Diwali Picks 2024: HDFC Securities believes bottom-up stock and sector specific opportunities will continue to reward nuanced investors in the coming year as well. The brokerage has constructed a portfolio of 10 stocks that offer compelling investment opportunities - two well established mega caps, and 4 each in mid cap and small cap category that are likely to offer relatively limited downside and superior upside potential.
Here's a look at them.
BANK OF INDIA
Price Target: Rs 132
BoI boasts a strong capital adequacy ratio, improved NIMs, and enhanced asset quality, evidenced by lower gross and net non-performing assets (GNPA & NNPA). Bank is trading at P/B 0.6x FY26E ABV, which is an attractive entry point. We expect the valuation to improve given improved financials and better outlook. We recommend investors to buy the stock in the Rs. 96-106 band for a target price of Rs. 132 (0.75x FY26E ABV) till next Diwali.
JK LAKSHMI CEMENT
Price Target: Rs 936
Capacity expansion to drive volume growth: The company’s volume growth is expected to show a healthy increase led by capacity expansion and a pick-up in demand in key markets.
We expect the cement demand to pick up pace by H2FY25. Taking into consideration the capacity expansion and strengthening operational performance, we expect the company to report a healthy performance in the coming years. We expect revenue/EBITDA/PAT to increase at a CAGR of 7.6%/15.7%/13.9% over FY24 to FY26E. We believe investors can buy the stock in Rs. 738-819 band (15x FY26E EPS) for a target of Rs 936 (18x FY26E EPS) till next Diwali.
JYOTHY LABS
Price target: Rs 600
Jyothy Labs has successfully undergone a substantial transformation from a promoter-driven, south-centric, singleproduct entity to a professionally managed, and multi-product company operating nationwide. As a result, the company’s revenue has grown at 12.7% CAGR between FY20-24. Margin expansion is being driven by better product mix and improving operating efficiencies. We expect Revenue/EBITDA/PAT CAGR of 12%/15%/17% between FY24-26E. We recommend a buy on Jyothy Labs in the band of Rs 480-533 for target price of Rs 600 (43.75x FY26E EPS) till next Diwali.
L&T FINANCE
Price target: Rs 219
L&T Finance over the years has been constantly reducing its dependence on the wholesale lending business by aggressively expanding its well diversified retail financing business. We envisage a 18% growth in advances over FY24-FY26. We believe the stock is available at reasonable valuations for a reason of possible asset quality hiccups in wholesale lending though the focus on this business has been falling. We recommend investors to buy the stock in the Rs 153-170 band for a target price of Rs. 219 (2.0x FY26 ABV) till next Diwali
NATIONAL ALUMINIUM COMPANY
Price target : Rs 270
We expect a firm and strengthened aluminum price outlook due to tightness in global supply and recovery in demand. Margins are expected to improve with ramp up of coal production at Utkal D and E mines. NALCO is one of the lowest cost producers of alumina globally and has integrated operations with an increase in alumina refinery capacity. The company is well positioned to benefit from the strong alumina prices. We expect revenue/EBITDA/PAT to increase at a CAGR of 9.7%/32.8%/29.2% over FY24 to FY26E. We believe investors can buy the stock in Rs. 198-220 band for a target of Rs. 270 (15x FY26E EPS) till next Diwali.
Navin Fluorine International
Price target: Rs 3,948
We expect 23.5% CAGR in revenue led by robust growth from CDMO and Specialty Chemical segment and healthy growth from HPP business over FY24-27E. Overall performance was weak in FY24 due to lower revenue from CDMO and HPP business. We estimate 750bps expansion in margin due to better product mix and scale up of Specialty Chemical business over the next three years. Strong revenue growth coupled with margin improvement could drive 35% CAGR in net profit over the same period. Company is focusing on acquiring customers, expanding its range of products, and increasing volume and efficiencies to drive operating leverage. Amid challenging environment, NFIL is focusing on growth in sales volumes and maximizing capacity utilization. Management remains confident of a recovery in EBITDA margin close to 25% levels by the end of FY25. We recommend buy on Navin Fluorine in the band of Rs. 3059-3396 for a target price of Rs. 3948 (40.5x FY26E EPS) till next Diwali.
NCC
Price target: Rs 363
The company has a well-diversified order book, robust execution capabilities, strong focus on debt reduction and improvement in working capital. Segment diversity across building, mining, railways, electrical, water & environment is one of the key differentiators at NCC. Company’s vast experience and proven execution capabilities can help leverage rising opportunities in the buildings, water infra, transportation, metros, defense and airports as the awarding momentum picks up. Positive tailwinds with Government’s focus on infrastructure development by various schemes will also aid the growth of the company. Given the all-time high order book, execution ramp-up, and robust balance sheet we expect NCC to capture healthy growth in the medium term. We expect Revenue/EBITDA/PAT to grow at CAGR of 16%/21%/39.6% over FY24-26E. Investors can buy the stock in the band of Rs 273-303 for a target of Rs. 363 (18x FY26E EPS) till next Diwali.
PNB HOUSING FINANCE
Price target: Rs 1160
Going forward, we have envisaged a 18% CAGR in its loan book over FY24-26E, while the NII is expected to grow at 16% and PAT at 15% over the same period. The RoA of the company is expected to improve to 2.2% by the end of FY26. We recommend investors to buy the stock in the Rs. 893-991 band for a target price of Rs. 1160 (1.7x FY26E ABV) till next Diwali.
RIL
Price target: Rs 3243
Given the large technological advancements and ambitious growth targets, Reliance’s Retail, Telecom, and new energy segments are poised to become the upcoming growth drivers over the next two to three years. The company aims to double its EBITDA in the next five years, powered by 5G opportunities, increased investments in AI/data centers, further expansion in Retail and the start of PV/battery facilities in New Energy. The company could report a consolidated revenue/EBITDA/PAT CAGR of approx. 19%/14%/16% over FY24-26E. Investors can buy in the Rs. 2447-2716 band for a target of Rs. 3243 (23.5x FY26E EPS) till next Diwali.
State Bank Of India
Price target: Rs 960
We believe SBIN is equipped to sustain growth, given its surplus liquidity (Rs. 3.7 trn) and a comfortable LDR (76.5%). We build in marginal NIM compression over FY24-26E on the back of a turn in the rate cycle during H2FY25. We recommend investors to buy in the Rs. 733-813 band with a target price of Rs. 960 (1.8x Mar-26 ABVPS).