Stocks ideas for 2024: HDFC Bank, DLF, L&T, IndusInd Bank, Wonderla Holidays shares among Sharekhan’s top picks

Brokerage Sharekhan in a strategy note said valuations in certain pockets are stretched, as reflected in the micro-cap rally and the euphoria in primary issues including the SME segment. The brokerage said Nifty trades at 23.4 times the trailing 12-month price-earning (PE), which is neither cheap nor expensive, especially given the expected earnings growth of 12-14 per cent CAGR over the next two years.

For 2024, this brokerage prefers increasing exposure to large-caps and value stocks at reasonable prices. It sees better times for pharmaceutical sector, two-wheeler makers and IT firms. It also likes multi-year investment themes such as capex (engineering, Infra and real estate), Capital (banks, financial services) and consumer. The brokerage has recommended 12 stocks for 2024. Here’s what it said on some of the stocks:

DLF Ltd

DLF Ltd is expected to report healthy sales bookings led by a strong launch pipeline for the next two years, which is expected to sustain, given healthy demand momentum with a possible peaking out of interest rates. Its rental portfolio is gradually witnessing higher physical occupancies while focusing on doubling its retail portfolio over the next 4-5 years.

"Robust absorption of ultra-luxury residential projects and limited inventory has led to sharp price uptick in prices which is expected to benefit DLF which has more than 50 per cent exposure in its available inventory (Rs 4,244 crore) and planned projects (Rs. 19,710 crore)," Sharekhan said.

Besides, it said DLF is expected to benefit from strong residential demand in its key NCR market especially in the ultra-luxury segment with price appreciation tailwinds.

HDFC Bank Ltd

Sharekhan said the structural drivers are in place with strong execution capabilities. The bank is confident of keeping long-term profitability metrics (1.9-2.1 per cent ROA) with high teen growth, it said adding that HDFC Bank is on track on the retail deposit mobilisation front.

Sharekhan said net interest margin for HDFC Bank has bottomed out and that it should improve gradually as high-cost wholesale funding gets replaced with retail funding (CASA & retail deposits) and improving loan mix towards other retail high yielding segments.

"Valuations are reasonable and have priced in all the barring factors that could weigh down the earnings trajectory of the merged entity. The probability of further de rating is very bleak. We maintain Buy rating with an target price of Rs 1,900," it said.

IndusInd Bank Ltd

IndusInd Bank shares have seen re-rating and Sharekhan expects a further re-rating given a sustained earnings progression and strengthening of liability franchise. The IndusInd bank is likely to outpace the sector in terms of earnings growth, led by stable margins, strong loan growth visibilityand further improvement in credit costs, SHarekhan said

"This should keep RoEs at 15 per cent in the near to medium term. "Key focus is on strengthening franchise and delivering sustained healthy RoA/RoE trajectory with lower RWA growth. We have a buy rating with a target of Rs 1,850," Sharekhan said.

Larsen & Toubro Ltd

Larsen & Toubro Ltd (L&T) has an order book of Rs 4.5 lakh crore, which suggested a 2.4 times trailing 12-month consolidated revenues as of September quarter. The strong order inflows and lifetime higher order book provide healthy revenue visibility over the next two years, Sharekhan said.

"Order prospects in domestic and international markets remain strong at Rs. 8.8 lakh crore in the near term. The management retained order inflow and revenue growth guidance of 10-12 per cent YoY and 12-15 per cent YoY for FY2024, while being reasonably confident of surpassing it on the back of strong H1," Sharekhan said. It said L&T sees ample opportunities in the middle east region in hydrocarbon and renewables. The capex is large in this region and therefore, all players would get a fair share of the pie. Besides, the company expects Rs 19,000-20,000 crore of orders to be awarded in the defence segment in the near to medium term.

"L&T remains at the forefront to reap benefits from the AtmaNirbhar Bharat scheme with its diversified businesses across sectors such as defence, infrastructure, heavy engineering and IT and is the best proxy for domestic capex," Sharekhan said.

Lupin Ltd

Lupin received an Establishment Inspection Report (EIR) for the Pithampur Unit-2 in July 2023, post which it intends to launch 4-5 ophthalmic products from that unit. Recently, Lupin received approval from the USFDA for loteprednol Etabonate Ophthalmic Suspension, 0.2 per cent where it does not face competition.

Its wholly-owned subsidiary Lupin Atlantis Holdings recently acquired Sanofi’s products like AARANE and NALCROM for European and Canadian markets, respectively to focus on its respiratory portfolio. Besides, Lupin recently launched gSpiriva which is gaining momentum. Though USFDA has not given an exclusivity right, Sharekhan believes Lupin will not face competition until FY26E as only two players have filed for the product.

"We factor in gSpiriva’s sales of $100 million in FY26E, which brings Lupin’s US FY26 sales to $1 billion, Ebitda margin to a five-year high of 21 per cent and raises EPS by 11 per cent to Rs 60 per share. As the company’s margin profile is expected to increase in-line with its peers, we upgrade to BUY with a revised target of Rs 1,500," Sharekhan said.

Bank of India

The Bank of India shares continued to outperform, given a strong asset quality outlook which should boost return on asset closer to 1 per cent, Sharekhan said. RoA in H2FY2024 is expected to reach 1 per cent and sustain going ahead in near to medium term, it said.

"Strong sector tailwinds are supporting the overall performance. Loan growth momentum is also expected to be healthy led by resurgence in MSMEs and corporate credit growth going ahead, while the retail segment continues to perform well. The bank has been guiding that quality of loans sanctioned/disbursed in post-COVID times is far superior with very low delinquency. Thus, lower slippages trends is likely to sustain and narrow the perceived gap in underwriting with respect to peers," it said.

Sharekhan believes valuations are expected to inch higher as the return ratio improves in the coming quarters on the back of healthy loan growth, stable margins and lower credit cost. It has a target of Rs 120 on the banking stock.

Wonderla Holidays Ltd

Wonderla Holidays has three amusement parks in Kochi, Bengaluru, and Hyderabad. It owns a resort near its Bengaluru Park. The company is setting up new parks in Odisha and Chennai with a capex of Rs 400 crore. A change in focus to attract more walk-in visitors through marketing activities, arranging of special events twice a month and addition of new attractions have aided in a sharp rise in footfalls. New parks will incrementally add footfalls from FY2025-26, Sharekhan said.

"Wonderla Holidays is focusing on an asset-light model to enter new markets by signing lease-land agreement with various state governments. This will help WHL to generate high cash flows, which will be utilised to add attractions in new and existing parks. WHL is in talks with states such as Punjab, Gujarat, Madhya Pradesh and Uttar Pradesh to set-up new parks. Attractive valuations, a sturdy balance sheet despite a huge capex and double-digit earnings visibility makes Wonderla Holidays a comfortable play in discretionary space," it said.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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