network and strong brand recall.

Macrotech Developers (Lodha) remains the fourth Diwali Pick of IDBI Capital CMP: ₹804 and Target: ₹1,061 indicating 32% return expectations.\

Key Triggers for the rise in Macrotech Developers share price include GDV (Gross Development value) addition. Macrotech has added projects with a GDV of Rs2300 Crore during Q2FY24 and thus in 1HFY24 it has added 82% of its guidance for FY24 of Rs17500 GDV addition. Over mid term Macrotech Devevelopers or Lodha guides 20% growth in pre-sales. Macrotech Developers (LODHA) continues to target 30% plus Internat rate of returns (IRR) from JDA projects, and management sees healthy opportunities to acquire projects that can generate the return.

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Narayana Hrudayalaya Ltd is another key pick of IDBI where it sees an upside of 24% from CMP: ₹998 to Target price: ₹1,238

Key Triggers as Per IDBI Capital include Strong expansion plan of Narayana Hrudayalaya. Narayana Hrudayalaya’s focus on high growth regions: with capex to be specifically invested towards core and high performing regions such as Bangalore, Kolkata and Cayman to enhance growth visibility. Narayana Hrudayalaya’s Ramp up in new hospitals and IDBI Capitals expect healthy revenue and profitability going forward. Despite capex intensity going up, Return on Equity and Return of Capital Employed will remain healthy at 25%. Faster ramp up in new Cayman unit will be key. Narayana Hrudayalaya stock is currently trading at 28x FY25 consensus EPS estimates.

Union Bank of India is another conviction pick of IDBI capital where from CMP: ₹103 to TARGET: ₹138 IDBI Capital sees an upside of 34%.

Key triggers for the stock include Healthy Balance sheet growth for Union Bank of India. Asset quality improved has improved and Net Interest Margins expanded for Union Bank of India. Union Bank reported 90% YoY growth in 2QFY24 net profit to Rs.3500 Crore (higher than market estimates), driven by 57% YoY decline in provisions to Rs.1770 crore. A low SMA book (0.52%) and controlled restructuring (1.7%) provide a healthy outlook on asset quality. Additionally, the bank's valuation at 0.8 times price to Book value for FY24 estimates is relatively inexpensive compared to its peer as per IDBI Capital.