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Fundamental picks: NHPC, PowerGrid among HDFC Securities' top bets

HDFC Securities has picked Action Construction Equipment Ltd, NHPC Ltd, and Power Grid Corporation of India Ltd, Symphony Ltd for investment (PTI)Premium
HDFC Securities has picked Action Construction Equipment Ltd, NHPC Ltd, and Power Grid Corporation of India Ltd, Symphony Ltd for investment (PTI)

Despite a positive performance throughout the day, stock market indices ended flat on Tuesday. Keeping in view the macro economic factors, market volatility HDFC Securities has picked Action Construction Equipment Ltd, NHPC Ltd, and Power Grid Corporation of India Ltd, Symphony Ltd for investment

After a promising performance in the opening session, stock market indices ended flat on Tuesday. The Sensex ended 37.08 points lower at 60,978.75, while the broader Nifty was flat at 18,118.30.

Auto and IT stocks were the top gainers of the day. Axis Bank, Dr. Reddy's laboratories, and Hindalco Industries were among the worst performers of the day. Whereas, Tata Motors, Maruti Suzuki, Bajaj Auto, and HCL Technologies earned the most on Nifty.

The market investors remained optimistic about the share market growth on the occasion of the Lunar New Year, and normalcy in China after the relaxation of COVID curbs.

Keeping in view the global scenario, market volatility, macroeconomic indicators, and performance of companies, HDFC Securities has picked 4 names as fundamental bets - Action Construction Equipment, NHPC, and Power Grid Corporation of India and Symphony - for the upcoming 2-3 quarters.

Action Construction Equipment

Recommendation: Buy in the band of Rs.332‐338 & add more on dips to Rs.298‐301.5 band | Target Price: Rs. 375 | CMP: 333.40

“We think the base case fair value of the stock is Rs.375 and the bull case fair value is Rs.403.4  over the next three quarters. Investors can buy the stock in the band of Rs.332‐338 and add more on dips to Rs.298‐301.5 band," says the brokerage house.

Action Construction Equipment Ltd is a key player in the field of manufacturing and marketing of cranes, construction equipment material handling, etc. It enjoys more than 65% of the market share in India's mobile and tower crane manufacturing business. The company has recently finalised the deal in the Defence sector and received an order from the government of Ghana. Company's diversified portfolio, recent launches, and focus on capital expenditure can be its key driver of growth.

Risks: Rise in input costs, high dependence on other sectors, competition from local and multi-national players, slow growth of the agriculture growth segment, etc.

NHPC

Recommendation: Buy in the Rs. 41.75 – 42.75 band and add on dips to Rs. 38 | Target Price: Rs. 46.35 | CMP: 43.50

“We think the base case fair value of the stock is Rs. 46.35 and the bull case fair value is Rs. 50.15 over the next two-three quarters. Investors can buy the stock in the band of Rs. 41.75 – 42.75 and add more on dips to 38," says HDFC securities.

The Mini Ratna category -1 PSU, NHPC Limited is India's largest hydro-power company. The company is involved in the whole process of hydro-power project development. Present in 13 states, the company contributes to 15% of the total installed hydroelectric capacity in India. The company can enjoy a long-term gains with the expansion of its hydro-power capacity. Its focus on renewable energy equipment, the government's positive stance on hydro-power electricity, strong creditworthiness of the company, are its major plus points.

Risks: Delay in execution of projects, counter party credit risk, and high relative tariff.

Power Grid Corporation of India

Recommendation: Buy in the band of 223-227 and add more on dips to 200-203 band | Target Price: 249 | CMP: 221

“We think the base case fair value of the stock is 249 and the bull case fair value is 270 over the next two–three quarters. Investors can buy the stock in the band of 223-227 and add more on dips to 200-203 band," states HDFC securities.

The "Maharatna", Power Grid Corporation of India Ltd is India's largest electric power transmission utility and it operates 86% of India's inter-regional transmission network.

Apart from its key focus in transmission, the company is also present in telecom and consultancy. In 2022, Power Grid Corporation of India owned and operated 1,73,790 circuit km (ckm) of electric transmission lines and 270 sub-stations with a total transformation capacity of 4,93,042 MVA.

Risks: Company's overdue receivables, project execution risk, private competition, inefficiency at the operational level, promoter risk, operational risk, etc.

Symphony

Recommendation: Buy in 947-963 band and add further on dips in 850-862 band | Target Price: Rs. 1057 | CMP: 957.85

“We think the base case fair value of the stock is 1057 and the bull case fair value of 1124. Investors can buy the in-stock 947-963 band and add more on dips in 850-862 band," said HDFC securities.

Formed in 1988, Symphony Limited has a forte in the air cooler business in India. The company tried to diversify its business by beginning consumer durable production (geysers, washing machines, etc). However, the company suffered huge losses and was on the verge of bankruptcy in 2002. Since then, Symphony kept its focus on air cooler production. Till now, the company has managed to maintain its profitability with the high brand recalling the value of its air coolers.

As India's average temperature is increasing every year, the rise in demand for air coolers can boost its sales in the long run. Being the market leader in the field of branded air coolers, Symphony can tap the rise in demand for branded coolers. High brand recall, strong global opportunities, and impressive return ratios are some of the factors supporting the company.

Risks: The company's focus on seasonal business, competition from the unorganised segment, and dependence on a single product.

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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