ITD Cementation, EPL, and Bharat Electronics are stocks HDFC Securities advises investing in for the upcoming two to three quarters after the Sensex and Nifty gained close to 2% in September.
The Sensex and the Nifty, two market benchmarks, are up roughly 2% so far in September after each losing 2.5% in August. Although the mood appears to have slightly improved, the market faces several challenges in the near future.
Inflation risk still exists, interest rates are high, and central banks have indicated they still have room to hike rates. Furthermore, significant global economies like the US, China, and Europe are exhibiting indications of distress. All of this clouds the market's short-term outlook.
So what do you do? Avoid pursuing every stock. Select only high-quality stocks with solid fundamentals to wager on.
The following four equities are those HDFC Securities, a brokerage firm, advises investors to purchase now for the ensuing two to three quarters. These equities are appealing at this time due to their strong fundamentals. Look at this:
India-based ITD Cementation | Base case target price: 258.5; Bull case target price: 282
In the price range of 230 to 238 and 203 to 207, HDFC Securities advises purchasing this stock. Additional purchases should be made on price declines.
The brokerage firm made a point of pointing out that ITD Cementation is among the major gainers from the government's increased attention to infrastructure improvement projects for the railroads and the metro.
From a long-term standpoint, it bodes well that it is concentrating on margins and cash flow generation. Comparing ITD Cementation Limited to its competitor companies, the company has excellent financials and a robust balance sheet, which gives the business an advantage when it comes to competing for new, large projects.
"Over the course of the fiscal years FY23 and FY25, we anticipate that sales, EBITDA, and PAT will increase at a CAGR of 26%, 43%, and 65%, respectively. We adjust our earnings multiple, increasing it to 13.75 times for base case valuation and 15 times bull case multiple to the company's FY25 earnings, the brokerage firm stated, noting that the high quality of orders coming into the order book is offering a positive future outlook for sales.
EPL | Bull case target price is 242 | Base case target price is 226
In the price range of 203 to 210, HDFC Securities advises purchasing this stock, and adding more on price rebounds in the region of 182-189.
The brokerage company emphasised that EPL is a market leader who is poised to keep expanding its market share in a sector that is going through a structural change as a result of the launch of cutting-edge products.
Given their dedication to sustainability objectives, larger personal care firms are anticipated to swiftly adopt EPL's robust innovation pipeline and many sustainable solutions. The company's chances are improved by a consistent focus on building a presence in untapped markets and gaining a larger percentage of consumer spending, according to HDFC Securities.
The recovery of the margins should be further aided by raw material softening. Over the next few years, HDFC Securities anticipates sales and PAT CAGRs of 12% and 23%, respectively, and an increase in EBITDA margin of 286 bps.
According to HDFC Securities, return on equity (RoE) and return on capital employed (RoCE) will rise even further from 12.7 percent and 11.9 percent, respectively, in FY23 to 18.5 percent and 15.4 percent by FY25.
Bull case goal price: 163; Base case target price: 151; Bharat Electronics (BEL)
HDFC Securities advises purchasing this stock between 136 and 140 and adding more when it declines, between 121 and 125.
The brokerage company noted that rising defence capital spending is beginning to have a significant positive impact on BEL. Due to its dominant market position, track record, relationship with the armed forces, existing infrastructure and production facilities, strong R&D capabilities, and established infrastructure, the corporation has an advantage over its rivals.
The government's increasing capital budget allocations and sustained emphasis on implementing enabling reforms to boost India's potential to manufacture defence products at home while gradually reducing imports underpin BEL's pipeline of new orders, which is strong. According to HDFC Securities, the company is India's main domestic provider of defence electronics equipment for the country's armed forces and is crucial to the country's government.
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