Diwali is perceived as an auspicious occasion by investors and traders. Every year, thousands of them invest in their favourite stocks with the hope that their investments will generate healthy returns.
So far this year, the market has been volatile and wise and prudent investors cannot afford to bet on stocks that are not so sound on fundamental indicators.
Brokerage firm Edelweiss Broking has picked 11 stocks based on their strong fundamentals. These stocks look poised for growth in the medium to long term. Take a look:
The brokerage firm highlighted that the bank has been witnessing substantial improvement in overall stress levels because of (a) aggressive recognition of bad loans in the past, (b) rising share of secured retail loans, and (c) improving corporate rating profile, leading to GNPA levels that are at a 24 quarter low, with current GNPA being 2.8% compared to a peak of 6 8 in Q4FY18.
"Over FY22-25 we estimate (i) 16% loan CAGR, led by a spurt in corporate loans, and (ii) 19%/23% jump in net revenue/net profit, spearheaded by improvement in margin and overall cost. Consequently, RoA RoAE is expected to catapult from 0.7%/7.2% in FY19 to 1.6%/16.2% in FY24E," said Edelweiss.
The brokerage firm said given the strong demand for its products amid tailwinds across both domestic as well as export markets, capacity addition of key products is on the cards.
"Based on favourable product mix, improving product realizations and operating leverage led by expansion in existing capacities, we expect Balaji Amines to record 22% earnings CAGR growth over FY23-25e," said Edelweiss.
Edelweiss believes Brigade is the best play on revival in the residential market and would continue to maintain its market share given its asset-light model, strong brand and execution track record, growth capital in place, comfortable leverage position and one of the best cost of borrowing industry (nearly 8%).
"Ramp up in Brigade’s leasing income with a large part of capex behind it would act as a key catalyst in restricting the downside in its valuations," said Edelweiss.
Edelweiss expects CIFC to deliver RoA and RoE of 2.8-3% and 19.3-21% respectively, in FY23-24E, led by a CAGR of around 23% in earnings over FY22-24E.
"Given the growth trajectory, asset quality, parentage and return ratios, we expect its valuation premium to sustain compared with that of peers. We reiterate our buy recommendation with a revised target price of ₹827 valuing at 4 times FY24 ABV," said Edelweiss.
The brokerage firm is positive on Elecon considering its strong growth potential with an expectation of CAGR of 22% and 26% in revenue and EPS, respectively, over FY22-25E, driven by robust demand, operating leverage, and low-interest expense.
"We have a tactical buy rating with a target price of ₹417 valuing the stock at 20 times FY24E PE. Downside risk to our call includes a weak performance of international subsidiary (20-25% of sales) in case of global recession," said Edelweiss.
"ICICI Bank is our top pick in the banking sector as it is growing at a healthy pace, has a strong digital push, and is focused on risk-calibrated operating returns. These, combined with its best-in-class provision coverage, should lead to a re-rating for the bank," said Edelweiss.
Edelweiss maintains a buy rating with a target price of ₹470 per share. "Due to controlled capex and healthy outlook for the non-Covid business, we believe Max Healthcare is the best play in the Indian hospital space," said Edelweiss.
A strong order book provides good visibility to revenue growth. MTAR’s present order book is likely to be nearly ₹1,250 crore (had a total order book of ₹648 crore at the Q4FY22 end and ₹766 crore at Q1FY23 end). Order book from the clean energy segment alone is likely to be nearly ₹900 crore.
"We estimate 44%/45% revenue/EPS CAGR over FY22-25E leading to EPS of ₹42/60 in FY24/25. Growth to be
primarily driven by the clean energy business expanding at 56% CAGR over FY22-25E," said Edelweiss,
Edelweiss expects Sapphire’s store count to grow at a nearly 20% CAGR over FY22-25E. "We like Sapphire’s business model, growth opportunities, execution capabilities and management quality," said Edelweiss.
As per the brokerage firm, SJS is a positive FCF generating company while generating nearly 22-25% adjusted RoE over FY22-25E and a net cash balance sheet which will help the company to pursue organic and inorganic growth.
"We forecast sales/EBITDA/PAT to grow at 21%/20%/21% CAGR over FY22-25E and initiate coverage with a 'buy' rating assigning a price target of ₹590 valuing the company at 22 times FY24 EPS," said Edelweiss.
Trent’s growth prospects remain robust owing to an accelerating shift to branded products and a growing appetite for aspirational yet strong value propositions.
"Innovation in the product portfolio, scaling up of supply chain, 100% contribution from own brands, aggressive store expansions and leveraging on digital presence will be key growth drivers in the medium term," said Edelweiss.
"Though Trent's valuation is at a premium as compared to the industry at 36 times FY24 EV/EBITDA, we believe this premium valuation is justified on account of Trent’s successful execution in scaling up Westside brand and its other brand Zudio can replicate this execution in the coming years," said the brokerage firm.
Disclaimer: The views and recommendations given in this article are those of the broking firm. These do not represent the views of MintGenie.