Buying for September: From LIC Housing to Greenply, Kotak Sec lists 6 top stocks

Godrej Consumer: The brokerage has a buy call on the stock with a target price of ₹1,135, indicating an upside potential of 13%. It said that the June quarter was a well-rounded quarter with 10% organic volume growth in Indian business. Further, management’s turnaround initiatives have also started to yield results, noted Kotak. It expects earnings to grow by 10.8% in FY24E and grow by 24.6% in FY25E. Stock is currently trading at a  valuation of 42.4x P/E FY25E EPS. The brokerage also cut FY24-26E EPS by 4-7%; roll over and revised fair value (FV) to ₹1,135 (from ₹1,150).

Greenply Industries: The brokerage has an add call on the stock with a target price of ₹191, implying an almost 19 percent upside potential. As per the brokerage, Q1FY24 was a weak quarter due to subdued plywood demand and the start of the MDF plant. But despite a weak Q1FY24, management expects 10% plywood volume growth in FY24E as the newly commissioned MDF plant provides revenue growth visibility, noted Kotak. It also stated that the MDF plant is in the ramp-up stage and is expected to impact the company’s earnings in FY24E. It expects earnings per share of ₹7.3 in FY24E and ₹11.2 in FY25E. It valued the stock at 17x PE on FY25E earnings and changed the rating to ADD (earlier BUY).

Reliance Industries: The brokerage has an add call on the stock with a target price of ₹2,600, which implies just an 8 percent upside potential. According to Kotak, the next generation coming on board is a key positive for the firm. Its retail segment is likely to be the fastest-growing business of RIL with more stake-sales likely while for its telecom subsidiary Jio, 5G rollouts to drive market share gains, Jio AirFiber will launch in Sept 2023, noted the brokerage. For O2C, the brokerage sees the transition to a sustainable/circular energy business with net zero by 2035. Kotak maintained an ADD rating with a fair value of ₹2,600 largely on a lower valuation for Reliance Retail.

LIC Housing Finance: The brokerage has a buy call on the stock with a target price of ₹580, indicating an over 37 percent upside. The brokerage noted that LICHF reported strong margins, supported by near-full transmission of higher rates, however, it expects the rate to decline hereon, especially in light of the weak trends in disbursements. The firm also posted strong NIM expansion led to NII growth of 37% YoY and stable asset quality performance, added Kotak.  

SRF: The brokerage has a buy call on the stock with a target price of ₹2,730, implying an upside potential of 16 percent. A cyclical downturn presents a buying opportunity. The brokerage noted that Q1 was a soft quarter for the firm, as expected, with all segments impacted. However, it added that while the near-term outlook is toned down, the firm expects improvement in coming quarters.  Chemicals segment growth will slow in FY24 but should rebound in FY25, said Kotak. It expects earnings to de-grow 7.6% in FY24 and grow at 31.8% in FY25. It values the stock on SOTP (Sum of The Parts) & arrives at an FV of ₹2,730.

Sun Pharma: The brokerage has an add call on the stock with a target price of ₹1,245, indicating a 12 percent upside potential. The brokerage stated that Q1FY24 was a fine quarter, gRevlimid and lower R&D spends drive 19% EBITDA beat. Barring the blip in specialty and India, underlying performance was still healthy, it added. However, it warned that the upside risk to FY24 guidance has increased but expects domestic growth to recover. Kotak marginally raised FY24-26E EPS estimates & target multiple to 26x (25x earlier) on higher domestic valuation. Roll forward to June 2025E, it revised FV to ₹1,245 (Rs1,150 earlier) and retained ADD.