Muhurat Picks: HDFC, Kotak and SBI Securities pick top stocks for bumper returns till next Diwali – check target price

Muhurat Picks: From financials to FMCG to Auto, domestic brokerages such as HDFC Securities, Kotak Securities, and SBI Securities have come out with reports on stocks to buy this Diwali for bumper returns up to 22 per cent on a long-term basis.

They have recommended the stocks on the basis of strong fundamentals and rich valuations, ranging from large cap to broader markets category.

Below is the list of 9 stocks picked by the domestic brokerages:

SBI Securities Top Muhurat Picks

ITC: Buy – Target: 405; Upside: 22%

Investment Rationale: ITC is a market leader in cigarette making with a dominant market share. The cigarette business contributes around 30% to the company’s gross revenues, it is the cash cow of the company and cash flow from this business is used to fund other businesses of the company.

Valuation: At the current price, ITC is trading at a compelling valuation with P/E multiple of 23.4x/21.1x FY23E/FY24E Bloomberg consensus earnings, offering favourable risk-reward ratio.

Bank of Baroda: Buy – Target: 405; Upside: 19%

Investment Rationale: Strong recovery in advances; healthy growth in net interest income and profit during the first quarter of the financial year 2022-23 (Q1FY23) as well as asset quality improving further; adequately capitalized are key triggers that are likely to help the shares of BoB to surge, going forward.

Valuation: At the current price, Bank of Baroda is trading at an inexpensive valuation of 0.8x/0.7x of its FY23E/FY24E book value respectively which looks attractive as compared to other leading PSU Banks.

United Spirits: Buy – Target: 987; Upside: 20%

Investment Rationale: Recently concluded strategic sale of 32 popular brands with focus on premium portfolio reflects United Spirit’s strategy of accelerated profitable growth. Healthy improvement in operating performance during FY16-FY22 period; and debt free balance sheet coupled with marked improvement in RoCE over last 7 years.

Valuation: At the current price, the stock is trading at a P/E of 54.5x/46.9x of its FY23E/FY24E Bloomberg consensus earnings.

Kotak Securities Top Muhurat Picks

Mahindra & Mahindra: Buy – Target: 1500; Upside: 22%

Investment Rationale: Given the strong order book on account of successful new launches, Kotak expect the automotive segment to deliver a strong performance in the coming quarters. The company expects to lead the EV (electric vehicle) revolution in India through the three strategic pillars of brand, design and technology.

Valuations: Attractive valuations and reasonable growth prospects drive our BUY rating.

Axis Bank: Buy – Target: 960; Upside: 22%

Investment Rationale: Axis Bank has adequate buffer to manage any unexpected shocks. The brokerage looks at Axis Bank as a franchise where further divergence in multiples between the frontline banks looks unlikely and hence, the downside risk to own at current levels is quite limited, in its view. It has converged on various operating metrics with its frontline peer

Valuations: We value the bank at 2.1X book and ~22X June 2024E EPS (due to charges for Citi) for Return on equity of ~15% in the medium term

Infosys: Buy – Target: 1750; Upside: 19%

Investment Rationale: Infosys will be at the forefront of driving the digital journey of clients. Low exposure to legacy services, solid digital credentials; ability to structure & win integrated/complex transformation deals are positives, which will power Infosys an industry-leading growth. It can also benefit from increased focus on cost takeout priorities by clients.

Valuation: We value the stock at 25x September 2024E EPS and increase target to Rs1,750 on rollover.

HDFC Securities Top Muhurat Picks

Bharat Electronics: Buy – Target: 123; Upside: 22%

Investment Rationale: Orders inflow is expected at Rs 18,000-20,000 crore in FY23E. It has formed many strategic alliances and partnerships with Defence laboratories, the Ordnance Factory Board, DPSUs, niche technology companies and reputed global OEMs and Indian companies for addressing the emerging Defence and Non-Defence businesses, including exports.

Valuations and Recommendations: We recommend investors to buy the stock at Rs 101 and add more on dips at R87 (22.0x FY24E EPS) for a target price of Rs 123 (31x FY24E EPS) till next Diwali.

Birla Corporation: Buy – Target: 1069; Upside: 19%

Investment Rationale: Birla Corp is committed to increasing its annual cement production capacity to approximately 30 million tons (mt) by 2030. It is also aiming to add more renewables in the power mix, with plans to add a total of 8 megawatts solar power capacity in FY23. It has 2 operational captive limestone mines in Madhya Pradesh and Rajasthan.

Valuations and Recommendations: We recommend investors to buy the stock at Rs 896 and add more on dips at R784 (6.3x EV/EBITDA FY24E, $63.9/T FY24E) for a target price of Rs 1069 (7.7x EV/EBITDA FY24E, $78.8/T FY24E) till next Diwali.

Deepak Fertiliser: Buy – Target: 1058; Upside: 18%

Investment Rationale: Deepak Fertilisers & Petrochemicals is the second-largest manufacturer of Nitric Acid in Southeast Asia and the largest in India; it is also a leading manufacturer and marketer of Iso Propyl Alcohol (IPA). The company serves sectors such as agriculture, pharma, mining, infra, and health, and hygiene. It plans to invest Rs 2,200 crore to set up a TAN complex in Odisha.

Valuations and Recommendations: We recommend investors to buy the stock at Rs 895 and add more on dips at R791 (10.5x FY24E EPS) for a target price of Rs 1058 (14x FY24E EPS) till next Diwali.