Samvat 2078: Find out top 5 heavyweight stocks for returns up to 30%

Ahead of Muhurat trading on Thursday evening on account of Diwali (Laxmi Pooja), the domestic brokerage house Kotak Securities has listed the top five stocks to Buy up to an upside of 27 per cent during today’s one-hour trading session. Stocks are BPCL, Hindalco, HUL, ITC, and L&T.

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). 

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These stocks are picked on the basis of deep analysis and overall growth of the market in 2021 along with key positives that would drive the market. The majority of the sectors after the sharp re-rating in the multiples raise the modest returns for a ‘longish’ period of time.

1 BPCL: Buy – Target Price – Rs 550/share (upside 27.4 per cent) 

The brokerage expects a recovery in refining margins driven by sustained improvement in global demand, robust marketing margins despite elevated oil prices and potential value unlocking from privatization, and BPCL's auto fuels volume growth was ahead of domestic consumption in Q1FY22.

Kotak Securities says, “Marketing margins on auto fuels have remained elevated, the company’s refining margins have increased in recent weeks and expect earnings per share to increase by 18.3 per cent in FY23E to Rs. 39.9.”

2 HUL: Buy – Target Price – Rs 2950/share (upside 20 per cent)

The company reiterates the strategy of growing the core, premiumization, and market development, similarly, management reiterated the underpinnings of HUL’s growth. The company is winning with digitally savvy premium consumers in e-commerce and is also a market leader in Home Care segment.

The management has called out some softness in rural demand and the company is confident of consistent double-digit EPS growth partly aided by modest margin expansion. In Q2FY22, HUL witnessed market share and penetration gains in 75 of the portfolio.

3 Hindalco Industries: Buy – Target Price – Rs 565/share (upside 19.4 per cent)

Kotak Securities expects the company to report a Free Cash Flow of Rs 29,575 cr during the FY22-24E period, similarly, strong aluminium prices and record margins at Novelis to drive earnings upgrades. It added, with upside risks to earnings across India Novelis HNDL offers attractive risk-reward.

Novelis is a sister metal company of Aditya Birla Group-led Hindalco Industries. The brokerage value the company at 4.5x Sept 2023E EBITDA and Novelis at 6.9x Sept 2023E EBITDA. The higher spreads suggest further QoQ margin expansion for Novelis in the coming quarters.

4 ITC: Buy – Target Price – Rs 565/share (upside 19.4 per cent)

The cigarette segment registered 33 per cent year-on-year revenue growth in Q1FY22, the company estimate volume growth at 30 per cent YoY. The company witnessed gradual improvement in market conditions post mid-June 2021 ITC launched refreshed packs of many brands in core areas.

Paperboard, paper, and packaging segment and agribusiness remain strong for the company and inexpensive valuations (cigarette business trading at 7-8X PE) and robust dividend yield (5 per cent). 

Kotak Securities are now attributing Rs10/share (Rs 120 bn) to ITC InfoTech. The domestic leisure segment witnessed an uptick since Jun 2021 which Augurs well for the Hotel business.

5 Larsen & Toubro: Buy – Target Price – Rs 2100/share (upside 18 per cent)

The brokerage expects 17 per cent CAGR in revenues and 26 CAGR in PAT of L&T’s core Engineering and Construction (E&C) business in FY21-24. The company has generated a meaningful amount of free cash flows after interest in contrast to peers.

It reiterates a positive stance on L&T and values the consolidated core E&C business at 17x earnings multiple and also increases the sum of the parts SoTP based fair value to Rs 2100 from Rs 2050 on the higher fair value of investment Mindtree.

(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.)