HDFC Securities is bullish on Manappuram Finance, Narayana Hrudayalaya and Welspun India owing to the companies’ strong fundamentals and growth potential going ahead.
The brokerage recommends buying these stocks at current market prices and adding on dips for a time horizon of two quarters.
Here are the fundamental picks by HDFC Securities:
High sustained RoEs (>22 percent), negligible credit costs, resumption of steady-state AUM growth once lockdowns are lifted, the possibility of spinoff/listing of Asirvad Finance are some triggers that are likely to play out over the next few quarters, HDFC Securities said.
The consolidated loan book of the company is expected to grow at a CAGR of around 15 percent over FY21-FY23. PAT is expected to grow at 21 percent CAGR as provisioning requirements would moderate going forward, as per the brokerage.
HDFC Securities feels investors could buy the stock at the current market price and add on dips to Rs 157-159 band for base case fair value of Rs 198 and bull case fair value of Rs 211 over two quarters.
Narayana Hrudayalaya is a good bet on the structural long-term growth story of the Indian healthcare industry, considering its established presence across healthcare verticals, geographic presence and its blended model of affordable & high-quality services, the brokerage house said.
Notwithstanding the strong growth in the profits from the existing Cayman unit, leverage metrics and operational performance would be impacted in the near to medium term until the new facility stabilises and starts generating incremental profits, as per the brokerage.
"We believe the base case fair value of the stock is Rs 529 and the bull case fair value of the stock is Rs 565 over the next two quarters. Investors can buy the stock and add on dips to Rs 425-427 band," it said.
In the home textile space, HDFC Securities believes, Welspun India can be a leading beneficiary of the 'unlocking' across the world. It caters to some of the best-known names in the hospitality industry with a suite of innovative products, said the brokerage. Apart from this, its next leg of growth will be driven by the newly commissioned flooring solution business which is likely to grow 2.6x over FY21-23E, it added.
"Going forward, we expect, strong free cash flow generation as a large part of capex is over and its investment phase is in the final stages of conclusion. Its overall Revenue and PAT are likely to register a growth CAGR of 13.4/20% over FY21-23E," it said.
HDFC Securities feels the base case fair value of the stock is Rs 115 and the bull case fair value is Rs 123 over the next two quarters. Investors can buy the stock and further add at Rs 95, it added.
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