For the investors to bring the best out of the current market scenario, HDFC Securities has suggested Lumax Auto, Marksans Pharmaceuticals and Mishra Dhatu Nigam as its top 3 fundamental stock picks for the next two three quarters.
1. Lumax Auto Technologies
Recommendation: Buy in ₹262-267 band and add more on dips in ₹230-235 band | Target price: ₹290
With the falling international fuel price and rising sales of automobiles, sales of intermediate equipment and automotive parts will also ramp up in the future. Betting on the improving outlook of automobile demand, the company will enjoy an increased off-take for its products. LATL is one of the largest automobile ancillary manufacturers in India and has also added new models to its portfolio. The company is also aiming to expand its operations in EV parts manufacturing.
HDFC securities recommend investors buy company shares in ₹262- ₹267 band for a period of two to three quarters. The brokerage research firm asks to add more investment if the value of the shares enters the ₹230-235 band.The company shares have a bull case fair value of ₹312. HDFC Securities has predicted a gradual improvement of 12-13% in LATL’s EBITDA margins over the next 3-5 years. The company shares closed at ₹261.95 on BSE on Tuesday.
2. Marksans Pharmaceuticals
Recommendation: Buy on dips at ₹56-57 and add more on dips at ₹50 | Target price: ₹62.4
The Pharmaceutical industry remains a lucrative site for investors in the stock market. Since the arrival of the COVID pandemic, stocks of several pharma companies have been performing well. Marksans Pharmaceuticals focuses mainly on OTC medicines and soft gel products in the US and UK markets.
HDFC securities has recommended investors purchase Marksans shares when it enters the share price band of ₹56- ₹57 for the next two quarters. They can further invest in the company if its shares fall below ₹50. HDFC securities have predicted the bull case fair value of the company to be at ₹66.6.
Marksans Pharmaceuticals shares closed 1.17% lower at ₹59.15 on 29 November. The company shares have been performing well for the last one week.
There will be steady growth in the over-the-counter medicine segment with low price erosion. The company registered a CAGR of 13% over FY 2018-22. With its established subsidiaries network in the US, UK and Australia, Marksans earns 70% of its revenue from the OTC business. Present in more than fifty countries the company produces around 300+ generic products across ten therapeutic areas. It is also planning to expand business operations in regulated markets.
3. Mishra Dhatu Nigam
Recommendation: Buy in the ₹235-239 band and add more on dips to ₹211-215 band | Target price: ₹262
The government-owned Mishra Dhatu Nigam Ltd (MIDHANI) is the only Titanium producer in India. It manufactures an array of super-alloys, titanium, titanium alloys, special-purpose steels, controlled-expansion alloys, soft magnetic alloys, etc.
‘Investors could buy in the ₹235- 239 band and add more on dips to Rs. 211- 215 band. The base case fair value of the stock is ₹262 and the bull case fair value of the stock is ₹281 over the next 2 quarters. At the CMP of ₹237 the stock trades’ said HDFC securities in its statement.
The company shares closed 1.79% lower at ₹247 on 29 November. The company shares have been performing well for the past week.
In addition to that, the company also offers metallurgical testing, evaluation, and consultancy service. Its joint venture with National Aluminium Company Ltd , Utkarsha Aluminium Dhatu Nigam, will set up a mega aluminum production plant in Andhra Pradesh with a capacity of 60,000 tons per annum. MIDHANI receives orders from a wide range of sectors including defense, space, aeronautics,etc. The company reported a 348 % YoY rise in its export turnover for FY22 to ₹87 crore.
4. PDS
Recommendation: Buy in ₹345-362 band and add more on dips in ₹307-313 band | Target price: ₹383
PDS Limited (PDSL) is a design-led plug-and-play platform, providing customised manufacturing and sourcing solutions to the world's leading textile retailers and brands.
We believe that in the past years, the company has been able to build a strong foundation on which it can now capture several burgeoning opportunities. PDSL has an ambition to cross the USD 2.5 billion (~doubling from current levels) top line mark over next five years, powered by geographic expansion, operational excellence, strategic investments, collaborative partnerships and a high-margin, asset light business model.
We think the base case fair value of the stock is ₹383 (13x FY24E EPS) and the bull case fair value is ₹417 (14x FY24E EPS). Investors can buy the in stock ₹345-362 band (12x FY24E EPS) and add more on dips in ₹307-313 (10.5x FY24E EPS).
5. Devyani International
Recommendation: Buy in the band of ₹184-188 & add more on dips to ₹164-168 band | Target: ₹205
Devyani International Ltd (DIL) is the largest franchisee of Yum Brands in India. It is among the largest operators of quick service restaurants chain in India operating 1096 stores as of Sep 30, 2022. The company operates Yum's iconic brands KFC and Pizza Hut in India as well as in Nigeria and Nepal.
A strong recovery in the out-of-home consumption, rising traction for branded products, aggressive store expansion plans, value proposition through an innovated menu and widening delivery reach will help DIL’s revenues clock a CAGR of 36% over FY22-24E (~23% increase due to store count).
We think the base case fair value of the stock is ₹205 (28x FY24E EV/EBITDA) and the bull case fair value is ₹220 (30x FY24E EV/EBITDA) over the next two-three quarters. Investors can buy the stock in the band of ₹184-188 (26x FY24E EV/EBITDA) and add more on dips to ₹164-168 band (23x FY24E EV/EBITDA).
