Diwali 2023 stocks: PL lists 6 largecaps, 7 mid and smallcaps, and 8 technical picks for this festive season
The festive season is here and brokerage house Prabhudas Lilladher has come out with its top large-cap, mid-cap, small-cap and technical picks for this Diwali.
Samvat 2079 has seen the Nifty making new lifetime highs in an increasingly uncertain and volatile global environment. Going ahead, for Samvat 2080, the global geopolitical situation will remain grim as the Israel-Palestine war has added to the already crippled global order due to Russia-Ukraine war. Also, the strong resilience of the US economy despite high inflation is likely to keep policy rates high which can impact the FPI inflows in the near term.
Brokerage house Prabhudas Lilladher (PL) expects the next few months to remain volatile given the impact of EL Nino on inflation, global volatility in commodities, and interest rates. Lok Sabha elections are going to be the most important event for the next 12 months. PL believes the return of a strong majority government can re-rate the markets meaningfully from current levels.
The festive season is here and Prabhudas Lilladher has come out with its top large-cap, mid-cap, small-cap and technical picks for this Diwali.
Large-cap picks:
Hindalco Industries: Buy | TP: ₹557 | Upside: 15.5%
PL believes Hindalco is well placed amongst the metals space as a) Novelis (70% of consolidated EBITDA) is expected to witness gradual improvement in per ton EBITDA to USD 525/t over the next few quarters; b) Novelis has prioritised capex (USD 2.5 billion) on fully integrated 600ktpa Greenfield capacity at USA, which would drive volume growth from FY26E; c) recent fall in thermal coal prices and opening of captive coal mines will benefit India business post-FY26; and d) rising focus on high margin value-added downstream products would drive domestic volume growth from FY26.
ICICI Bank: Buy | TP: ₹1,280 | Upside: 35%
ICICI Bank continues to deliver strong earnings driven by a beat on all parameters. Core PPoP performance has been superior to peers as it witnessed a healthy CAGR of 22.5% over FY19-23 driven by margin increase without diluting credit standards. Likely core RoA/RoE for FY25/26E is 2.0%/17.0% (vs 1.7%/15.3% for HDFCB), said the brokerage.
Maruti Suzuki: Buy | TP: ₹12,485 | Upside: 21%
MSIL is well poised for a revenue CAGR of 13% over FY23-FY26E led by stable industry demand, healthy order book, new launches, higher ASPs, and an improving supply chain which provides good visibility of demand for the near to medium term. Recent model launches by MSIL have positively impacted average selling prices (ASPs), profit margins, and the proportion of high-end models. MSIL holds a strong position in the CNG segment, which is poised for high growth as India focuses on clean energy. MSIL should also benefit from improving margins led by a shift towards higher-priced SUVs, stable input costs, price increases, and higher capacity utilisation, said PL. It estimates a 25% EPS CAGR over FY23-26E.
Max Healthcare Institute: Buy | TP: ₹610 | Upside: 3%
The company showed phenomenal growth in the past two years and PL expects this momentum to continue given 1) strong expansion plans (+1100 additional beds by FY25E end), 2) improving payor mix (15% revenue contribution from institutional by FY25E vs 18.4% now) and 3) scale up in labs.
Siemens: Accumulate | TP: ₹4,241 | Upside: 26%
Siemens has been focusing on product localisation, improving the business mix, and cost optimisation, which will improve the margin profile going forward. PL remains positive on SIEM from a long-term perspective given 1) its strong and diversified presence across industries through a focus on electrification, digitisation & automation products, 2) product localisation, 3) its strong balance sheet, 4) healthy public & private capex and 5) focus on cost efficiencies.
Titan Company: Accumulate | TP: ₹3,312 | Upside: 1.5%
PL remains positive on TTAN as a play on consumer shift towards organised players in jewellery, eyecare, watches, and emerging segments. Titan continues to consolidate in the Jewellery segment and is creating the next levers of growth in Eyewear (Titan Eye+), Jewellery (Caratlane and Mia), Dress material (Taneira) and Wearables (Titan and Fastrack). It expects strong growth in 2H24 led by soft gold prices and the upcoming marriage season. It also expects premium valuations to sustain given a strong growth outlook and emerging lifestyle play.
Mid & small-cap picks:
Greenpanel Industries | TP: ₹464 | Upside: 37%
The company is well-positioned for growth and value creation given its 1) leading position in the domestic MDF segment, 2) strong growth prospects in domestic MDF demand, 3) planned capacity increase of 35% over FY23-26 and 4) extensive distribution network.
Navin Fluorine: Buy | TP: ₹4,007 | Upside: 10%
Navin Fluorine is completing a dedicated ₹540 crore agrochem intermediate project by Dec’23 and launching the fifth molecule from its MPP project next year. Along with this, the demand for HFO is expected to normalise next year and debottlenecking of 25% by the CY24 end is expected to drive earnings post that. PL expects EPS to rise from ₹75.7 in FY23 to ₹133.6 in FY26.
Navneet Education: Buy | TP: ₹205 | Upside: 44%
PL believes NCF implementation is likely to emerge as a key re-rating lever for Navneet as it would make the second-hand books market redundant and result in a significant volume delta. Substantial yield advantage is also expected, as repricing at a higher level becomes easier post-curriculum revamp. The turnaround in Indiannica business (expected to be profitable in FY24E), back-ended recovery in gross margin amid softening paper prices, narrowing losses in Ed-Tech, and impending benefits from NEP are expected to result in sales/PAT CAGR of 12%/35% over FY23-FY25E, it said.
R R Kabel: Buy | TP: ₹1,624 | Upside: 16%
PL has a ‘high conviction BUY’ on the stock. RR Kabel is one of the fastest-growing consumer electrical companies in India, which has reported a revenue CAGR of 43.4% over FY21-23. PL believes RR Kabel is a play on several opportunities in the W&C segment given 1) a strong brand with a diverse product portfolio 2) well-structured capacity expansion plans, 3) increasing dealers' distribution network and 4) a distribution-led export business.
Safari Industries: Buy | TP: ₹4,752 | Upside: 10%
Over the last few years, Safari has been consistently gaining market share which stood at 23% in FY23. PL believes the journey of market share gain is likely to continue as it has outlined a capex plan of ₹215 crore. In addition, the rising share of own manufacturing will structurally elevate the margin profile as it would reduce reliance on outsourcing and thereby 1) eliminate currency volatility 2) reduce freight and 3) result in accrual of manufacturing profit within the company in addition to trading profit. Its consistent gain in market share and rising share of indigenous manufacturing is likely to result in sales/PAT CAGR of 24%/31% over FY23-FY26E.
Suntek Realty: Buy | TP: ₹565 | Upside: 25.5%
PL expects the company’s pre-sales to grow 2x over the next 3 years aided by ongoing projects and a strong new launches pipeline. Further, given the likely strong cash flow generation, it sees SRIN to step up new project additions which will be a key catalyst for stock performance. Also, the adoption of asset light model has enabled the company to acquire scale without straining its balance sheet and this will likely continue in new project additions too. PL expects Revenue/EBIDTA CAGR of 83%/123% over FY23-26E.
Zee Entertainment Enterprises: Buy | TP: ₹314 | Upside: 17%
PL believes the recent NCLT order has absolved uncertainty risk surrounding the ZEEL-SONI merger which was in a limbo for around 2 years. The proposed merger is a win-win situation and will likely 1) result in material synergies (~6-8% largely on the revenue side) 2) drive growth, as a merged entity will have cash ammunition of ~US$1.7bn to fund digital ambitions and 3) reduce concerns surrounding board room decision risks. It believes this development is positive and warrants a re-rating. PL expects a sales CAGR of 9% over FY23-FY26E with EBITDA margin of 12.4%/18.1%/19.6% in FY24E/FY25E/FY26E, respectively.
Technical outlook and stock picks for Diwali by PL
The Nifty index currently is precariously placed with the overall bias maintained with a very cautious approach. The breach below the 19500 zone was very crucial with the trend and sentiment turning negative and currently with the 19200-19250 zone positioned as the important and crucial resistance zone, a decisive breach above is much needed to improve the bias to some extent.
PL has come out with select quality stocks as Diwali picks which on technical parameters are well placed indicating strength and look promising to yield good returns in the next one-year time frame. Here's what it says:
Ashok Leyland: The stock has overall maintained a strong trend on the weekly chart with a short erosion witnessed from the peak zone of 191 levels and has almost retraced 50% of the recent rally with the support zone lying at 160 levels of the significant 50EMA zone. The RSI also has gradually cooled off from the overbought zone and is currently well placed to anticipate consolidation and further improvement in the bias, it said. “With the chart looking good, we suggest buying the stock for an upside potential target of 210-255 levels keeping the stop loss at 147,” added PL.
BHEL: The stock has made an all-time high of 148 levels and thereafter with some correction has witnessed a decent erosion from the 133 zone and currently has arrived at the long-term trendline support zone of 113 levels where it has shown signs of bottoming out and improving the bias, according to PL.
“On the weekly chart, the bias has been maintained strong and with a slight correction witnessed, again has seen a pullback to improve the bias with the trend maintained intact, and further rise is anticipated in the coming days. With the chart looking attractive, we suggest buying and accumulating the stock for an upside potential target of 160-190 keeping the stop loss of 107 for the medium-term time frame investment purpose,” it said.
CDSL: “The stock, on the weekly chart, has overall turned the trend positive after the downward slide and very much strengthens the bias moving past the significant 100 period MA and indicating a breakout above the resistance barrier of 1430 zone to anticipate for further rise. With the RSI also well placed and showing strength, there is much upside potential visible from current levels we anticipate a further upward rise in the coming days. With the chart looking attractive, we suggest buying and accumulating this stock for upside targets of 1850 -2100 keeping the stop loss of 1300,” said PL.
Exide Industries: The stock on the weekly chart has indicated a strong uptrend since the last 5 months and recently with a short correction from the peak zone of 273 has cooled off to show signs of bottoming out near 240 levels. Almost a retracement of 38.20% is completed of the recent rally and with an indication of improvement visible in the weekly chart, one can anticipate for further rise in the coming months, advised PL.
“The RSI also has cooled off from the highly overbought zone and is well placed at an attractive level for another strong upward move. With the chart looking good, we suggest buying and accumulating the stock for an upside target of 300-340 levels keeping the stop loss of 225,” said PL.
L&T: The stock on the weekly chart, has given a strong bull run in the last one year and recently witnessed some profit booking from the peak zone of 3120 level and has slipped to some extent to take a breather. On the daily chart, it has shown signs of taking support near the significant 50EMA level of the 2890 zone with some consolidation seen and indicating a pullback to improve the bias. With the RSI also showing a trend reversal has signaled a buy with immense upside potential visible from current levels, said the brokerage. “We suggest buying and accumulating the stock for an upside target of 3500-4350 levels keeping the stop loss of 2700,” it added.
SRF: “The stock has maintained the long-term trendline support zone near 2000 levels on the weekly chart and currently has shown improvement in the bias with pullback witnessed and anticipated to carry on the positive move further ahead. A decisive move past the 2350 zone of the cluster of moving averages of 50EMA and 100 period MA on the weekly chart shall further strengthen the trend and can expect for strong upward move in the coming months. With the RSI also well placed and indicating a trend reversal to signal a buy, we suggest buying and accumulating the stock for an upside potential target of 2600-2950 keeping the stop loss near 2000 levels,” said PL.
Tata Motors: The weekly chart has indicated a strong bull run for the stock in the last 2-3 years and after every consolidation phase, has indicated a strong upward move to scale new heights. Recently after the decent rally, it has been consolidating for quite some time maintaining above the significant 50EMA zone, on the daily chart, with near-term support intact near 590 levels, the brokerage said.
“On the weekly chart, maintaining the support near the 550 zone of the important 50EMA level, once a decisive move past the 677 zone is established, shall trigger for fresh breakout anticipating further targets of 750 and 820 levels for the medium-term time frame. We suggest buying and accumulating for an upside potential target of 780-820 levels keeping the stop loss of 550,” it added.
Tata Power: “The stock has witnessed a decent rally in the last 5-6 months indicating a clear triangular breakout on the weekly chart thereafter strengthening the trend and recently with a short correction with 50% retracement of the recent rally has shown signs of taking support near the confluence of 50EMA and 100 period MA zone of 228-230 levels to make the chart look attractive. There is much upside potential from current levels and can anticipate for further rise in the coming months. We suggest buying and accumulating the stock for an upside potential target of 290 - 320 keeping the stop loss of 210,” said PL.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.
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