Diwali Picks: Coal India, Airtel, Ashoka Buildcon, 2 Others Stocks May Hedge Better Returns Than Nifty

With the Diwali festival set to light up the corners of India, brokerage StoxBox has selected five stocks as its top picks to buy for Samvat 2080. These stocks are from diverse segments like infrastructure, telecom, metal, real estate, and FMCG. They are Ashoka Buildcon, Bharti Airtel, Coal India, Colgate-Palmolive and Puravankara.

In the past five years, StoxBox's Diwali picks have outperformed the benchmark Nifty 50. As per the data given by the brokerage, StoxBox's diwali picks were up by 12% in 2018 versus 10% of Nifty, and further gained by 20% in 2019 versus merely 3% of Nifty. The best performance of Diwali picks was seen in 2020 during the onset of pandemic with StoxBox's top picks registering a whopping 123% returns versus 55% returns of Nifty 50.

In 2021 and 2022, StoxBox's diwali picks have rallied by 19% and 13% compared to Nifty who dipped 1% in 2021 but gained 10% last year.

For Diwali 2023, here is the rationale of StoxBox behind selecting five stocks to buy:

1. Ashoka Buildcon: (TP: Rs 163)

Infrastructure development is crucial to uplift the socio-economic status of any nation. To meet India's aim of reaching a USD 5 trillion economy by 2025, infrastructure development is the need of the hour. The private sector is emerging as the key player across various infrastructure segments, from roads and communication to power and airports. Ashoka Buildcon's robust order inflows, latest technology and innovative construction practices and better project execution, despite inflationary challenges could still deliver healthy financial performance. The asset monetization program continues to substantiate Ashoka's full cycle credentials and efficient use of capital to develop, construct, commission, operate and sell investments.

On the valuation front, Stoxbox said, "we are thus positive about the long-term prospect of the company and value it at a P/E of 13x based on FY23 earnings to arrive at a target of INR 163 which is 21% upside from current levels."

2. Bharti Airtel: (TP: Rs 1,106)

Bharti Airtel remains on strong footing with industry-leading ARPU, higher focus on premiumization, a growing subscriber base and earlier tariff hikes. The industry pricing environment has become more favourable, raising expectations for regular tariff hikes.

The brokerage expects ARPU to improve led by increasing tariffs, 2G to 4G migrations, prepaid to postpaid conversions and rising data monetization. The India business continued on a strong footing, with the company consistently delivering healthy revenue growth. Other businesses, such as Fixed Broadband and Enterprise, are witnessing strong traction and will drive revenue growth in the medium term. Further, the company has an excellent track record in business execution and is expected to deliver robust performance led by broad-based growth across segments.

On the valuation front, StoxBox is thus positive about the long-term prospect of the company and value it at a P/E of 38x based on FY23 earnings to arrive at a target of INR 1,106 which is 19% upside from current levels.

3. Coal India:

CIL plays a significant role in achieving the nation's energy security. Based on the demand projection in "Vision 2024" for the coal sector in India and subsequent demand projection on CIL, a roadmap has been prepared wherein CIL has envisioned 1 Billion Tonne (BT) production in FY25-26 to meet the coal demand of the country. CIL has identified all required resources to achieve this target, including significant projects contributing to its 1 BT production plan.

Thus, StoxBox's note said, "we give a "Buy" rating to this mining company. On the valuation front, We are thus positive about the long-term prospect of the company and value it at a P/E of 8x based on FY23 earnings to arrive at a target of INR 370 which is 19% upside from current levels."

4. Colgate - Palmolive (India):

It is to be noted that 80% of the urban population is still not brushing twice and 55% of the rural population does not use toothpaste daily, implying a huge growth opportunity in oral care business. In the quarter gone by, the business also saw green shoots in rural recovery and recovery in its volumes. Further, it is also looking for relevant opportunities from the global portfolio which can be introduced in the domestic markets.

With the entry of new CEO Prabha Narasimhan (ex-HUL head in the beauty and personal care segment) and her strategies to further augment the business, the brokerage remains positive on the overall growth story.

On the valuation front, StoxBox said, "We are thus positive about the long-term prospect of the company and value it at a P/E of 50x based on FY23 earnings to arrive at a target of INR 2,500 which is 18% upside from current levels."

5. Puravankara:

The real estate sector is expected to expand to USD 5.8 trillion by 2047, contributing 15.5% to the GDP from its existing 7.3% share. This places companies like Puravankara in a favourable position that enjoys healthy sales book and collections. To drive future growth, the business is also focusing on scouting new acquisitions to expand further and enter new markets.

On the valuation front, the brokerage said, "We are thus positive about the long-term prospect of the company and value it at a P/E of 20x based on FY23 earnings to arrive at a target of INR 176 which is 20% upside from current levels."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.