Stocks to buy: B&K Securities lists top 5 picks for May including SBI

Kajaria Ceramics: As per the brokerage, KJC’s margins have been impacted in recent quarters due to high gas costs and discounts offered to push sales amid higher competition. However, it has tweaked its fuel mix towards bio-fuel and natural gas to optimise cost structure. Accordingly, it expects EBITDA margin to recover in the coming quarters, noted the brokerage. Further, over the medium term, improving product mix as well as declining gas cost bodes well for an improvement in profitability, it added. It also pointed out that return ratios have improved with RoE/RoCE expansion by 370 bps/160 bps to 18.9%/22.9% during FY19-22. With improvement in profitability, Anand Rathi expects these to further improve in FY22-25E.

Balrampur Chini Mills: As per the brokerage, the positive commodity cycle has put the company in a very sweet spot with its EBITDA likely to double over FY23-25. Anand Rathi expects sugar prices to remain strong due to lower crops, higher diversion and strong international prices. It values the stock at ₹540 on 15x FY24 earnings, indicating an around 30 percent upside from current levels. It further stated that the firm's ethanol capacity has doubled (from December 2022) at a time when both cane availability and recovery are on the rise. The company stands to gain from both alcohol/positive sugar cycle with EBITDA slated to rise over 65% in FY24 over FY23, added the brokerage.

Gujarat Gas: The brokerage has maintained Buy with a target price of ₹578/share, indicating an upside of 23%. Gujarat Gas’s industrial volumes can see a sharp increase from 4QFY23 onwards, as spot LNG prices have moderated by 42%, stated the brokerage. Gujarat Gas reported high EBITDA/scm of ₹8.7 in Q3FY23 even in an environment of high spot LNG prices and high Administered Price Mechanism (APM) gas cost which depicts the ability of management to churn out high margins in a tough macro environment, noted Anand Rathi. It added that the government has set the APM gas price at US$ 6.5/mmbtu for FY24/25 which will aid the growth of CNG volumes in the medium term.

Titagarh Wagons: With strong executional capabilities, TWL should be the biggest beneficiary from the shift of government’s focus to rolling stock procurement and public transport creation, said the brokerage. It further stated that the company has a robust order book of ₹101.3 bn as of Q3FY23 and in April 2023 bagged a large Vande Bharat train order for ₹247 bn. Robust order book along with capacity expansion plans provides strong revenue visibility in the medium term, noted the brokerage.

State Bank of India: The brokerage expects SBI to report strong growth in net interest income (NII) with strong credit growth and margin expansion in Q4FY23E. It does not foresee any significant stress on the asset quality front. On a relatively long time frame (during FY23-25), the brokerage expects the bank’s deposit composition to remain steady as compared to other large banks as SBI’s customer base is much more granular. The continuity in core performance and likely improvement in treasury gain due to a reduction in interest rates would lead to re-rating in the stock, it added.