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Business News/ Markets / Stock Markets/  Five fundamental stock picks for you to look at amid uncertain times
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Five fundamental stock picks for you to look at amid uncertain times

After a muted start, Sensex and Nifty traded higher on Tuesday. The experts suggest allocating funds to quality stocks given the headwinds. Experts have recommended Care Ratings, IRCON, Rail Vikas Nigam, Anup Engineering and Federal Bank for investment

Top stock brokerage firms have recommended five stocks for investment for next three four quartersPremium
Top stock brokerage firms have recommended five stocks for investment for next three four quarters

After ending on a bearish note on January 16, stock market indices traded higher on Tuesday supported by FMCG and IT stocks. Whereas bank and pharma stocks lagged behind. Looking at the macro headwinds, experts are predicting a mild to modest recession this year which could hit the market too and hence they suggest investing in quality stocks and fixed income products.

“I would suggest going a little overboard on fixed income securities as yields have become very attractive. Equity play should be done through staggering approach over a period of time, with long term play through equities always in mind," said Ujjwal Jain, founder & CEO of WealthDesk.

Based on the stock market trend and the current economic situation, top brokerage firms have suggested investors to invest in Care Ratings, IRCON International, Rail Vikas Nigam, and The Anup Engineering, Federal Bank.

Brokerage: HDFC Securities 

Care Ratings Ltd 

Recommendations: Buy in 635-650 band & add more on dips in 560-575 band| TP: 708| CMP: RS 621.55

“We believe investors can buy the stock in the band of 635-650 and add on dips in 560-575 band (14x Sep’24EEPS) for a base case fair value of 708 (17.5x Sep’24E EPS) and bull case fair value of 748 (18.5x Sep’24E EPS) over the next 2 quarters." stated the brokerage firm HDFC Securities.

CARE ratings enjoy the position of second largest credit rating agency in India after Crisil. Mandatory ratings of new products/borrowers by agencies like RBI, SEBI, etc, have brought new sources of income for credit rating agencies. Oligopolistic market structure, government focus on capex, higher scrutiny by banks, improving bank credit growth, and increased private participation in bond market can prove to be a positive game changer for CARE ratings in the long run.

Risks: Rate hikes by RBI, competition from new players, economic slowdown, low proportion of non rating business.

Brokerage: HDFC Securities 

IRCON INternational Ltd 

Recommendation: Buy in 62-64.25 and add more on dips to 54.25-56.25 band | TP: 70| CMP: 60.60

“We think the base case fair value of the stock is Rs.70 (9.5x FY24E EPS) and the bull case fair value is Rs.75.55 (10.25x FY24E EPS) over the next two-three quarters.Investors can buy the stock in the band of Rs.62-64.25 (8.55x FY24E EPS) and add more on dips to Rs.54.25-56.25 band (7.5x FY24E EPS)." suggests HDFC securities.

With a special expertise in infrastructure sectors like railways, highways, bridges, flyovers, etc, Ircon International Limited (IRCON is an integrated engineering and construction company.

The brokerage firm remains confident on the company based on its healthy order book, strong execution capabilities, robust order pipeline and stable EBITDA margins. In addition to this, easy availability of cheaper funds, strong clientele base, government’s thrust on infrastructure zone, are additional positive factors for the company.

Risks : Over dependence on Railways, competition from other players, rise in input cost and inflation, uncertainty of global projects can pose risk to company’s growth.

Brokerage: HDFC Securities

Rail Vikas Nigam Ltd 

Recommendation: Buy in 71-74 band and add on dips in 64-66 band | TP: 81 | CMP: 74.00

“We feel investors can buy the stock in 71-74 band and add further in 64-66 band for base case target of 81 (10x Sep’24E EPS) and bull case target of 86.5 (10.75x Sep’24E EPS) over the next 2-3 quarters.", says the brokerage firm.

Rail Vikas Nigam Ltd. (RVNL) has maintained a healthy balance sheet with its asset light business model. RVNL is a project executing agency working for and on behalf of MoR (Ministry of Railways) and has a strong order book visibility. The company has also finalised some strong orders with an order value of as much as 1,545 crore. The company is likely to get Navratna status and is aiming to expand to other countries. It is also expected to earn more from the National Rail Plan.

Risks: Company’s margins can be hampered due to the slow execution of its projects. In addition to this, competition from other players, over dependence on railways, pending clearance of land and forest acquisitions can be a challenge for the company.

Brokerage: HDFC Securities 

The Anup Engineering Ltd 

Recommendation: Buy in the band of 908-925 and add more on dips to 825-845 band | TP: 1021 | CMP: 971.75

“We think the base case fair value of the stock is 1021 and the bull case fair value is 1115 over the next two-three quarters. Investors can buy the stock in the band of 908-925 and add more on dips to 825-845 band ." says the brokerage firm.

The Anup Engineering Limited(AEL) has gained strength in manufacturing equipment production. The company mainly produces heat exchangers, pressure vessels, centrifuges, columns & towers and small reactors. The company has maintained its healthy operating margins and strong balance sheet.Its order book increased from 393 cr as of Mar 2022 to 536 cr in Sep 2022.

Risks: The working capital intensive nature of the business can pose a threat on its growth trajectory. Delay in capacity expansion and volatility in raw material prices can also impact its profit margins.

Brokerage: Sharekhan by BNP Paribas

Federal Bank 

Recommendation: .e maintain our Buy rating on the stock | TP: 170 | CMP: 137.75

“We believe the bank is well poised to sustain RoA of 1.2-1.3% over the medium term. A few more quarters of steady performance can help justify a marginally lower cost of equity, thereby implying a re-rating of the stock." says the brokerage firm.

Sharekhan also states that the bank has a stable\ asset-quality outlook is stable for the sector. The company alcan attain a steady stock performance

Federal Bank reported PAT of Rs. 804 crore (up 54% y-o-y/14% q-o-q), led by strong operating profit growth of 39% y-o-y and a 7% decline in provisions. The bank reported strong return ratio of 1.3% RoA and 15.9% RoE, which is currently at its 8-year high.

Risks: Economic slowdown due to which slower loan growth and higher-than-anticipated credit cost; slower growth in retail liability; and lower margins than expected.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 17 Jan 2023, 03:00 PM IST
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