The US Fed minutes were distinctly hawkish with the message that “restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2%". In spite of this hawkish minutes the US markets closed in the positive territory because the markets expect a soft landing for the US economy.
In India, the near-term challenge to the market comes from the sustained selling by FIIs who sold ₹2,620 crores equity in the cash market on January 4.
“Favoured view expects renewed bargain hunting from the 18000 vicinity, but we would wait for a breach of 18150 to confirm strength. Alternatively, direct fall below 17960 will allow bears to continue dominance with nearest support seen at 17670," said Anand James - Chief Market Strategist at Geojit Financial Services.
Also read: Why Bajaj Finance shares today tanked ₹500 in a single day
Amid the global uncertainty around economic growth/slowdown in 2023 and the challenging environment in terms of rate hikes, brokerages have picked a few names that still look attractive in the current market:
Brokerage: HDFC Securities
Gujarat Themis Biosyn
LTP: ₹773.85 | Target: ₹852 | Recommendation: Buy in the band of ₹774-787 & add more on declines at ₹682
We expect the company to benefit from ramp up of new products post large capital expenditure. Management aims to start revenue from export markets mostly from FY25E. It has identified new products, for both the markets. We estimate revenue, EBITDA, and PAT CAGR of 29%/28%/27% over FY22-25E. Operating margin is expected to remain at around 49-50% over the next 2-3 years. We feel investors can buy Gujarat Themis Biosyn in the band of ₹774-787 and add more on declines to ₹682 (12x Sep-24E EPS) for base case target of ₹852 (15x Sep-24E EPS) and bull case target of ₹909 (16x Sep-24E EPS) over the next 2-3 quarters.
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Ahluwalia Contracts (India)
LTP: Rs. 476 | Target: Rs. 525 | Recommendation: Buy in the Rs. 471-481 band & add more on dips to Rs. 425- 433 band
Ahluwalia Contracts (ACIL) continues to see robust prospects in healthcare, data centers, industrial structures apart from government buildings. Competitive intensity remains elevated and ACIL remains very selective in bidding for projects. While there are near term headwinds of high input costs, ACIL expects to report 15% revenue growth and margins in the range of 11%-12% moving ahead.
The promoter family remains closely involved in the business with well-defined responsibilities and clear understanding of future roles. ACIL’s robust and diversified order book, strong bidding pipeline, timely execution could help to bring more orders going forward.
We feel the Base case fair value of the stock is ₹525 (12.25x Sept 24E EPS) and the Bull case fair value is ₹557 (13x Sept 24E EPS) over the next two quarters. At the CMP of ₹476 the stock trades at 11.1x Sept 24E EPS.
Chennai Petroleum Corporation
LTP: Rs. 207 | Target: Rs. 230 | Buy in the Rs. 205-209 band & add more on dips to Rs. 180-184 band
Chennai Petroleum is largest refinery in south India with a total installed capacity of 10.5 MTPA. Considering the strategic importance of Chennai Petroleum (CPCL’s) refinery in the southern India, expansion plan and strong promoter back ground, we believe the financial performance could improve in the medium term. Singapore GRMs have improved in November/December after falling sharply between July and November 2022. CPCL’s ongoing enhancement projects and expectation of sustained bounce back in GRM could lead to strong earning visibility and RoE improvement going forward.
Refining fundamentals remain robust. CPCL’s Average Gross Refining Margin (GRM) in H1FY23 stood at US$ 14.58 per bbl vs. US$ 5.75 per bbl in H1FY22 and GRM was at US$ 4.44 per bbl in Q2FY23 vs. US$ 5.83 per bbl in Q2FY22. We expect that GRM could be flat to slightly up QoQ in Q3FY23.
Base case fair value of the stock is ₹230 (4.75x FY24E EPS) and the bull case fair value of the stock is ₹254 (5.25x FY24E EPS) over the next 2 quarters. At the CMP of ₹207 the stock trades at 4.3x FY24E EPS.
Brokerage: Sharekhan by BNP Paribas
MOIL
Recommendation: Buy | CMP: Rs. 170 | Price Target: Rs. 205
We have increased our FY23-24 earnings estimate to factor higher volume/margin assumption and have also introduced our FY25 earnings estimate in this report. The stock is attractively valued at 3.2x/2.5x its FY2024E/FY2025E EV/EBITDA, considering expectation of earnings recovery and healthy dividend yield of 3-4%. Hence, we maintain a Buy rating on MOIL with an increased PT of Rs. 205 (revision in PT reflects increase in FY24 earnings estimate).
Key Risks: Lower steel output amid recent policy changes could affect manganese ore demand. Lower-than-expected manganese ore prices could affect the company’s profitability and our view on the stock.
Federal Bank
Recommendation: Buy | CMP: ₹138 | Price Target: ₹165
At the CMP, the stock currently trades at 1.3x/1.2x/1.0x its FY2023E/FY2024E/FY2025E BV. Factors such as focus to build better digital capabilities, sustaining healthy loan growth outlook, stable asset quality with higher-rated corporate book, and continued focus to increase its retail mix with higher-yielding businesses such as commercial vehicles, credit cards, and micro credit are expected to augur well for the bank’s growth going ahead.
Asset quality should remain stable due to the benign credit cycle. Focus on growing assets and liabilities in a granular manner along with an improved return ratio augur well for the bank going ahead. We believe now consistent steady performance could drive re-rating in the stock. Potential value unlocking in Fed Fina (NBFC subsidiary) via an IPO could be an additional catalyst for the stock.
Key Risks: Economic slowdown leading to slower loan growth and higher-than-anticipated credit cost.
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.
