India emerged as a shining star through Samvat 2078 and strengthened its position in the global economy. India stood strong amid many global headwinds – high inflation, rising interest rates, currency swings, geopolitical uncertainties, as well as the onslaught by foreign institutional investors (FIIs) selling their stake. Broking firms expect a similar trend in Samvat 2079 as well, and have now come up with their list of key themes and stock picks.
So, here are the top stocks as recommended by brokerage houses to brighten up your portfolio this Diwali.
SBI
SBI continues to strengthen its balance sheet and focuses on building a superior loan book. This has aided in a sustained turnaround in operating performance and will drive the return ratios higher.
“Among PSU Banks, SBI remains the best play on a gradual recovery in the Indian economy, with a healthy provision coverage ratio (PCR) at 75 per cent, Tier-I of 11.2 per cent, a strong liability franchise, and improved core operating profitability,” says the Motilal Oswal Brokerage Research Report.
Apollo Hospital
Apollo Hospital (APHS) is well-placed to deliver improved occupancy in healthcare services, partly supported by international patients and higher share of insurance-linked patients. According to the Motilal Oswal Brokerage Research Report, “enhanced offerings to patients through Apollo 24/7 platform and better footfalls in Apollo Health and Lifestyle (AHLL) network will aid growth.”
Voltas
A leader in the air conditioning and cooling technology segment, this company has a major influence in the Indian market, and it continues to focus on its ‘consumer-first’ approach. It has collaborated with Beko’s state-of-the-art R&D, and has patents and best-in-class technology, with a focus on Voltas Beko’s in-house manufacturing capabilities.
“We expect the growth momentum to regain, with revenue and PAT expected to clock 20 per cent and 27 per cent CAGR respectively, over FY22-FY24E, led by the improving revenue visibility and operating efficiency. Considering the decent earnings growth, higher volume, and improved business visibility over the medium-term, we have ‘BUY’ rating on the stock, with a target price of Rs 1,110,” writes Reliance Securities in its report.
PI Industries Ltd
PI industries Ltd. (PI) is the manufacturer and developer of complex chemical solutions in agri-sciences with an integrated approach. PI is India’s largest contract research and manufacturing services (CRAMS) company with patented products accounting for a major chunk of its revenue. The company operates through a strong infrastructure consisting of three formulation facilities. Export accounts for nearly 75 per cent of its topline, while domestic business contributes the rest.
“PI remains a leading agrochemical company with leading market share in certain crops, good monsoon, pick-up in demand, portfolio of specialised products, robust pipeline of new products, China+1 strategy, and strong CSM business outlook. Improved net assets turnover, and strong balance sheet is expected to help the company improve its performance going ahead. Thus, we recommend our investors to BUY the scrip with target of Rs. 3,740 from a 12 months’ investment perspective” writes Ashika in its research report.
Varun Beverages
Varun Beverages Limited is a part of RJ Corp Group. It is a key player in the domestic beverage industry and one of the largest franchisees of PepsiCo in the world (outside of the US). The company produces and distributes a wide range of carbonated soft drinks and non-carbonated beverages, including packaged drinking water under the trademarks owned by PepsiCo, Stokely-Van Camp, Tropicana Products and other affiliates.
According to Reliance Securities, higher volume growth is leading to a higher revenue, as the company is expanding into newer geographies (South and West India), where penetration potential is huge for the long term. The company’s new capacity in Bihar got exhausted in the first year itself against the management’s internal estimate of three years.
“Factoring much better than expected acceptance in new markets and network expansion, healthy volume growth, backed by new geographies post acquisition, new products, backward integration, margin expansion, huge penetration potential in new geographies and healthy return ratios, we have BUY rating on VBL with a 1-year Target Price of Rs 1,080,” writes Reliance Securities in its report.
Mahindra Lifespace
Mahindra Lifespace is a leading residential developer with strong presence in Mumbai and Pune, and is now expanding in Bengaluru. The management aims to grow its pre-sales by 2.5 times to Rs. 2,500 crore in FY25E by scaling up launches and project additions.
“Given the industry tailwinds and shift towards branded developers, Mahindra group is now gearing up to unlock the growth potential in its real estate vertical,” says the Motilal Oswal Brokerage Research Report.
Metro Brands
According to Motilal Oswal Brokerage Research Report “Metro Brands’ success lies in its excellent store economics, with two times store productivity versus Bata, and healthy profitability. A strong brand, healthy portfolio of in-house and third-party brands and an efficient demand-pull supply chain model ensures product freshness in stores”. It enjoys high return on invested capital (RoIC) of 20 per cent, led by efficient working capital, store economics and healthy growth outlook.
APL Apollo Tubes Ltd
According to Bonaza, the company is well placed to benefit from rising application of steel tubes.
“With rising application of structured steel tubes in construction projects, the share of structural steel tubes in India is expected to expand to 22.7 mt by 2030 (17 per cent CAGR over CY19-30E). We believe APL Apollo is well-placed to grab this massive growth opportunity given its pan-India presence, spare capacity (utilisation rate of 78 per cent), capacity expansion, and new innovative product launches,” Bonaza writes in its report.
United Spirits Ltd
United Spirits Ltd (USL) is the second-largest spirits company in the world by volume and is a subsidiary of Diageo plc., a global leader in alcohol and alcoholic beverages with an outstanding portfolio of brands across spirits, beer and wine categories.
Its recently-concluded strategic sale of 32 popular brands with focus on premium portfolio reflects USL’s strategy of accelerated profitable growth.
“USL has recently concluded the sale of 32 brands on slump sales basis to InBrew Beverages for consideration of Rs 828.5 crore. USL and InBrew have entered into a five-year franchise arrangement for 11 other brands. This step reflects continuous focus of USL towards premium and international brands, which is likely to drive margin expansion in medium- to long-term for USL,” SBI Securities writes in its report.
Mold-Tek Packaging Ltd
Mold-Tek Packaging Ltd (Mold-Tek) is among the leading rigid plastic packaging 100 per cent backward integrated companies in India. It is in the business of manufacturing injection-moulded containers for various industries, such as paints, lubricants, food, FMCG, and dairy, among others.
As of FY22, the company has 10 state-of-the-art manufacturing facilities spread across India, with a total installed capacity of 45,000 MT per annum. Mold-Tek has emerged as a complete packaging solutions provider with wide range of products and value added services.
According to an SBI Securities report, new, innovative, value added products, and favourable product mix will likely lead to increased profitability.
Mold-Tek has launched new innovative packaging products, such as
1] New pails for Diesel Exhaust Fluid (DEF);
2] Introduced new Q-pack containers in cashew packaging that gives a long shelf life than tins;
3] IML containers for sweet packs, restaurant packs, and online food delivery;
4] QR-coded IML packaging with complete traceability all across the supply chain. This brings the “Digital packaging” concept to India for the first time; and
5] Injection Blow-Moulded products (IBM) for pharma OTC sector (EBITDA/Kg is as high as Rs. 180-200 as compared to that of Rs. 30-40 for paints and lubes, Rs. 80-90 for food and FMCG, and Rs. 80-100 for ordinary IBM products). Some of these products will be the growth drivers for Mold-Tek over the next 2-3 years.
