Stocks to buy: DevenChoksey lists TCS, Bajaj Finance, DCX Systems among 6 top picks for July; do you own any?

Stocks to buy: Experts recommend investing in quality stocks with reasonable valuation and healthy growth prospects. Wealth management firm DevenChoksey lists TCS, Bajaj Finance, Balaji Amines, DCX Systems, SBI Life Insurance, and Shree Cement as top picks for July.

Nishant Kumar
First Published10 Jul 2024, 02:02 PM IST
Stocks to buy: DevenChoksey lists TCS, Bajaj Finance, DCX Systems among 6 top picks for July; do you own any?
Stocks to buy: DevenChoksey lists TCS, Bajaj Finance, DCX Systems among 6 top picks for July; do you own any?(Pixabay)

Stocks to buy: Indian stock market benchmarks, the Sensex and the Nifty 50, declined over a per cent each in intraday trade on Wednesday, July 10, on profit booking across sectors.

Experts see this correction as healthy as concerns over premium valuations of the market have been mounting. At record high levels, the domestic market lacks fresh triggers to sustain the gains. The focus now is on the Budget and Q1 earnings of India Inc. Meanwhile, inflation prints in the US and India and speculations around interest rate trajectory will also keep the market busy.

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At this juncture, experts recommend betting on quality stocks with reasonable valuation and healthy growth prospects.

Wealth management firm DevenChoksey listed six stocks as the top picks for July. Take a look:

TCS | Previous close: 3,985.50 | Target price: 4,194 | Upside potential: 5%

The company is focusing on AI, new energy, supply chain, and talent. In recent times, it has seen strong deal wins. TCS bagged an order from BSNL worth $150 million to set up large data centres in the four regions of the country.

TCS and AWS have signed a strategic multi-year agreement to accelerate cloud transformation and offer customers access to GenAI solutions.

"Multi-year deal wins and strong TCV provide revenue visibility for coming quarters. TCS is at the forefront of engineering 5G and 6G communication stacks using open standards. Two state-of-the-art labs dedicated to future-ready communication infrastructure and interoperability have been established in Bengaluru and Gurugram. The company has established strategic partnerships in energy management to advance energy transition projects," said DevenChoksey.

"We expect net revenue and adjusted PAT to grow at a CAGR of 9 per cent and 12 per cent, respectively, over FY24-FY26E. We assign a P/E multiple of 26.6 times on FY26E EPS of 158.2 to arrive at a target price of 4,194 per share," said the wealth management firm.

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Bajaj Finance | Previous close: 7,068.05 | Target price: 8,000 | Upside potential: 13%

Product diversification and omnipresence strategy support the company's strong business momentum.

DevenChoksey observed that over the past 17 years, Bajaj Finance has had a 36 per cent CAGR growth in AUM and a 50 per cent CAGR in PAT. This growth has been driven by the company's successful geographic expansion, which has allowed it to tap into new markets and customer segments across India.

Bajaj Finance has been aggressively focusing on expanding its customer base by diversifying its products and geographical expansion.

"We assign a P/ABV (price to adjusted book value) multiple of 4.5 times on FY26E adjusted book value of 1,778 to arrive at a target price of 8,000 per share," said DevenChoksey.

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Balaji Amines | Previous close: 2,348.90 | Target price: 2,643 | Upside potential: 13%

DevenChoksey believes capacity expansion and sequential price recovery will drive the company's growth.

Recent progress includes the successful launch of N-Butyl Amines manufacturing at Unit 4, which increased the yearly production capacity to 15,000 metric tons.

"The stock is trading at PE multiples of 25.2 times and 19.6 times, based on FY25E and FY26E EPS, respectively. We expect the revenue to grow at 21.7 per cent CAGR and PAT to grow at 39.5 per cent CAGR over FY24-26E. We apply a PE multiple of 21.5 times to FY26E EPS and arrive at a target price of 2,643," said DevenChoksey.

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DCX Systems | Previous close: 420.30 | Target price: 519 | Upside potential: 23.5%

DCX Systems Ltd. is a leading Indian manufacturer of electronic sub-systems and cable harnesses for the aerospace and defence sectors.

DCX has successfully developed obstacle detection equipment for railways, completing product demos and qualification standards. With preparations in place for mass production pending government tenders, DCX's investment of approximately 210 crore in NIART will harness internal capabilities and ToT from ELTA for manufacturing. With India's substantial fleet of 14,000 locomotives and a significant 340,000 million allocated for technological upgrades by the government, DCX aims to seize this opportunity through NIART," said DevenChoksey.

"We expect revenue, PAT CAGR of 29.6 per cent and 45.5 per cent, respectively, over FY24 to FY26E. We maintain our multiple of 36 times P/E to FY26E EPS of 14.4 to arrive at a target price of 519/share," said the wealth management firm.

SBI Life Insurance Company | Previous close: 1,524.75 | Target price: 1,705 | Upside potential: 12%

DevenChoksey believes the company's product mix is well-poised to meet the industry opportunities led by its strong market positioning.

Its VNB margins may remain rangebound in the coming quarters.

"VNB margin stood at 28.1 per cent for FY24, a decline from 30.2 per cent in FY23, which remained the industry phenomenon. For the quarter, the fall in VNB margins was 332 bps YoY. The decline in the margins was primarily due to an increase in the share of the ULIP business compared to the previous year. However, the VNB margin will not see further impact despite the higher share of ULIPs due to the company’s efforts to improve protection and sub-par growth," said DevenChoksey.

"We continue to apply a 2.2 times P/EV on FY26E EVPS of 776.2 and a VNB multiple of 12.4 times to arrive at a weighted average target price of 1,705 per share for SBI Life (50:50 weights on the P-EV and appraisal value methodology)," DevenChoksey said.

Shree Cement | Previous close: 27,776.30 | Target price: 30,662 | Upside potential: 10%

Shree Cement is an India-based company that produces and sells cement and cement-related products. The company has also recently forayed into the ready-mix concrete business with a 100 crore capex in the pipeline for two years to enhance its premium product portfolio.

To improve margins, the company is pushing the adoption of green power and relying less on traditional sources of energy. Shree Cement intends to add 188 MW of green power generation capacity, out of which 148 MW is expected to be installed by FY25E.

"We expect net revenue and adjusted PAT to grow at a CAGR of 11.8 per cent and 14.2 per cent, respectively, over FY24-FY26E. We assign an EV/EBITDA multiple of 17.5 times on FY26E EBITDA to arrive at a target price of 30,662 per share," said DevenChoksey Research.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

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First Published:10 Jul 2024, 02:02 PM IST
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