Diwali 2024, stocks to buy: Tata Power, TechM, NCC, PCBL shares among ICICIdirect's 7 Muhurat picks

Tata Power Company Ltd, Natco Pharma Ltd, Tech Mahindra Ltd, Sansera Engineering Ltd, NCC Ltd, HDFC AMC and PCBL Ltd are seven stocks that ICICIdirect said investors can buy in Muhurat trading this Diwali for up to 40 per cent returns in Samvat 2081. These stocks offer strong earnings growth visibility and stable cash flows, return on equity (RoE) and return on capital employed (RoCE).

"Indian equity, have faced some jitters in last 1 month, amid the heavy FII selling of close to Rs 1 lakh crore amid escalated geopolitical tensions and talks of incremental flows into China given the stimulus. Nonetheless, positive catalysts such as robust corporate earnings and favorable growth continue to present Indian equity as superior proposition in the global backdrop," ICICIdirect said.

Its target for Nifty stands at 27,500 with preference towards capital goods, private banks, and AMCs, and select auto stocks, IT and pharma sectors.

Sansera Engineering
Sansera Engineering is an auto component manufacturer of precision forged components (engine, non-engine) for end application in primarily auto domain. ICICIdirect said Sansera has seen a notable rise in revenues from international markets, with exports share in total revenue up from 22 per cent in FY23 to 25 per cent as of FY24.

"With fresh capital infused, new tie-ups in non-auto space including plans for new greenfield facility, we bake in 18.5 per cent revenue CAGR over FY24-27E. We have a positive view on Sansera and assign Buy rating on the stock with a target price of Rs 2,000 i.e. 28x PE on FY26-27 average EPS," it said.

PCBL Ltd
PCBL Ltd is the leading manufacturer of carbon black, which is used as a reinforcing material in tyres. PCBL also derives 11 per cent of sales volume from specialty carbon black, which finds application in paints and plastics.

PCBL’s management in the recent analyst meet outlined its vision wherein sales, Ebitda and PAT is expected to be 3 times, 4 times, 5 times, respectively over FY24-29E. RoE improvement is seen improving from 15 per cent (FY24) to 25 per cent (FY29E).

"We have positive view on PCBL and assign BUY rating amid profitable organic growth at its base carbon black business, turnaround in sight at Aquapharm and big opportunity in sight in Nano Silica. We expect Sales/PAT at PCBL to grow at a CAGR of 21 per cent/27 per cent over FY24-27. We value PCBL at Rs 600 i.e. 26 times P/E on FY26-27E avg. EPS," ICICIdirect said.

NCC
NCC is a construction company with presence across varied verticals such as buildings, roads, water, mining etc. Its standalone order book stands at Rs 47,625 crore, with 2.5 times trailing 12-month book to bill. The company’s topline growth guidance is at 15 per cent for FY25. Given the robust orderbook, ICICIdirect expects a healthy revenue CAGR of 15.6 per cent over FY24-27 to Rs 28,275 crore. Its Ebitda margin guidance is 9.5-10 per cent.

ICICIDirect is baking in Ebitda margins at 9.5 per cent in FY25 and 10.3 per cent FY26 against 9 per cent in FY24.

TechM
Tech Mahindra's new management has outlined a vision of Industry leading topline growth, improved EBIT margins of 15 per cent from 6.1 per cent in FY24, RoCE of over 30 per cent and suggested returning over 85 per cent of free cash flow via dividends & buybacks.

"We believe, the company’s dollar revenue will grow at CAGR of 6.7 per cent between FY24-27E, but operating profit growth is likely to outpace with EBIT margin improving from 6.1 per cent in FY24 to 14.5 per cent in FY27E, implying a CAGR of 43.6 per cent over FY24-27E," ICICIdirect said.

It values TechM at 25 times P/E on FY27E EPS and assigned a target price of Rs 2,000.

Tata Power
Tata Power is an integrated players in the energy landscape, with footprint in generation, renewables, transmission and distribution. The company is well on track to reach an installed capacity of 15 GW through a diverse mix of solar, wind and pumped hydro storage. Tata Power also has 13 per cent market share in existing rooftop market. ICICIdirect said India is revamping the policies to give a boost to solar rooftop segment with higher subsidy and 40 GW target over the next couple of years and expects Tata Power to benefit from this opportunity.

"We believe Tata Power as attractive opportunity to play the entire power value chain in India and coupled with the strong renewable capacity addition targets. We value it on SoTP basis and arrive at a fair value of Rs 530 per share," the brokerage said.

Natco Pharma
Natco has, developed a knack for manufacturing complex generic products with few competitors, especially for US market. Natco has enjoyed significant windfall since the launch of generic version of blockbuster global anti-cancer drug Revlimid in FY22. ICICIdirect said the company saw Rs 3,500 crore sales from generic Revlimid in FY22-FY24 and expects another Rs 5,000 crore sales in FY25 and FY26. As this opportunity is expected to wane significantly, Natco has already started focusing on the next potential blockbusters where the company intends to challenge the patent or launch the product with mutual understanding with the innovators, the brokerage said, as it suggests a target price of Rs 1,680 for the stock based on 18 times FY26 base business EPS of Rs 87.20 and Rs 110 NPV for gRevlimid.

HDFC AMC

HDFC AMC is among the largest and profitable mutual funds with an average AUM of Rs 7.68 lakh crore as on September 30. Its market share stood at 11.5 per cent. Improving equity mix, higher market share in robust SIP flows & superior efficiency are seen aiding HDFC AMC's profitability.

"Realignment of distribution structure is seen to limit pressure on yields. The stock remains a play on structural growth in Indian asset management domain with superior operational matrix. Considering relatively higher business growth without any b/s risk, we remain positive on the stock," ICICIdirect said.

The brokerage has assigned a target price of Rs 5,500 on HDFC AMC, valuing it at 37 times FY27 EPS.