HDFC Securities is bullish on Infosys, Bank of Baroda, Mahindra CIE Automotive, and Sandhar Technologies on the back of the strong fundamentals of these companies and their growth potential.
The brokerage recommends buying these stocks at current market prices and further add on dips for a time horizon of two quarters.
Here are the top Fundamental picks from the Retail Research Desk at HDFC Securities.
We see a possibility of the revenue guidance being exceeded led by new deals that can kickstart in Q2/Q3FY22. The company will be at the forefront of digital transformation opportunities, HDFC Securities said.
We believe the base case fair value of the stock is Rs 1,739 (29x FY23E EPS) and the bull case fair value of the stock is Rs 1,828 (30.5x FY23E EPS) over the next two quarters. Investors can buy the stock in the band of Rs 1,575-1,605 and add further on dips in the Rs 1,430-1,450 band (24x FY23E EPS).
Bank of Baroda
The brokerage expects Bank of Baroda to grow its loan book at 8 percent CAGR while NII and Net profit are expected to grow at 9.5 percent and 255 percent CAGR respectively over FY21-23E. ROAA is estimated to improve to 0.8 percent in FY23E from the current 0.1 percent in FY21.
We expect healthy recoveries and upgrades in the next two years. Asset quality trends of corporate and MSME would be crucially monitorable. Most of the concerns arising out of pending writeoffs out of restructured/SMA accounts are already in the price, the brokerage said.
We believe that investors can buy BoB at LTP and add more at Rs 73.25 for the base case fair value of Rs 86.5 and the bull case fair value of Rs 93 over the next two quarters, it added.
Mahindra CIE Automotive
We expect Mahindra CIE Automotive revenue to grow at 23 percent CAGR over CY20-CY22, led by the strong India business. EBITDA and PAT margin are expected to expand 576/595 bps during the same period. RoCE/RoE are expected to improve from 10.1/11.5 percent in CY20 to 35/46 percent by CY22E.
The brokerage believes investors can buy the stock in the band of Rs 265-270 and add on dips to Rs 238-242 band for a base case fair value of Rs 296 and bull case fair value of Rs 315.
A strong rebound in automobile production post a slump would be a key driver for earnings revival. For Q4FY21 and FY21, the company registered strong performance both in India and international operations.
We expect a 15 percent CAGR in revenue over FY21-23E led by strong growth across all segments. The operating margin is expected to expand 130 bps to 11.4 percent led by better product mix and cost-efficiency.
Strong sales along with healthy margin expansion would drive 47 percent CAGR in net profit over the same period. The company’s ability to outpace industry growth provides significant comfort, HDFC Securities said.
We like Sandhar given its strong relationship with OEMs, diversified business, and healthy balance sheet. We feel that investors can buy the stock at Rs 295-301 and add more on declines to Rs 265 for base case target Rs 333 and bull case target of Rs 363.5 over the next two quarters.
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First Published: IST