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Business News/ Photos / Adani Ports, IndiGo, SBI and more: Kotak lists 8 top stocks to buy in December

Adani Ports, IndiGo, SBI and more: Kotak lists 8 top stocks to buy in December

Indian equities hit a record high in trade today on the back of the sweeping BJP victory in 3/5 states and have jumped 5.5% in November. The surge is supported by healthy GDP data, strong earnings, and robust foreign inflows. Brokerage house Kotak has listed 8 stocks to buy in December.

Adani Ports: The brokerage has a ‘buy’ recommendation on the Adani Group stock with a target price of  <span class='webrupee'>₹</span>940, implying an upside of 13.5%. Kotak noted that the firm's EBITDA (operating profit) grew 19% yoy, 4% ahead of its estimate. It pointed out that the firm's operating metrics are tracking ahead on guidance & leverage continues to decline. Kotak expects EPS to grow by 18.6% in FY25E & by 15.6% in FY26E. The stock is currently trading at 14.6x P/E FY26E earnings. Adani Ports is Kotak's top pick among infrastructure assets. The brokerage is also enthused by a cleaner balance sheet.

1/8Adani Ports: The brokerage has a ‘buy’ recommendation on the Adani Group stock with a target price of 940, implying an upside of 13.5%. Kotak noted that the firm's EBITDA (operating profit) grew 19% yoy, 4% ahead of its estimate. It pointed out that the firm's operating metrics are tracking ahead on guidance & leverage continues to decline. Kotak expects EPS to grow by 18.6% in FY25E & by 15.6% in FY26E. The stock is currently trading at 14.6x P/E FY26E earnings. Adani Ports is Kotak's top pick among infrastructure assets. The brokerage is also enthused by a cleaner balance sheet.

Indian Hotels: Kotak has initiated coverage with an ‘add’ rating on the Tata Group hotel stock with a target price of  <span class='webrupee'>₹</span>460, implying an upside of 8%. Indian Hotels is the largest hospitality player in India, with 192 operating hotels, said the brokerage, adding that it has diversified its earnings profile with increasing contribution from fees and other revenues. Its EBITDA is expected to grow at 25% CAGR over FY23-26E. The firm's premium valuations will factor in a superior return profile, and an aggressive growth path, further noted Kotak. Indian Hotels’ revenue will improve on the back of new keys and improving ARRs and operational cash flows remain strong, reflecting improved business performance, stated the brokerage. It expects earnings per share (EPS) of  <span class='webrupee'>₹</span>13.6 in FY25E and  <span class='webrupee'>₹</span>16.7 in FY26E. 

2/8Indian Hotels: Kotak has initiated coverage with an ‘add’ rating on the Tata Group hotel stock with a target price of 460, implying an upside of 8%. Indian Hotels is the largest hospitality player in India, with 192 operating hotels, said the brokerage, adding that it has diversified its earnings profile with increasing contribution from fees and other revenues. Its EBITDA is expected to grow at 25% CAGR over FY23-26E. The firm's premium valuations will factor in a superior return profile, and an aggressive growth path, further noted Kotak. Indian Hotels’ revenue will improve on the back of new keys and improving ARRs and operational cash flows remain strong, reflecting improved business performance, stated the brokerage. It expects earnings per share (EPS) of 13.6 in FY25E and 16.7 in FY26E. 

Infosys: The brokerage has a ‘buy’ call on this IT major with a target price of  <span class='webrupee'>₹</span>1,700, implying an upside of 17%. Kotak noted that the firm is well-poised to continue to benefit from large and mega-deal opportunities. It posted a record TCV despite another guidance cut, added Kotak, but warned that the underlying business volumes are still extremely weak. 

3/8Infosys: The brokerage has a ‘buy’ call on this IT major with a target price of 1,700, implying an upside of 17%. Kotak noted that the firm is well-poised to continue to benefit from large and mega-deal opportunities. It posted a record TCV despite another guidance cut, added Kotak, but warned that the underlying business volumes are still extremely weak. 

InterGlobe Aviation: The brokerage has a ‘buy’ call on this airline stock with a target price of  <span class='webrupee'>₹</span>3,300, implying an upside of over 20%. Kotak noted that yields are likely to be higher for longer, so capacity constraints will sustain for some time. Airlines have enhanced the pricing gap versus railways over the past three years, however, customers are not flocking away to lower-cost AC rail option. The brokerage expects earnings per share (EPS) of  <span class='webrupee'>₹</span>175.2 in FY25E and  <span class='webrupee'>₹</span>198.5 in FY26E. It retains a positive stance on IndiGo, noting upside risks to yields for FY25.

4/8InterGlobe Aviation: The brokerage has a ‘buy’ call on this airline stock with a target price of 3,300, implying an upside of over 20%. Kotak noted that yields are likely to be higher for longer, so capacity constraints will sustain for some time. Airlines have enhanced the pricing gap versus railways over the past three years, however, customers are not flocking away to lower-cost AC rail option. The brokerage expects earnings per share (EPS) of 175.2 in FY25E and 198.5 in FY26E. It retains a positive stance on IndiGo, noting upside risks to yields for FY25.

PI Industries: The brokerage has an ‘add’ recommendation on the stock with a target price of  <span class='webrupee'>₹</span>4,110, implying an upside of 8%. Kotak stated that PI reported a good quarter, bucking industry-wide weakness. Also, margins were stronger than expected due to improved product mix & scale benefits, it added. Management guidance possibly implies a relatively subdued growth outlook for H2FY24 but product concentration risk remains a key concern, cautioned the brokerage. Domestic business disappointed amid an erratic monsoon, it said. It also cut FY26E by 8% and tweaked our Sep 2024 FV to  <span class='webrupee'>₹</span>4,110 (30X 1YF P/E).  

5/8PI Industries: The brokerage has an ‘add’ recommendation on the stock with a target price of 4,110, implying an upside of 8%. Kotak stated that PI reported a good quarter, bucking industry-wide weakness. Also, margins were stronger than expected due to improved product mix & scale benefits, it added. Management guidance possibly implies a relatively subdued growth outlook for H2FY24 but product concentration risk remains a key concern, cautioned the brokerage. Domestic business disappointed amid an erratic monsoon, it said. It also cut FY26E by 8% and tweaked our Sep 2024 FV to 4,110 (30X 1YF P/E).  

State Bank of India: Kotak has a ‘buy’ call on India's largest public sector lender with a target price of  <span class='webrupee'>₹</span>725, implying an upside of almost 27%. As per the brokerage, the firm has a solid balance sheet and fewer pressure points. Further, it also has solid return ratios despite provisions for wage settlement, noted Kotak. SBI reported 8% YoY growth in earnings in Q2, loan growth was at 12% YoY and NIM was unchanged QoQ. The increase in the share of retail in the loan mix recently has been driven primarily by non-housing segments. RoA and RoE were at 1% and 16%, respectively, added Kotak. (REUTERS)

6/8State Bank of India: Kotak has a ‘buy’ call on India's largest public sector lender with a target price of 725, implying an upside of almost 27%. As per the brokerage, the firm has a solid balance sheet and fewer pressure points. Further, it also has solid return ratios despite provisions for wage settlement, noted Kotak. SBI reported 8% YoY growth in earnings in Q2, loan growth was at 12% YoY and NIM was unchanged QoQ. The increase in the share of retail in the loan mix recently has been driven primarily by non-housing segments. RoA and RoE were at 1% and 16%, respectively, added Kotak. (REUTERS)

Sun Pharma: Kotak has an ‘add’ rating on the pharma major with a target price of  <span class='webrupee'>₹</span>1,280, implying an upside of just 4%. In Q2, the firm posted a well-rounded performance and a healthy 9% operating beat. Kotak believes that new launches and specialties will drive US growth. It added that the firm's existing specialty portfolio is close to breakeven. US specialty business continued to do well; underlying trends remain strong. Kotak has factored in 14%/11% CAGRs in global specialty/overall sales, respectively, over FY23-26E. It also tweaked FY24-26E EPS by 0-2%. 

7/8Sun Pharma: Kotak has an ‘add’ rating on the pharma major with a target price of 1,280, implying an upside of just 4%. In Q2, the firm posted a well-rounded performance and a healthy 9% operating beat. Kotak believes that new launches and specialties will drive US growth. It added that the firm's existing specialty portfolio is close to breakeven. US specialty business continued to do well; underlying trends remain strong. Kotak has factored in 14%/11% CAGRs in global specialty/overall sales, respectively, over FY23-26E. It also tweaked FY24-26E EPS by 0-2%. 

Supreme Industries: The brokerage has an ‘add’ recommendation on the stock with a target price of  <span class='webrupee'>₹</span>4,780, implying an upside of 7%. SIL reported robust Q2FY24 performance led by 29%/12% yoy volume growth in the plastic piping and packaging segment, respectively, said the brokerage. Robust demand outlook from the government’s infrastructure program, real estate, etc. is positive for the stock, it added. Management expects 23% volume growth (vs 20%+ guided earlier). Kotak also upgraded its earnings estimates for FY24E-25E in the 2.5%-3% range. Robust volume in the piping business & strengthening of the product led to the re-rating of stock, noted Kotak.  (iStock)

8/8Supreme Industries: The brokerage has an ‘add’ recommendation on the stock with a target price of 4,780, implying an upside of 7%. SIL reported robust Q2FY24 performance led by 29%/12% yoy volume growth in the plastic piping and packaging segment, respectively, said the brokerage. Robust demand outlook from the government’s infrastructure program, real estate, etc. is positive for the stock, it added. Management expects 23% volume growth (vs 20%+ guided earlier). Kotak also upgraded its earnings estimates for FY24E-25E in the 2.5%-3% range. Robust volume in the piping business & strengthening of the product led to the re-rating of stock, noted Kotak.  (iStock)

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