Stocks to buy: Aditya Birla Capital, Sundaram Fasteners, Kansai Nerolac among top picks this month

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© Provided by The Financial Express Although the benchmark indices have moved range-bound since reaching fresh record highs, stock-specific action has continued. (Image: REUTERS)

Sensex and Nifty have gained a little over 1% so far in September but have managed to hit fresh all-time highs repeatedly. S&P BSE Sensex has scaled 58,553 while the NSE Nifty 50 hit 17,436 for the first time ever. Although the benchmark indices have moved range-bound since reaching fresh record highs, stock-specific action has continued. With uncertainty surrounding how high Dalal Street can climb as tapering talk starts in the United States and the third wave of covid-19 disrupts global economies, Yes Securities has picked 4 stocks that it believes can give returns in the range of 40-81% over the next 12 months. 

Aditya Birla Capital – Buy

Target price: Rs 205

Aditya Birla Capital’s share price began this year strongly, surging 50% between January and the first week of March. However, since then, the stock has slipped 15%. Analysts at yes Securities said they believe Aditya Birla Capital is at an inflexion point with all franchises expected to do well in the next 3 years. Analysts added that Aditya Birla’s management has guided that in the NBFC business, retail and SME mix to increase to nearly 65% by financial year 2023-24 while in the housing finance business, affordable housing share to increase to ~65%, and for the cash cow business of AMC, the expectation is to have a sustained ROE in the range of 35-40% in next 3 years. The target price set by Yes Securities would see the stock rally 81% from current levels. 

Sundram Fasteners – ADD

Target price: Rs 1,324

Share price of Sundram Fasteners has already zoomed 77% so far in 2021, outperforming the benchmark Nifty 50. “Sundram fasteners has showcased a healthy financial performance in the past (FY10- 20 PAT CAGR of ~15.5%) and dividend pay-outs (25%+),” Yes Securities said. They added that improvement in business across verticals is likely to keep ROEs at18%. “We believe company is likely to see accelerated growth between FY22-25 as both automotive and non-automotive verticals will do well, which would also lead to re-rating in the stock. Given the quality play, the stock is currently trading at an attractive valuation of 23x FY24E P/E and 13.5x FY24E EV/EBIDTA,” they added. From current levels, the stock will need to rally 43% to reach the target price.

Kansai Nerolac Paints – Buy

Target price: Rs 900

The company has diversified its business in recent years and expanded its geographical presence beyond India. The stock price has, however, not been rewarding for investors, falling 4% so far this year. “We are positive on Kansai largely backed by expected improvements in structural drivers such as shift towards organized sector, housing push in semi-urban and rural areas, shorter painting cycles, governments focus on increasing rural income and increased consumer awareness in rural areas,” the brokerage firm said. Kansai commands ~40% market share in Industrial segment. “We expect ROE to move to reach 17% by FY23E. Given quality play, the stock is trading at an attractive valuation of 33x FY24E P/E,” Yes Securities said. The stock will have to jump 48% from the current price to reach the expected target price.

Zydus Wellness – Buy

Target price: Rs 3,360

The FMCG firm’s share price has surged 28% from the middle of March to date after having fallen significantly between January and March. “Zydus has a good track record of creating brands and then scaling it up. We expect a continuation of same for next few years supported by strong macro tailwinds and changing consumer behaviour,” Yes Securities said. The company is in a leadership position in 4 out of the six brands it runs. “Given quality play, stock trading at an undemanding valuation of 30x FY24e, lower than its peer set trading between 40x-60x of FY24,” the brokerage firm said. The stock is expected to surge 40.5% to reach the predicted target price. 

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