Top Stock Picks: Kotak lists 8 stocks to buy in September

Pranati Deva
Updated: 07 Sep 2022, 09:38 AM IST
TL;DR.

Indian equity markets in August 2022 carried on with momentum witnessed in July 2022. While there was some volatility in the second half of August 2022, the domestic equity markets ended the month with healthy gains. A recent report by KotaK Securities noted that India’s economic and earnings recovery coupled by capital expenditure cycle is expected to keep Indian markets attractive over the long term. With upcoming festive season, discretionary sectors and stocks could see some interest from market participants, it added. As the broader market valuations are rich, opportunities arising from market correction can be used to add quality stocks (with attractive valuation) from long term investment perspective, advised Kotak. Here's a list of stock the brokerage recommends for September:

Aster DM Healthcare: The brokerage has a 'buy' call on the stock with a target price of ₹221, indicating an upside of 11 percent. Asper the brokerage, the firm's sharpened India focus and likely restructuring of operations offer scope for rerating. It continues to guide for ~20% India hospital EBITDA margins in the next 2 years, added Kotak.

Axis Bank: The brokerage is bullish on the stock with a target price of ₹960, implying a potential upside of 28 percent. Kotak noted that the lender witnessed 90% YoY earnings growth and a 90% YoY decline in provisions. Its net interest margin improved 10 bps QoQ and fee income growth solid at 35%, added the brokerage. Further, Asset quality is not showing any signs of concern, it noted. The bank is well positioned for a re-rating from current levels, said Kotak.

Brigade Enterprises: Kotak sees the stock rising 10 percent to ₹565 in 12 months. It has a buy call on the realty player. The brokerage said that the firm showcased strong performance across segments and its land bank rose. Further, steady collections continue to aid debt reduction, it added. The company also maintained guidance of +20% volume growth in the residential segment in FY23, which is a positive.

Dalmia Bharat: The brokerage has an add rating on the stock with a target price of ₹1,800, indicating a potential upside of 17 percent. Kotak noted that Q1FY23 EBITDA came in line with estimates on strong volumes. Commodity costs have peaked but seasonal headwinds keep prices under pressure, it stated. Expansion projects remain on track and increasing share of green power is encouraging, said Kotak. However, it expects earnings to decline by 35.8% in FY23E and grow by 54.9% in FY24E.

Hindalco: Kotak has a buy call on the stock and sees a potential upside of 25 percent. Its target price of the stock is ₹550. As per the brokerage the Q1FY23 India EBITDA was ahead of estimate led by stronger aluminum margins. Meanwhile, weaker metal prices and costs pressures should keep aluminum margins under pressure, it added. At Novelis, management has increased its EBITDA/ton guidance by 5%. Novelis resilient earnings would help cushion contraction in Indian aluminum spreads, noted the brokerage.

PVR: Kotak sees 20 percent upside in the stock at ₹2,200. It has a buy call on the stock. Q1FY23 EBITDA surpassed Q1FY20 levels on the back of 93% recovery in footfalls, pointed out Kotak. PVR intends to open 125 new screens in FY23, which is another positive. Kotak expects earnings (EPS) to grow 173.7% in FY23 and 16.8% in FY24. Merger synergies and valuation re-rating can drive ~30% upside from current levels, it added.

RIL: The brokerage has a buy call on the stock with a target price of ₹2,980, indicating a potential upside of 13 percent. In large cap Indian oil & gas space, RIL is our preferred pick, said Kotak. Fixed broadband is Jio's new focus while 5G services rollout has been planned from Oct’22 and pan-India by Dec’23 with investments of ₹2 lakh crore, informed the brokerage. Another ₹75000 cr investments across polyesters, vinyl & carbon fiber chains is also planned, it added. Further, JioMart on WhatsApp can enable scaling up of new commerce business, the brokerage hopes.

United Spirits: The brokerage has an add rating on the stock with a target price of ₹890, indicating a potential upside of 10 percent. The firm reported weak earnings and Kotak believes that its management needs to further step up its game. It expects earnings to grow by 0.9% in FY23E & by 21.7% in FY24E.

First Published: 07 Sep 2022, 09:38 AM IST