Samvat 2078: Finance to Construction - SBI picks these 5 stocks for gains up to 27%

From finance to construction sectors, SBI Securities list out the 5 best stocks to Buy during Muhurat Trading 2021. The stocks that are picked on the back of strong fundamentals are Kotak Bank, Cholamandalam Investment, KNR Construction, Grasim Industries, and Sundaram Fastener.

The brokerage sees an upside of between 26-27 per cent on a long-term basis. Muhurat trading is considered to be an auspicious event for prosperity and growth, as believed in the Indian market, which opens for an hour or so on the day of Diwali (Laxmi Pooja).  

SBI Securities expect the stock market to continue its upward journey given the rising participation, low return on fixed income or FDs, rise in risk-taking abilities of Indian investors, rebound in GDP growth, fast vaccination, and opening of the economy.

1 Kotak Mahindra Bank: Buy – Target Price – Rs 2721/share (upside 27 per cent)  

The bank has a strong operating profit with the net spread of >350 basis points and enjoys excellent asset quality with gross non-performing asset of 3.2 per cent having a provision coverage ratio over 62 per cent and CASA (Current and Savings Account) at 60.2 per cent.

The stock is trading at 4.5x and 4x of its FY22e/FY23e book. We expect as the interest cycle starts its uptrend, the return ratios will further gain strength. The bank generates healthy NIM and RoA of 4.5 per cent and 2.2 per cent respectively.

 2 Cholamandalam Investment: Buy – Target Price – Rs 774/share (upside 26 per cent) 

The company has registered >14% CAGR in its three years AUM while on a YoY basis during Q1FY22, AUM clocked 7% growth in spite of a weak outlook. The company is taking measures to keep the cost to income lower which is reduced by 50 bps in the past three years to2.1%. 

The vehicle finance business is the largest segment with >75% share. Chola has a diversified liability mix across bank loans, market borrowings, perpetual tier-2 debts, and overseas borrowings. At the current price, the stock is trading at 4.6x/4.1x of its FY22e/FY23e BV respectively.

3 KNR Constructions: Buy – Target Price – Rs 358/share (upside 26 per cent) 

KNRC has a D/E of 0.4x with cash and bank balance of Rs 147.8 cr as of March 2021. It generated strong return ratios in FY21 with RoE of 19% and RoCE of 22%. During FY21, KRNCL’s consolidated revenue/EBITDA/PAT grew by 18%/12%/50% YoY respectively despite a challenging environment.

KRNCL has an order pipeline of ~Rs6,596 cr as of Mar2021 which is ~2.5x of its FY21 revenues thereby giving healthy revenue visibility over the medium term. Around 46% of the orders are from the Irrigation segment and their main is from the road segment. 

4 Grasim Industries: Buy – Target Price – Rs 2151/share (upside 26 per cent) 

The company is expected to invest Rs 2100 cr over the next 2 years across the business verticals like VSF, Chemicals, and Textile. It has a reasonable balance sheet with a Net Debt to EBITDA of 0.47x as of June-21. It has cash and investment of Rs 16000 crs, and reports strong quarterly numbers.

Grasim is a leading global producer of Viscose Staple Fibre (VSF), the largest Chlor-Alkali, Linen, and Insulators player in India. Through its subsidiaries, Ultra Tech Cement and Aditya Birla Capital, it is also India’s largest cement producer and a leading diversified financial services player.

5 Sundram Fasteners: Buy – Target Price – Rs 1059/share (upside 27 per cent) 

The company has witnessed a strong uptick buoyed by recovery across the Auto sector. Over the years, the company has developed a leadership position in the fasteners segment as well as it has improved its position in export markets.

Further, the company’s effort to de-risk itself from the cyclicality of the auto business would augur well for the long term. At the current price, the stock is trading at 40.7x/35.9x of its FY22e/FY23e earnings respectively.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)