Muhurat Trading: 2 Defence Stocks, 5 Others Are Top Picks Of ICICI Securities: Nifty Seen At 21,500

Equity stocks have globally faced hiccups in recent times, and volatility has been seen broadly. However, this also brings the opportunity for buying stocks that have potential for long-term wealth creation. And auspicious trading hour aka Muhurat trading which will be held on the evening of November 12th is the right time for adding attractive stocks to portfolios.

Brokerage ICICI Securities said, positive catalysts such as a) robust corporate earnings (likely to grow at 16.5% CAGR over FY23-25) and b) Favourable Growth-Inflation dynamics of India (~6-7% sustainable growth with comfortable inflation of ~5%), indeed, makes India an outlier as an Equity investment destination in the medium to long term amid a dwindling global growth milieu.

The brokerage added, "Our one year forward, Nifty target is at 21500 (20x FY25 EPS) with a sectoral bias towards banks, capital goods/infrastructure, power while avoiding sectors having more global exposure like IT, oil & gas etc."

Further, it said, "We continue to see reasonable opportunities across the market spectrum with the key filter being quality. We continue to advise investors to utilise equities as a key asset class for long-term wealth generation by investing in quality companies with strong earnings growth and visibility, stable cash flows, RoE and RoCE."

Hence, brokerage ICICI Securities has selected seven stocks for buying during the muhurat trade. These are:

1. Century Plyboards: (Buying Range Rs 595 to Rs 630 For TP Of Rs 750).

ICICI Securities said, "We expect ~15% CAGR in revenues over FY23-25 driven by ~31%/15%/11% revenues CAGR in the MDF/Laminate/Plywood. The margins, after some softness in FY24, are likely to revert to normalised levels of 16.2% in FY24. This will result in ~19.2% earning CAGR for the company over FY23-25. The company is also well poised on its balance sheet with net debt free status and capex largely to be funded through internal accruals."

Also, they added, "Century has led the industry on most metrics and remains a superior player in the segment. With strong housing demand in last 2 years and likely completion of those sold inventory, woodpanel industry is likely to witness a robust demand spurt ahead. We are enthused by strategic expansion plans across segments
and relatively diversified positioning of the company. We have valued the company at 32x FY25 P/E to assign a target price of Rs 750."

2. TV Today Network: (Buying Range Rs 185 To Rs 200 For TP Of Rs 260)

TV Today remain a key proxy for election led ad spending and with further catalysts such as ad recovery kicking in as festivities begin and margins improvement level.

On the margins front, the brokerage said that the company is planning to consolidate the separate entities such as Tak channels, Lallantop and others (currently being separately run) which will bring down the overall costs . Considering the same, it expects margins to inch up to 18% in FY25 vs. 15.5% in FY23. It also have baked in ~9% revenue CAGR over FY23-25 to ₹ 1040 crore, with ~15% growth likely after flattish H1FY24.

3. Larsen & Toubro: (Buying Range Rs 2,870-2,960 For TP Of Rs 3,560)

The company with diversified presence across business verticals and geographies commands a mammoth order-backlog of Rs 450000 crore, up 22% YoY as of Q2FY24. This provides strong revenue visibility over next 2-3 years. Coupled with this a strong project pipeline of ₹ 8.8 trillion will ensure 15% order inflow growth in FY24. Strong scale up in services business like IT and Finance also provides cushion to cash flows and cyclical risk of engineering business.

It added, "We remain upbeat on the prospects of the company and believe L&T is the best proxy play on India capex story and preferred large cap capital goods pick. L&T is expected to deliver 18.6% and 26.5% revenue and PAT CAGR over FY23-FY25E, respectively. We believe selective profitable growth. monetisation of non-core assets, strict balance sheet discipline will help L&T to achieve 18% ROE by 2026 and create shareholder value. We value the company on SoTP basis and arrive at a fair value of ₹ 3560."

4. Coromandel International: (Buying Range Rs 1,020-1,080 For TP Of Rs 1,330)

Coromandel has been strengthening its upstream integration capabilities. Via its strategic tie up with leading integrated players like Tifert (Tunisia) and Foskor (South Africa) for meeting its Phosphoric acid requirements. Further, the company is setting up a new 1,650 MT per day design capacity sulphuric acid plant at its fertiliser complex in Visakhapatnam at a cost of Rs 400 Crore.

Also, the company foray into drone business represents significant opportunity as it plays a dominant role in precision agriculture. Moreover, the global agriculture drone market is estimated to be US$ 0.6B in CY22 and projected to reach US$ 2.5B by CY27, growing at a CAGR of 32%. Brokerage believes Coromandel is well positioned to capture the agricultural drone market, and hence it values the company at at ₹1330 based on ~16x FY25E P/E multiple.

5. State Bank of India: Buying Range Rs 565-585 For TP Of Rs 725)

SBI has demonstrated its strength in previous quarters both on core operating performance and asset quality. Management confidence on growth (14-15%), steady margins and return ratios remaining at ~1% in FY24-25E warrants a re-rating, and should see strong positive momentum. Plough-back of profits leading to improving RoE of ~16-17% to add to valuation.

Asset quality remained resilient with GNPA/ NNPA at 2.76%/ 0.71% while restructured book stood at ~70 bps of advances. Healthy PCR stands at 76.4% for advances and ~30% coverage on restructured book provides comfort on continued benign credit cost expected at ~30-50 bps ahead.

6. Spandana Spoorthy Financial: (Buying Range Rs 840-890 For TP Of Rs 1100)

Diversifying liabilities mix, improvement in credit rating is seen to offset pressure of rising interest rates, thus keeping margins steady in FY24-25E. Recovery has been witnessed in asset quality with GNPA at ~1.4% as of Sep 2023. Focus on quality customer accretion (wherein customer has less than 2 lenders), stage 3 coverage of ~70.3%, provides confidence on credit cost remaining steady at ~2% ahead.

It added, "Sustained recovery witnessed in last 6 consecutive quarters translating in improvement in RoA. Continued strong business growth (35-40%), steady margins and moderate credit cost (~2%) is seen to keep RoA healthy above 4.5% (calculated), thereby driving valuation ahead."

7. Bharat Dynamics: (Buying Range Rs 970-1030 For TP Of Rs 1,260)

Order backlog stands healthy at ~₹ 23,500 crore (11.3x TTM revenues) gives strong visibility in terms of future revenue growth and profitability. Moreover, orders pipeline remains strong for missiles, torpedoes, countermeasures over the next 3-5 years; provides more comfort on future earnings. Huge opportunity for BDL in export markets too driven by rising interest from friendly countries with relatively lower manufacturing cost.

Brokerage said, "PAT CAGR expected at ~53% over FY23-25E, led by pick-up in execution and improvement in margins. Increase in profitability with strong asset turnover to result in healthy return ratios over FY23-24E. We value BDL at Rs 1260 i.e. 28x FY25E EPS."