Lupin, M&M to Tata Steel - Which stocks should you buy?

Indian equity indices bounced back today though by a small margin after four consecutive sessions of fall this week. Thousands of investors lost crores of rupees due to downward movement of stocks. Picking out the right stock in a volatile market such as this is not an easy task. However, information is wealth for the investors. Here are the brokerages' reports on five prospective stocks:

Lupin (BUY): 

Edelweiss said that the stock’s current valuation of 17.8x FY21E EPS – amid depressed earnings – offers an attractive entry point in its view. "A promising respiratory and biosimilar franchise may unlock value in the long run. We maintain ‘BUY/SP’ with a target price of Rs 900 (22x December 2020E earnings)."

Mahindra & Mahindra (BUY):
JM Financial said that slowing tractor growth and BS-VI transition pose near term challenges for the company. While near term challenges continue, valuation remains attractive. Pre-buy during 4QFY20 and successful BS-VI transition will be the key monitorables, the brokerage said. "Maintain BUY with a revised target price of INR725. Prolonged auto slowdown and weaker than anticipated monsoon are key risks."

Pidilite Industries (BUY): 
Edelweiss said Pidilite Industries’ (PIDI) Demand revival, entry in new markets/adjacent categories and anticipated demand shift from unorganised to organised players are envisaged to boost PIDI’s revenue and earnings. "As we roll forward we arrive at TP of INR1,486. At current market price, the stock is trading at 46x FY21E EPS. We maintain ‘BUY/SP’."

Tata Steel (BUY):
Tata Steel reported consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) of Rs 55.3 billion, higher than JM Financial's estimate of Rs 53.5 billion, driven by out-performance in Indian operations. Its consolidated net debt witnessed an increase from Rs 949 billion at the end of March 2019 to Rs 1,030 billion reported in June 2019, driven by the acquisition of Usha Martin steel assets and IND AS 116 impact. The brokerage downward revise FY20/FY21 EBITDA/tonne to Rs 12,000 for Tata India and $45 for Corus (refer exhibits 5-8). "Tata Steel remains our preferred play given reduced exposure to Corus as operations get India heavy, consistent profitability contribution from Bhushan Steel and stabilising debt profile (potential deleveraging). Maintain BUY."

HCL Technologies(BUY):
JM Financial said that it expects the strong recovery in the organic revenue growth and clarity on the accounting/financial impact of the  intellectual property (IP) acquisitions should help reverse the underperformance as against the Nifty IT Index in the recent period. "Maintain BUY with a revised target price of Rs 1,310 (INR 1,280 earlier)."