BackStock picks: Hindustan Aeronautics, NTPC - two PSU stocks that can give up to 22% upside; here's why
The benchmark BSE Sensex has risen over 10% in the last six months and around 7.6% year-to-date (YTD). Meanwhile, PSU stocks, or shares of public sector enterprises, have seen a decent upward trend backed by strong fundamentals.
PremiumThe Indian stock market indices, Sensex and Nifty 50, traded lower on Tuesday dragged by selling in auto, metals, banking and IT stocks amid weak global cues.
The benchmark BSE Sensex has risen over 10% in the last six months and around 7.6% year-to-date (YTD). Meanwhile, PSU stocks, or shares of public sector enterprises, have seen a decent upward trend backed by strong fundamentals.
The BSE PSU index has outperformed the frontline indices by a huge margin as the index has rallied 32% in the last six months and more than 25% YTD.
Here are two PSU stocks that analysts believe can give up to 17% to 22% upside on the back of strong fundamentals.
While brokerage firm Prabhudas Lilladher has initiated coverage on Hindustan Aeronautics (HAL), Anand Rathi Stock Broking has initiated coverage on NTPC with a ‘Buy’ rating.
Hindustan Aeronautics
Hindustan Aeronautics has a monopoly-like position in India’s defence aerospace sector. Along with this, the government’s push to procure indigenously designed & developed defence aircraft, the company is likely to be in a sweet spot to benefit from a long-term demand opportunity.
The company is involved in several major fighter jet projects (Tejas Mk2, AMCA, TEDBF) and helicopter projects (LUH, LCH, IMRH) which will replace the various outgoing fleets.
The company’s FY23 closing order book stood at around ₹818 billion. Manufacturing contracts account for ₹605 billion, including the landmark ₹457 billion order for 83 Tejas Mk 1As. There is also a highly visible ₹480 billion order pipeline for FY24.
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Prabhudas Lilladher has initiated coverage on Hindustan Aeronautics with a ‘Buy’ rating at a target price of ₹2,266 per share, implying an upside of over 17% from Friday’s closing price.
“HAL is a play on the growing strength & modernization of India’s air defence given its position as the primary supplier of India’s military aircraft, long-term sustainable demand opportunity, owing to the government’s push on procurement of indigenous defence aircraft, leap in HAL’s technological capabilities due to development of more advanced platforms, robust order book and improvement in profitability through scale and operating leverage," the brokerage firm said.
It estimates Revenue and Adjusted PAT CAGR of 11.0% and 14.2% over FY23-26E.
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NTPC
NTPC is India’s largest energy conglomerate diversified into the fields of consultancy, power trading, training of power professionals, rural electrification, ash utilization and coal mining.
The total installed capacity of the company is 73,024 MW (including JVs) own stations include 26 coal based, 7 gas based, 1 Hydro, 15 Solar and 1 Small hydro project. Under JVs and Subsidiaries, NTPC has 9 coal based, 4 gas based, 8 hydro based and 18 renewable energy projects.
By 2032, non-fossil fuel-based generation capacity shall make up nearly 50% of NTPC’s portfolio. As on March 31, 2023, the company has 17% of the total national capacity and contributes 25% of total power generation of India due to its focus on high efficiency.
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With the gradual increase in renewable and green energy share and the company being at the forefront in implementation of India’s key energy transition, analysts at domestic brokerage firm Anand Rathi believe the growth prospects are improving for the company and expect multiple re-rating due to higher green energy share aiding in increased ESG score.
Anand Rathi has initiated coverage on NTPC with a ‘Buy’ rating and a target price of ₹300 per share, implying an upside of more than 22% from Friday’s closing price.
NTPC share price has seen a sharp surge as the stock is up more than 27% in the last three months and up over 46% year-to-date (YTD).
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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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