RIL, HDFC Bank, SBI, Maruti among 19 high-conviction ideas for March by InCred Equities; check full list here
Brokerage firm InCred Equities lists 19 high-conviction stocks for March with 'add' recommendation on all. Clean Science, IndiGo, Tata Steel, SBI Cards are 'reduce' calls.
Brokerage firm InCred Equities has listed Reliance Industries (RIL), HDFC Bank, Maruti Suzuki, State Bank of India (SBI) and Tech Mahindra, among its 19 high-conviction ideas for March.
Ajanta Pharma, Ashok Leyland, Aurobindo Pharma, Bharat Electronics, Bharat Forge, Mahindra & Mahindra Finance, Shriram Finance and Thermax are also among its high-conviction ideas for March.
Overall, the brokerage firm has listed 19 stocks as its high-conviction ideas for the month with an 'add' recommendation on all of them.
On the other hand, Clean Science, InterGlobe Aviation (IndiGo), Tata Steel and SBI Cards and Payment Services are the four stocks on which the brokerage firm has a 'reduce' call.
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Ajanta Pharma | Recommendation: Add | Target price: ₹2,400
"We currently build in a relatively slower growth in the US in FY26 assuming higher price erosion. If current US dynamics prevail, in a bull case, there can be an upside to US numbers as well as margins. This can lead to a target price of ₹3,000 in the next two years at 30 times PE (price-to-earnings ratio)," said the brokerage firm.
Ashok Leyland | Recommendation: Add | Target price: ₹208
The brokerage firm has maintained an 'add' rating on the stock due to the sustainability of the commercial vehicle upcycle from the government’s infrastructure spending push, market share gains in recent quarters and easing ASP discounts in the industry.
Aurobindo Pharma | Recommendation: Add | Target price: ₹1,178
At 12.7 times FY26F earnings, Aurobindo Pharma’s valuation is reasonable. Strong earnings optionality from the MSD deal and margin upside should improve the valuation, said the brokerage firm.
Bharat Forge | Recommendation: Add | Target price: ₹1,366
As per the brokerage firm, the conclusion of final trials for artillery guns and the government’s thrust towards its ‘Make in India’ initiative could lead to a pick-up in orders. Improved order inflow in the defence segment and the traction gained in electric two-wheelers should reduce the consolidated profitability drag from these two segments.
The brokerage firm pointed out that the ramp-up of aluminium forgings operations in the coming quarters, supported by a good order book, should drive the profitability of overseas subsidiaries. Management plans to double sales in the next 3-4 years, driven by the industrial division, which can be margin-accretive and less capital-intensive.
Bharat Electronics (BEL) | Recommendation: Add | Target price: ₹235
At 36 times one-year forward EPS (earnings per share), BEL’s valuation is in line with our estimate. Strong order-booking in the next two to three quarters can further improve the valuation, said the brokerage firm.
Camlin Fine Sciences | Recommendation: Add | Target price: ₹300
"We are building in 3,000t of vanillin sales in FY24F, and consequently, the loss from catechol sales to decline to US$5m (versus $9.9m in FY23) and lead to an increase in gross profit by ₹3 billion," said InCred.
"In the recent past, the stock traded at nearly 20 times the current year’s earnings and we assign the same multiple i.e., 20 times FY24F EPS to arrive at our higher target price of ₹300 from ₹180 earlier," the brokerage firm added.
Container Corporation of India (Concor) | Recommendation: Add | Target price: ₹1,083
The brokerage firm expects the proportion of rail container cargo at the three ports (JNPT, Mundra and Pipavav or GPPV) to rise from 25 per cent (FY23) to 36 per cent (FY26F).
It finds Concor well-placed to benefit as 81 per cent of its FY23 originating EXIM cargo is from JNPT, Mundra and GPPV combined.
"We factor in sales, originating cargo and EBITDA growth at 51 per cent, 47 per cent and 61 per cent, respectively, over FY24F-26F," said the brokerage firm.
Cyient DLM | Recommendation: Add | Target price: ₹1,049
InCred expects Cyient DLM’s EBITDA margin to increase from 10.6 per cent in FY23 to 11.5 per cent in FY26F led by improvement in the product mix from Build-2-Print (B2P) to Build-2-Specification (B2S).
"Currently, the B2S share is nearly 5 per cent and the company expects an improvement in the share, which will aid in margin improvement. Consequently, an increase in capacity utilisation at the Hyderabad facility will also aid margins due to the playout of operating leverage," InCred said.
Data Patterns (India) | Recommendation: Add | Target price: ₹3,000
"In a bull-case scenario, we see the scope for higher sales from production contracts, driven by export opportunities, leading to higher revenue growth of over 50 per cent versus our current estimate of nearly 40 per cent, with a steady EBITDA margin of nearly 40 per cent. This can raise our FY25F/26F EPS estimates to ₹60/ ₹80, respectively, which are nearly 15 per cent above our current estimates," InCred said.
Globus Spirits | Recommendation: Add | Target price: ₹2,519
As per the brokerage firm, key business triggers to watch out for in the coming months are:
(i) Expansion in the gross profit margin due to a rise in selling prices of Indian Made Indian Liquor (IMIL) and softening broken rice and energy costs.
(ii) The stabilisation of its newly commissioned plant in Jharkhand.
(iii) The completion of expansion projects in Bihar and West Bengal.
(iv) Foray into new markets in the Indian Made Foreign Liquor (IMFL) segment.
(v) The launch of new products in the IMFL segment.
(vi) Benefits from the higher prices of maize ethanol.
HDFC Bank | Recommendation: Add | Target price: ₹2,000
The brokerage firm believes with the merger of HDFC nearing completion and new branches set up in semi-urban and rural areas, the next phase of growth will drive a rerating for HDFC Bank.
Mahindra & Mahindra Financial Services (MMFS) | Recommendation: Add | Target price: ₹370
The brokerage firm pointed out that with a well-capitalised balance sheet and the ability to raise money (amid a strong promoter background), MMFS is capable enough to participate in the rising credit demand momentum.
"We are factoring in nearly 22 per cent CAGR in AUM backed by nearly 18 per cent CAGR in disbursements over FY23-26F. We believe the margins have already bottomed out for the company (like many NBFCs) considering the repricing of new vehicle loans and a consistent rejig of its portfolio towards better-yield assets. We project steady margins in the range of nearly 7.5 per cent over FY23-25F," InCred said.
Maruti Suzuki | Recommendation: Add | Target price: ₹12,554
The brokerage firm pointed out that Maruti Suzuki has been in a 17-year ascending channel pattern on the monthly charts. The stock has been in consolidation since bouncing from the channel support in the year 2020.
"The stock has confirmed a five-year consolidation breakout on the monthly charts and has entered a fresh zone. This breakout can push the stock towards the ₹12,000 level in the coming months. The price is expected to get a strong thrust from the Relative Strength Index or RSI, once it gives a move above the 70 level, which will confirm a major breakout in the RSI as well," said InCred.
Reliance Industries (RIL) | Recommendation: Add | Target price: ₹3,369
The brokerage firm has upgraded RIL to an 'add' from a 'reduce'.
For the consolidated entity of RIL, InCred Equitie forecasts an EBITDA CAGR of 33 per cent over FY22-24F and a profit CAGR of 35 per cent. The earnings growth will be mainly delivered by the refining segment. Net debt reduction is an added advantage as the company will be able to get extra cash flow generated from refineries, the brokerage firm said.
Shriram Finance | Recommendation: Add | Target price: ₹2,800
The brokerage firm observed that better profitability and market share gains led by product availability increasing in Shriram Credit Union Finance or SCUF branches is a key positive. Also, better pricing of used vehicles due to phase II of BSVI norms implementation from Apr 2023 is positive.
Som Distilleries & Breweries | Recommendation: Add | Target price: ₹446
Som Distilleries and Breweries (SDBL) has secured the required permissions from the Karnataka liquor industry regulator, as it progresses towards ramping up capacity by nearly 67 per cent at its Karnataka plant. Faster market share gains in Karnataka are key positives, as per the brokerage firm.
State Bank of India (SBI) | Recommendation: Add | Target price: ₹800
Strong asset quality in personal loans and other retail loans, despite the headwinds in small-ticket unsecured personal loans, is the key positive. A lower CD ratio will support margins in an aggressive competition environment for deposit acquisition, said the brokerage firm.
Tech Mahindra | Recommendation: Add | Target price: ₹1,625
"Moderation in sub-contractor expenses (11.5 per cent of revenue in Q3FY24 versus average 15 per cent/15.6 per cent in FY23/FY22, respectively), heightened focus on higher-margin business and operational efficiency could surprise FY25F margin," said InCred.
Thermax | Recommendation: Add | Target price: ₹3,675
As per the brokerage firm, Thermax is a key beneficiary of the green shoots witnessed in private sector capex in multiple industries. The company has a healthy order book of ₹107 billion with a strong pipeline of small ticket-size orders from the cement, biomass, food and beverage, and sugar/distillery sectors.
"We expect higher return ratios in the solutions business, including in green utilities such as solar- and wind-based opex. Solar energy business and subsidiary Thermax Onsite Energy Solutions (TOESL) have good long-term profit potential with higher margin and return ratios. We expect its EBITDA margin to expand from 7.4 per cent in FY23 to 8.8 per cent in FY26F," said the brokerage firm.
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Disclaimer: The views and recommendations above are those of the broking firm, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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