Nifty recovered sharply from the recent lows of 10,700 post the announcement on corporate tax cuts and brokerages are of the view that the overall trend for the markets remains positive with strong support zone placed at 11,200-11,000 levels on the downside.
The index would try to form a higher base and would likely witness consolidation before any trending move. The next leg of the bullish rally is likely to resume post 11,600-11,650 resistance break which would take the index higher towards the 12,500-13,000 levels, said Indiabulls Ventures.
Here are a few stock recommendations that can enlighten your stock portfolio this Diwali.
Aarti Industries | Target Price: Rs 875
Although the management has sharply lowered its growth guidance, the brokerage believes the same has been factored in the CMP. The multi-year contracts won by the company shall begin contributing from FY21E onwards which could offset the headwinds from Auto and Agrochem sectors in the near term. Pharma segment will take the drivers seat with sustainable margin profile of +20% over FY19-21E. AtCMP, stock trades at 18x its Sept21 EEPS. (Source: Axis Securities)
Dixon Technologies | Target Price: Rs 3,649
The brokerage expects strong growth in key segments viz, Consumer Electronics, Lighting and Home Appliances led by strong order book. Addition of new clients, recovery in mobile segment and robust growth in Security surveillance segment to aid revenue growth going forward. It maintains a buy with a target price of Rs 3,649. (Source: Axis Securities)
Dr. Reddy's Labs | Target Price: Rs 2,900
With gaining traction in domestic formulation, key high-value launches in the US market coupled with cost rationalization benefits will translate ~17% CAGR earnings growth over FY19-21E, Axis Securities said in a note. It is constructive on DRRD, given improving FCF generation and high earnings growth visibility. Regulatory hurdles, delay in US approvals of niche products (like gNuvaring and gCopaxone), and slowdown in domestic formulation business & other key markets remain major concerns. (Source: Axis Securities)
PVR | Target Price: Rs 2,050
PVR has constantly been focusing on screen expansion plans and innovation focus. Currently, there are ~9,650 cinema screens in India, of which only ~30% are multiplex screens, while the majority is still constituted by single screens. On account of the huge demand for multiplexes, the brokerage has a BUY rating on the stock. The stock is currently cheaply valued at 30x FY21 PE and the brokerage would like to assign a PE multiple of 35x on FY21E on an EPS of Rs 60.74 to arrive at a target price of Rs 2050 per share. (Source: Indiabulls Ventures)
Torrent Pharma | Target Price: Rs 340
The recent price move indicates a base building process with strong demand zone near rising support trendline which further validates the bullish structure and indicates limited downside from the current levels. The overall structure indicates limited downside from the current levels and hints for a new high in the long-term. (Source: Indiabulls Ventures)
Concor | Target Price: Rs 680
A four-year consolidation breakout has strong bullish implications especially when a preceding trend is strong on the upside. The pattern suggests the continuation of primary uptrend after a brief pause. Stock is likely to witness a multi-year uptrend going forward. (Source: Indiabulls Ventures)
Havells India | Target Price: Rs 795
Havells is strengthening its leadership by constantly expanding its product portfolio, increasing market reach and brand positioning. The brokerage believes Havells is best placed to leverage the opportunities in the FMEG space given the strong market share and distribution network. It expects the company performance to improve (vs Q1FY20) in the next few quarters led by festive demand. Moreover, Havells has strong balance sheet (low debt, low working capital), robust return ratios and healthy cash flows. The brokerage recommends a Buy with a target price of Rs 795.
Mahindra and Mahindra | Target Price: Rs 695
M&M has witnessed sharp correction in the last one year owing to cyclical downturn in the auto industry. Going forward, the brokerage expects the tractor industry to recover as normal monsoon, easing liquidity conditions and lower interest would aid domestic sentiments. M&M’s automotive segment is likely to witness challenges due to increase in competitive intensity and BS-VI implementation. Nonetheless, the brokerage believes that these concerns are largely factored in and the core business is available at attractive valuations. Further, recently announced JV (not priced in our estimates) with Ford India would help M&M in strengthening its product portfolio, improve operational efficiencies, and increase exports from India. It recommends a Buy on the stock, valuing the core business at 12x and arrive at a SOTP based target price of Rs 695.
Marico | Target Price: Rs 451
The Indian FMCG industry is the fourth largest sector in the economy, which is currently witnessing demand slowdown, thus we believe that in the near term sector would continue to face challenges. However, the sector is likely to revive going forward and grow steadily led by increasing demand from both rural and urban areas, changing consumer preference and emerging e-commerce space. With positive sector outlook, management remains confident on growing its revenue by ~13-15% YoY and volumes by ~8-10% YoY. Further, we believe the company would drive sustained profitable volume-led growth over the medium to long term, which would be driven by product mix, innovating new products, maintaining leadership position in key brands and by increasing promotion and advertisement spends.
Maruti Suzuki | Target Price: Rs 7,936
Maruti is better placed than peers in the PV space given its leadership position, strong product portfolio and wide distribution network. The firm is likely to be a key beneficiary of BS-VI transition (April-2020) due to its higher share of petrol vehicles and limited price increase in majority of its product portfolio. On the operational front, the brokerage expects margins to remain subdued in FY20E due to negative operating leverage but expect healthy recovery in FY21E. Factoring in a dismal show H1FY20 and a modest recovery in H2FY20, we estimate MSIL’s Revenue/EBITDA/PAT to grow at 4.9%/2.7%/8.5% over FY19-22E. The brokerage recommends a Buy on the stock with a target price of Rs 7,936.
Voltas | Target Price: Rs 780
Led by revival in consumption and capex cycle coupled with the company’s efforts towards brand building, enhanced product offerings and widening distribution reach, Voltas’ sales and PAT are estimated to grow by ~13% & 24% CAGR respectively over FY19-21E. The brokerage expects relatively better demand scenario for room AC and air coolers in the coming quarters, which will result in improved volume off-take in UCP. Despite intense competition, Voltas is well poised to sustain its leadership position in room ACs. Further, sales and profit growth in EMPS is expected to be healthy given better quality order book and efficient execution particularly on the domestic front.