Stocks to buy: Birlasoft, Ahluwalia Contracts among HDFC Securities’ top picks
The Indian stock market indices, Sensex and Nifty 50, were trading flat on Wednesday tracking weak cues from global peers.
The resilience of the Indian economy, improving macros and the ongoing September quarter corporate earnings are supporting the domestic market amid global geopolitical concerns.
Analysts believe market weakness can be used to buy high quality stocks, particularly in sectors like financials, automobiles and capital goods.
HDFC Securities have four fundamental stock picks for investors to buy at present prices and add on dips for a time horizon of two to three quarters.
Here are the fundamental picks by Retail Research, HDFC Securities.
Ahluwalia Contracts (India) | Buy | TP: ₹771
Ahluwalia Contracts continues to see robust order flow prospects in healthcare, data centres, industrial structures apart from government buildings. Competitive intensity remains elevated but the company remains very selective in bidding for projects.
Despite near term headwinds of high input costs, HDFC Securities expects Ahluwalia Contracts‘ margin to improve from FY24 with softening of commodity prices, a narrower gap of indices with input prices, slightly lesser competitive intensity and new projects bid at elevated input price assumption.
The company’s robust and diversified order book, strong bidding pipeline, timely execution could help to bring more orders going forward, HDFC Securities said.
“Investors can buy the stock in the ₹690-704 band and add more on dips to ₹615-629. We feel the Base case fair value of the stock is ₹771 and the Bull case fair value is ₹821 over the next two to three quarters,” said the brokerage.
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Birlasoft | Buy | TP: 560
The CK Birla Group company, Birlasoft’s growth prospects in digital and cloud infrastructure services, sharpened focus to build key business verticals through a micro-vertical strategy and a focused effort to scale up contribution from top-tier clients, provides revenue visibility for Birlasoft in the medium term, analysts said.
Q1FY24 saw a dip in new TCVs as some deals got rolled over to Q2. Birlasoft plans to give salary hikes starting September 1st, which may have a negative impact on margins in the short term, according to the brokerage firm.
HDFC Securities has a base case target price of ₹560 and the bull case target price is ₹597 per share over the next two to three quarters. It suggests investors can buy in the ₹505-520 band and add further on dips in the ₹446-456 band.
IIFL Securities | Buy | TP: ₹97
HDFC Securities remains bullish about the near to mid-term prospects of IIFL Securities owing to strong tailwinds across all capital market businesses.
“The stock is trading at a lower valuation as compared to its peers which we expect to narrow. We have envisaged 13% CAGR in topline and 18% in bottomline over FY23-FY25E,” the brokerage said.
It believes investors can buy the stock in the band of ₹88-90 and add on dips in ₹79-81 band for a base case fair value of ₹97 and bull case fair value of ₹108 over the next 2-3 quarters.
ZF Steering Gear (India) | Buy | TP: ₹845
HDFC Securities expects ZF Steering Gear (India)’s Revenue, EBITDA and PAT to grow at 12%, 22% and 39% CAGR over FY23-FY25, led by the improvement in demand scenario for CV and tractors.
“We expect EBITDA margin to expand by ~250 bps to ~15% and RoE to increase from ~6% in FY23 to ~10% by FY25E. We believe investors can buy the stock in the band of ₹768-784 and add on dips in the ₹695-710 band for a base case fair value of ₹845 and bull case fair value of ₹910 over the next 2-3 quarters,” the brokerage said.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 18 Oct 2023, 11:19 AM IST
