Stocks to buy: Mahanagar Gas, Va Tech Wabag, Aditya Birla Sun Life, among six fundamental stock picks by HDFC Securities

The Indian stock market traded higher on Wednesday led by gains in auto, realty, energy and financial stocks amid mixed global market cues. The upside momentum was supported by broader markets as the midcap and smallcap indices also traded over half a percent higher each.

HDFC Securities’ Retail Research has added six stocks to its list of Fundamental Picks as it expects these stocks to deliver decent upside.

The brokerage recommends investors to buy these stocks and add on dips for a time horizon of 2-3 quarters. These stocks to buy include Mahanagar Gas, Ahluwalia Contracts (India), Va Tech Wabag, Aditya Birla Sun Life AMC, FDC and Crisil.

Mahanagar Gas 

HDFC Securities believes the valuations of Mahanagar Gas are compelling, given superior return ratios among the city gas distribution players. With easing LNG prices and the pricing power of the company, margins are likely to normalise going forward.

Investors can buy in the band of ₹1,326-1,354 and add further on dips in the ₹1,194-1,218 band. The base case fair value of the stock is ₹1,485 and the bull case fair value of the stock is ₹1,577 over the next two to three quarters, said the brokerage firm.

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Ahluwalia Contracts (India) Ltd.

Ahluwalia Contracts continues to see robust order flow prospects in healthcare, data centres, and industrial structures apart from government buildings. Competitive intensity remains elevated but Ahluwalia Contracts remains very selective in bidding for projects. Despite near-term headwinds of high input costs, margin is expected to improve from FY24E with softening of commodity prices, a narrower gap of indices with input prices, slightly lesser competitive intensity and new projects bid at elevated input price assumption, HDFC Securities said.

Ahluwalia Contracts’ robust and diversified order book, strong bidding pipeline, timely execution could help to bring more orders going forward, it added.

The brokerage suggests investors can buy the stock in the ₹1,124-1,148 band and add more on dips to ₹1,013-1,033. It feels the base case fair value of the stock is ₹1,254 and the bull case fair value is ₹1,353 over the next two to three quarters.

Va Tech Wabag

Aided by a strong long-term outlook due to the expectation of order inflows and revenue growth in the upcoming years on better execution in the coming few quarters, the brokerage expects Va Tech Wabag’s revenue, EBITDA and PAT to grow at a CAGR of 9.5%, 19.1% and 10.8% over FY23–26E. 

According to HDFC Securities, the base case fair value of the stock is ₹798 and the bull case fair value is ₹861.5 over the next two-three quarters. Investors can buy the stock in the band of ₹723-738 and add more on dips to ₹647-660 band.

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Aditya Birla Sun Life AMC

The performance of the company has improved in recent quarters driven by enhanced operating leverage, buoyant equity markets and rising financial awareness. The management has shuffled roles giving more responsibilities to younger employees. We expect the company’s leadership in B-30 markets, new fund offerings in new segments, and focus on cross-selling to existing customers would provide tailwinds to growth and market share gains, HDFC Securities said.

It believes investors can buy the stock in ₹512-522 band and add on dips in ₹445-455 band for a base case fair value of ₹566 and bull case fair value of ₹609.

Crisil

The brokerage house expects Crisil’s Revenue and PAT to grow at 11% and 14% CAGR over CY23-CY25E, led by improving macros, market share gains, cost rationalization, and synergies from acquisitions. It believes investors can buy the stock in ₹4,900-5,000 band and add on dips in ₹4,400- 4,500 band for a base case fair value of ₹5,414 and bull case fair value of ₹5,821.

FDC

HDFC Securities estimates 11.7% CAGR in revenue led by 16.8% growth in exports business and 11% CAGR in India formulation business over FY23-26E. Strong revenue growth and improvement in gross margin could drive an 18.8% CAGR in net profit over the same period. 

Healthy growth in the domestic formulation business, better growth outlook in international business, robust balance sheet, strong return ratios, and buyback at regular intervals are some of the key positives for the company, said the brokerage firm. 

It feels investors can buy the stock in the band of ₹446-452 and add more on dips to ₹403.5 for a base case target of ₹491.5 and bull case target price of ₹529.5 over the next 2-3 quarters. 

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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 making any investment decisions.