2 Stocks To Buy & Hold For Upto 25% Upside, Expansion In VNB Margins: Emkay Globa

Indian stock markets have been marginally bullish today. Nifty closed at 16,520.85 points gaining by 1.10%, today on July 20. Here, a top brokerage firm suggests two stocks for investors.

Stock Recommendations By Emkay Global and Company Performances

Emkay Global, a renowned brokerage firm has mentioned two stocks, HDFC Life Insurance to buy and Ambuja Cements to hold.

HDFC LIFE reported 25% YoY growth in VNB to Rs. 5.1bn in Q1FY23, driven by 22% YoY growth in APE to Rs. 19.0bn and a 0.6ppts YoY expansion in VNB margins to 26.8%. Exide Life's performance for the quarter was largely stable. The merger and integration process of Exide Life with HDFC Life is progressing well, receiving regulatory approvals as per the estimated timelines. Solvency margins in Q1FY23 stood at 178%, with Rs. 3.4bn capital payout offsetting the positive impact of Rs. 3.5bn subordinated debt raise, mentioned the firm.

Ambuja Cements' Standalone Q2CY22 EBITDA fell 29% YoY/13% QoQ to Rs. 6.8bn, but came in 8% above the firm's estimates on lower-than-expected increase in cost/ton. EBITDA/ton fell 38% YoY/12% QoQ to Rs. 926. In H1CY22, Ambuja generated FCF of Rs. 9.2bn post working capital blockage of Rs. 3.3bn and capex of Rs. 4.7bn. After dividend payment of Rs. 12.5bn, net cash stood at Rs. 38bn as of Jun'22, Emkay Global said.

Return comparison of stocks and past performances on NSE

In this table the Current Market Price (CMP) and the Target Price (TP) of the recommended stocks have been mentioned.

Company	CMP	Target Price	1 Year Potential Return
HDFC Life Insurance	Rs. 543	Rs. 680	25.20%
Ambuja Cements	Rs. 371	Rs. 360	2.90%

Comments By Emkay Global

Giving a buy rating, Emkay Global commented on the stock, "HDFC LIFE reported a relatively modest set of numbers for Q1FY23 vs. our expectations. VNB margin for the quarter was supported by better product mix, but was affected by changes in mortality assumptions and increased fixed costs. Overall, FY23 has started on a mixed note amid the challenging macroeconomic scenario. With the Exide Life merger and integration on track, beyond the operational and financial performance of HDFC LIFE, the outcome and conditions of the impending HDFC Bank HDFC Ltd merger will weigh on HDFC LIFE shares."

"Factoring in Q2CY22 beat, we increase our CY22E EBITDA by 5%, while we broadly maintain our CY23-24 estimates with an unchanged June 23E Target Price of Rs. 360. Our DCF driven fair value implies a 1-yr forward standalone EV/EBITDA of 12.5x. An open offer from Adani Group at Rs. 385/sh may act as a cushion for the stock," Giving a hold rating, the firm said.

Disclaimer

The above stocks were picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.