HDFC Securities' six stock picks to earn between 20% and 29% by mid of 20215 min read . Updated: 28 Dec 2020, 02:33 PM IST
HDFC Securities top stock ideas to earn over 20% returns in next six months
As the year comes to an end, investors are curious to know which stocks will reap good returns in the next year. HDFC Securities Retail Research has filtered a handful of stock ideas for next two quarters. The brokerage believes these stocks may earn between 20% and 29% from their current market price in up to six months. Here are the six stock list includes, Spandana Sphoorty Financial, Dollar Industries, Healthcare Global Enterprises, DCB Bank, Coal India and Birla Corporation. Here's what the brokerage has to say about these stocks:
Spandana Sphoorty Financial
CMP: ₹720, Target Price: ₹928, buy at LTP and add on dips to ₹579-583 band
Spandana Sphoorty Financial (SSFL), the third largest NBFC-MFI in India has been in existence for 16+ years. It holds an AUM of ₹7,354 crore. It has strengthened its risk management process after every crisis and diversified geographically to reduce the impact thereof. As of Q2FY21 none of the states accounted for more than 18% of its portfolio and none of the districts contributed to more than 2% of the outstanding. Post the easing of lockdown all its branches became operational by May-end. It has provided for ~6% of its portfolio and with improving collection trends (Oct-20 absolute collections at 110%) might not be required to make significant provisions going forward. NPA levels are comfortable and capital raising in the last few years has led to a strong capital adequacy ratio of 45%.
CMP: ₹225, Target Price: ₹273, Buy at LTP and add on dips in the Rs.176-178 band
Dollar Industries is one of the leading, branded knitted wear manufacturer in India. . It has created a strong portfolio of brands (Dollar
Bigboss, Missy, Force NXT, Champion, Ultra Thermals, Force Go wear) which has presence across varied segments. Over the years it has transformed itself from a mass market brand (86% of revenues in 2006) to a house of brands focusing mainly on mid-market and premium segment which as on FY20 contributed 43% and 24% respectively of the overall branded B2C revenues.
Post the introduction of GST and Covid-19 pandemic,HDFC Securities Retail Research believe, low ticket sized branded knitted-wear as a category is all set to go through a structural shift. The brokerage expects the company to record a Revenue and PAT CAGR of 6% and 20% over FY20-23E. Higher PAT growth is likely to be mainly driven by cost rationalization measures and debt reduction.
Healthcare Global Enterprises
CMP: ₹165, Target Price: ₹198, buy in the Rs.155-161 band and add on dips to ₹136-140 band
Healthcare Global Enterprises (HCG) is the largest provider of cancer care in India. Aggressive expansion in the last few years and cap on cancer drug margins have hit financials (lower margins/RoCE, high debt) and stock price has corrected around 50% from its all-time high. Having doubled bed capacity over the last five years, the brokerage expects HCG’s capex phase to ease from FY21. "Large part of bed expansion is done and we expect incremental losses to be offset by earlier hospitals turning positive," says HDFC Securities.
In FY20, HCG launched oncology services in Bhavnagar, which has led to significant improvements in profitability. Further, multi-specialty center in Rajkot achieved break-even EBITDA in Q3FY20. In the past 36 months, HCG launched 7 new cancer care facilities across the country, reaching out to more cancer patients across metros as well as Tier-I & Tier-II cities.
CMP: ₹115, Target Price: ₹144, buy at LTP and add on dips to Rs.105-107 band
DCB Bank has managed to maintain healthy capitalisation, sustainable and calibrated growth in advances with continued focus on the SME segment, competitive NIMs, comfortable asset quality with stable management team. The company has strong capital adequacy, a comfortable liquidity position, a resilient operating model and increasing retail mix. The bank has created niche in mortgage financing (~40% of total advances) with emphasis on small ticket loans (ticket size ~3-3.5mn) to self-employed in Tier II-VI cities. Retail focus will help the Bank to deliver double digit growth in loan book from next fiscal.
CMP: ₹136, Target Price: ₹165, buy at LTP and add more on dips in ₹120-122 band
Coal India is the single largest producer of the coal in the world. Coal is at the forefront of the nation's energy march in meeting the fuel demand. In India, coal accounts for around 55% of the country's primary commercial energy and nearly 72% of the entire power generated in the country is coal based, which is a testimony to the importance of coal. "The focus on renewable and other clean form of energy sources remains a concern for the longer term, however we believe that those concerns are already factored in the current prices. Coal India has taken major initiatives to build matching logistics infrastructure to ensure evacuation of planned quantity of production," says HDFC Securities.
The stock has significantly underperformed the benchmark indices over the last few years on the back of multiple factors acting against the company. The brokerage believes most of the negatives are priced in and the extent of de-rating in the stock is not justified given its fundamentals. "We however do not have a very positive view on the stock for the long term but feel that there is tactical opportunity for the short term in the stock," says HDFC Securities.
CMP: ₹702, Target Price: ₹874, buy at LTP and add on dips to Rs.635-639 band
Birla Corp t has 4.2% of the market share in Indian cement industry. " We expect that Covid-19 led lockdown and slowdown in the economy could lead to subdued growth in volumes for Birla Corp for FY21 but benign raw material price and aggressive control on variable costs are likely to drive EBIDTA growth," says the brokerage.
The industry has a high dependence on real estate and infra sector which is expected to be impacted due to expected slowdown in the economy. Going forward, HDFC Sec expects, a gradual recovery in cement demand and volumes are likely to pick-up from H2FY21 onwards. In the case of Birla Corp, incremental volumes from the commencement of additional capacities will result in a lower decline in volumes compared to the industry. Also, on the demand side, key growth drivers are likely to be picked up in rural housing, Pradhan Mantri Awas Yojana (rural), Pradhan Mantri Gram Sadak Yojana and spending on key infrastructure projects.