Stocks to buy: CSB Bank, Subros among top fundamental stock picks by HDFC Securities
- The Sensex hit a fresh life-time high of 69,306.97, while the Nifty 50 jumped 120 points to scale a record high of 20,813. Broader markets supported the rally with the Nifty Midcap 100 index and Nifty Smallcap indices also trading at their high levels.
The Indian stock market extended its stellar rally and hit a record high on Tuesday on the back of strong domestic macroeconomic data and increased bets of interest rate cut in the US. Market also surged due the Bharatiya Janata Party’s (BJP) victory in three key state elections.
The Sensex hit a fresh life-time high of 69,306.97, while the Nifty 50 jumped 120 points to scale a record high of 20,813. Broader markets supported the rally with the Nifty Midcap 100 index and Nifty Smallcap indices also trading at their high levels.
HDFC Securities Retail Research has added two stocks in their fundamental picks that it believes can give decent returns in the time horizon of two to three quarters.
Subros | Buy | TP: ₹469
Subros is a leading thermal system manufacturer with the capability to manufacture compressors, condensers, hoses and tubes. For Subros, many new arrangements, technology improvement and technology upgrades have been in the pipeline. There is a significant success in its new business acquisition from its customer, business line of up to 2026 is almost complete, all new RFQs are either received or they are in progress or negotiation.
Based on that, it feels that it will have sustainable growth in future almost in double digit form, HDFC Securities said.
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The brokerage firm expects revenue and PAT of the company to grow at 10% and 48% CAGR FY23-FY26. EBITDA is expected to grow at 23% CAGR driven by savings due to higher localisation and EBITDA margins are expected to expand ~240 bps.
“We believe investors can buy the stock in the price band of ₹427-435 and add on dips to ₹377-385 band (17.5x Sep’25E EPS) for a base case fair value of ₹469 (21.5x Sep’25E EPS) and bull case fair value is ₹513 (23.5x Sep’25E EPS) in the next two quarters,” said the brokerage.
CSB Bank | Buy | TP: ₹417
CSB Bank reported healthy growth numbers in Q2FY24 with deposits growing 21 YoY, out of which CASA deposits grew 4% YoY. Gross advances rose by 27 YoY, out of which advances against Gold and Gold Jewelry rose by 32% YoY. Non-gold loans have started to grow healthily as well, HDFC Securities noted.
The bank has a strong provision coverage ratio of 91.75% including write offs. The asset quality of the bank has improved significantly over the last couple of years and the trend of strong recoveries and upgrades are expected to continue, it said.
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“We have envisaged 19% CAGR in its advances over FY23-25E, while its NII and PAT are expected to grow by 18% and 10% CAGR respectively over the same period. We believe that investors can buy CSB Bank in the band of ₹380-388 (1.52xFY25E ABV) and add more on dips in the band of ₹340-346 (1.35xFY25E ABV) for the base case fair value of ₹417 (1.65xFY25E ABV) and for the bull case fair value of ₹456 (1.8xFY25E ABV) over the next 2-3 quarters.
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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