Stocks to Buy in October: SBI Cards, Airtel among 5 stocks that may yield up to 29% returns

Stocks to Buy in October: Indian market is expected to follow global market trends and as the broader market valuations are rich, opportunities arising from market correction can be used to add quality stocks from a long-term investment perspective, domestic brokerage firm Kotak Securities said in its market outlook report.

From telecom to healthcare to information technology, the brokerage picked five bets from the large and mid-cap segments for bumper returns on a long-term basis. The stock picked are SBI Cards, Airtel, Apollo Hospital, Cummins India, and HCL Tech.

Below is the list of stocks along with the investment rationale:

SBI Cards and Payment Services (SBICARD) – BUY – CMP: 893; Target: 1150; Upside: 29%

Rationale: Around 105 per cent earnings growth, 22 per cent year-on-year OP profit growth, and around 30 per cent YoY decline in provisions. Solid growth signals: spend growth at 80 per cent YoY, card growth at around 20 per cent YoY growth. Credit cost is benign and at pre-Covid levels with unchanged NPL ratios. Opportunity size is a function of cash to digital and a play on economic growth

Bharti Airtel – BUY – CMP: 808; Target: 830; Upside: 3%

Rationale: Reported strong operational print in 1QFY23; results were in line with estimates. FCF (Free Cashflow) post lease and interest payment increased to Rs 6700 cr. ARPU increase, subscriber-mix improvement & 5G rollout to benefit Airtel and expect the company to report EPS of Rs23.1 & Rs40.6 in FY23E & FY24E, respectively.

Cummins India – BUY – CMP: 1216; Target: 1360; Upside: 12%

Rationale: Q1 results - Commodity price headwinds mask stellar business growth levels. Terms strength of demand growth as being at unprecedented levels. Upside risks emanate from new products in domestic & export markets. Revise down near-term estimates to account for the very weak start to the margin.

Apollo Hospitals – BUY – CMP: 4402; Target: 4850; Upside: 10%

Rationale: Healthy core performance; Hospital margins improve 200 bps sequentially to 23.9% in Q1FY23. Offline pharmacy going strong; 24/7 investments to rise further. The company has a lesser need for significant capex over the next few years. Best placed to benefit from the evolving landscape; Roll forward to Jun 24E.

HCL Technologies – BUY – CMP: 955; Target: 1165; Upside: 23%

Rationale: HCL is addressing gaps in the SaaS portfolio with focused bets. Execution is comforting. Apps have the potential to grow in high-teens. Healthy practice capture high-growth areas & balance in a portfolio of services. Aspires to challenge the hegemony of big players in apps, a mammoth task. The stock trades at an attractive valuation of 16x FY24E EPS, a dividend yield of 5%.