Stocks to buy: LKP lists 6 pre-budget picks that can give up to 23% returns in 3-4 months

Power Finance Corporation | Buy at ₹130-125 | TP: ₹156/167 | Stop Loss: ₹118 | Upside 20%: The power sector is likely to be in strong focus ahead of the Budget and could be one of the highlights of the session, noted LKP. PFC is the financial backbone of the Indian power sector and the brokerage has picked the stock to play the changing face of the power sector in India. The resolution of legacy portfolios coupled with encouraging asset quality trends makes LKP optimistic about the firm. Enforcement of discipline in the power sector through calibrated penalties on defaults by discoms together with the incentivized clearing of old overdue are positive tailwinds for PFC going forward, said LKP.

ITC | Buy at ₹315-305 | TP: ₹370/385 | Stop Loss: ₹285 | Upside 22%: ITC was the top performer in the entire FMCG space last year and LKP expects it to continue leading the sector in the coming months. As per the brokerage, ITC is a diversified conglomerate that is seeing strong traction in all its business verticals thereby making the 25% ROE business an attractive proposition. LKP envisages a moderate tax scenario for cigarettes and improving margin profile across its business verticals resulting in robust free cash generation thereby enhancing prospects of a de-merger going forward. New product launches coupled with positive tailwinds across its business verticals position ITC in a sweet spot, it added.

Tata Power | Buy above ₹225 | TP: ₹260/270 | Stop Loss: ₹180 | Upside 21%:  Tata Power is India's largest power distribution company in the private sector with a presence across the power value chain and is an attractive bet to play clean energy & EV infrastructure, said LKP. Its de-leveraging & strategic roadmap on the renewables business should bolster the prospects going forward, it stated. Capital allocation towards high growth areas of renewables, solar roof-tops, solar water pumps, and EV charging stations provides a structural growth story, added the brokerage.  

NTPC | Buy at ₹160-166 | TP: ₹180/200 | Stop Loss: ₹148 | Upside 23%: NTPC is India's largest power producer with over 70gw of capacity and aims to quadruple its share of non-fossil energy from the present level of 10% in the next decade through its subsidiary, NTPC Green Energy, noted the brokerage. NTPC's low cost of funds and aspirations in growing its RE portfolio would improve its ESG score and boost investor confidence. NTPC with a 25% market share is set to transform itself from conventional energy into an ESG accretive energy company. Its recent collaboration with Energy Vault aims to accelerate its energy transition goals, noted the brokerage.

Siemens | Buy at ₹2,800-2,835 | TP: ₹3,200/3,400 | Stop Loss: ₹2,600 | Upside 20%: LKP has picked Siemens to play the upcoming railway capex theme on electrification & signaling. Its strong order pipeline in railways, Metros, airports, and infrastructure projects provides clear visibility going forward given its undisputed leadership in technology, highlighted the brokerage. The traction was seen across energy, mobility, and smart infrastructure, positioning Siemens at the forefront, LKP pointed out.

Chambal Fertilisers | Buy at ₹280-289 | TP: ₹325/360 | Stop Loss: ₹260 | Upside 20%: The brokerage noted that the stock price of Chambal has corrected substantially on account of higher subsidies from the government which together with the rupee depreciation and the Russia-Ukraine conflict put pressure on its working capital and leverage position. Given the assurance from the finance ministry regarding payment of subsidies and the strong positioning of Chambal in both Urea & NPK, LKP has picked the stock to play the agri theme ahead of the Union Budget.