Diwali 2023 Picks: From ICICI Bank, Maruti To Kalyan, Praj Ind, SBI Securities Find 10 Stocks Attractive Bets

From Samvat 2079 to the upcoming Samvat 2080 this week, Indian market has delivered robust returns despite uncertainties in global conditions. SBI Securities said, during the last year, Indian benchmark equity indices have marginally underperformed their emerging and developed market peers, albeit, the broader markets have delivered strong returns across the board. Not just that, Indian economy is said as the island of stability amidst global chaos.

Data from SBI Securities showed that from October 24, 2022, to October 31, 2023, Nifty 50 and Sensex have recorded 7.6% and 6.8% upside respectively, while Nifty Smallcap 250 and Nifty Midcap 100 index have delivered a robust 28.3% and 26.0% returns respectively.

SBI Securities research note for Diwali 2023 picks said, "Indian equity markets were resilient (although volatile with 4 consecutive negative monthly closing between Dec'22 to Mar'23 period followed by 6 consecutive positive monthly closing on Nifty between Apr'23 to Sep'23 period) amid persistent geopolitical tensions, rising interest rate environment, banking crisis in US with shutdown of Silicon Valley Bank and volatile croreude/food prices. Global investors continue to stay positive on India, led by conducive business environment in the backdrop of stable political & macroreo setup."

Among the key gainers in this 1 year would be BSE Capital Goods (+42.3%), BSE Auto (+23.3%) and BSE Metals (+19.5%).

That being said, with Samvat 2080 on the roll, SBI Securities has recommended buying 10 stocks that are attractive for investment during Diwali 2023. These are - ICICI Bank, Maruti Suzuki, Ultratech Cement, Polycab India, Kalyan Jewellers India, Praj Industries, Titagarh Rail Systems, Mrs Bectors Food Specialities, Kolte-Patil Developers, and Goodluck India.

Here's what SBI Securities say about these stocks:

1. ICICI Bank:

As per SBI Securities, the bank's asset quality is expected to remain stable while the growth momentum will be maintained going ahead. The marginal drop in NIM during 2QFY24 by 30 bps was due to the repricing of the deposit as CASA market became more challenging. The change in product mix (focus on credit card/MSME/PL) however will help to post similar NIM and RoA for FY24.

However, the opex ratio may remain at elevated level given the investment in infrastructure (branch expansion) and higher employee attrition rates. However, the brokerage believes higher business growth visibility will help to cushion the impact on RoA and profitability.

The target price for ICICI Bank is set at Rs 1,081.

2. Maruti Suzuki:

Marurti is further adding 10 lakh unit capacity at Kharkhoda in Haryana, the production of which will start in 2HFY24. The company plans to have a total capacity of over 40 lakh units and a market share of 50% by FY30. Apart from this, the company is also planning to launch other powertrain options such as flex fuel and CBG as and when the fuel infrastructure is available in India.

Notably, the auto giant has received good response in its SUV launches. MSIL has launched a number of SUVs in the last 15 months including the revamped Brezza, Grand Vitara, Ertiga, Fronx and Jimny.

In the electric vehicles segment, the company is also planning to launch its maiden electric vehicle in FY25. It plans to have a portfolio of 6 battery EVs in its portfolio by FY30. The company is also looking at backward integration by setting up a battery manufacturing capacity adjacent to the EV facility.

The target price is set at Rs 12,000.

3. Ultratech Cement:

SBI Securities stated that cement volumes are likely to grow by 9-10% for industry for FY24. Average pan-India cement prices are up 7-8% v/s its June exit prices. The prices should likely hold for the remaining part of the year as well. Capacity utilization for Ultratech during the quarter was at 75% and the company sound optimistic on the demand scenario and expect higher utilization to continue in coming quarters.

Also, by end of September 2023 quarter, Ultratech's net debt/equity ratio stands at comfortable levels of 0.2x and the company is generating annual OCF to the tune of ~Rs 9,000 crore or more. This provides comfort that Ultratech will be able to execute capacity expansion plan without stretching the balance sheet.

Further, the company commands robust margins (EBITDA/tonne of Rs 956) and is likely to expand further led by improving share of premium products (21.7% share in 2QFY24), improvement in clinker conversion ratio (1.44 in 2QFY24 vs 1.41 in 2QFY23) and optimum fuel mix.

The target price is set at Rs 9,800.

4. Polycab India:

Polycab's management has guided for Rs 20,000 crore revenue by FY26. The management during the earnings conference call revealed that the guidance will be revisited in next 2-3 quarter and there is a possibility that the same will be upgraded. The company will do capex of Rs 600-700 crore each during FY24 and FY25. The EHV transmission line cables plant is expected to be operational by FY26.

During FY23-FY25E period, Sales/EBITDA/PAT is expected to grow at a CAGR of 19.8%/23.4%/23.8% to Rs 20,244.1 crore/Rs 2,805.3 crore/Rs 1,966.5 crore respectively, the brokerage's note said.

The target price is set at Rs 5,877.

5. Kalyan Jewellers India:

KJIL targets same store sales growth of mid to high single digits. It will focus more on capital efficient franchise store strategy to accelerate RoCE from the current levels of 17%. In terms of expansion, the company will increase its presence in high margin non-South India region. For international expansion, the company plans to do calibrated expansion in Middle East on the back of healthy business traction which will be largely funded from its capital-light franchise store strategy.

During FY23-FY25E period, Sales/EBITDA/PAT is expected to grow at a CAGR of 25.1%/23.3%/38.8% to Rs 22,037.2 crore/Rs 1,643.0 crore/Rs 832.1 crore respectively, as per the brokerage.

The target price is set at Rs 364.

6. Praj Industries:

Government of India has advanced the target of 20% Ethanol Blending Program (E20) program with petrol to 2025 from 2030 to reduce the country's oil import bill and pollution. Players like Praj are likely to be key beneficiary of such capex program.

Also, beer market in India is likely to grow at CAGR of 8.1% to Rs 622 billion and Praj is likely to be the key beneficiary in medium to long term. Additionally, the company is at the forefront when its comes to future fuels and is working on 2G ethanol (processing a wide range of agri residue such as rice straw, wheat straw, bagasse, corn stover and corn cobs, soft wood and empty fruit bunches to produce bioethanol and renewable chemicals), Renewable Natural Gas, Marine Biofuels, Sustainable Aviation Fuel (SAF) etc.

The technology for SAF is in the final leg of optimization and commercial offering and it is proven to significantly reduce carbon emissions when blended with Aviation fuel.

With healthy order book in hand and robust order inflows underpinned by strong industry tailwinds, the brokerage believes Praj will continue to deliver healthy operational and financial performance for next 3-4 years.

The target price is set at Rs 633.

7. Titagarh Rail Systems:

Titagarh is well placed in new floated tender by Indian Railways for 20,000 wagons. The management stated that this is only for one type of wagon & it expects other tenders to come out as well in the due course of time.

Also, the company's management alluded to reach its first production target of 15-20 coaches by mid of FY25 and reach full capacity of 70-75 coaches within 3 to 3.5 years. Current capacity utilization - 20-25%. The total passenger rolling stock opportunity (Metro projects) is worth Rs 500bn - Rs 700bn.

Further, the company aims to gain market share with the ramp-up of capacity going ahead. It is the only company with both stainless steel and aluminium body production technology.

The target price is set at Rs 988.

8. Mrs. Bectors Food Specialities Ltd (MBFSL):

MBFSL is adding 2 additional biscuit lines in Punjab to meet the growing demand with a total estimated cost of Rs 75 crore. The expected timeline of this project is 2QFY24. The company has also received approval for construction of building plan for its biscuit line at Dhar, MP which is expected to get ready in FY25. In its bakery segment, the company is adding bakery plant in Ncrore with an estimated cost of Rs 32.7 crore and estimated completion timeline of 3QFY24. Apart from this, MBFSL has also purchased land in Khopoli, Maharashtra for its bakery expansion which is expected to be commissioned by FY25.

The target price is set at Rs 1,358.

9. Kolte-Patil Developers Ltd. (KPDL):

Kolte-Patil is well-placed for across regions such as --- : (a) Pune - The company is entering new microreo-markets to capture a larger share of Pune region with product offerings across affordable, MIG, HIG and super luxury segments (b) Mumbai - Entering new micro markets of central suburbs of Mumbai and Navi Mumbai region with product offering in the range of Rs 1.5 crore - Rs 3.5 crore per unit and continues to focus on society redevelopment /JDA/JV/Structured Outright having more than Rs. 300 crore or top-line potential per project. (c) Bangalore - Continues to improve visibility through product offerings in MIG segment.

The target price is set at Rs 570.

10. Goodluck India:

The company is likely to spend Rs 200 crore as a part of capex over the next 2 years. The current capacity of 3,60,000 MT will be enhanced to 4,50,000 MT by FY25. With likely increase in cash flows, the management is confident to further deleverage the balance sheet by repaying partial debt and intend to repay the entire long-term debt of Rs 100 crore.

Moreover, the company is likely to post mid-teens growth in topline from current Rs 3,048 crore FY23 to Rs 4,500 crore plus by FY26. However, earnings are likely to grow at a faster rate led by expansion in EBITDA margin and reduction in interest cost on account of deleveraging of balance sheet.

SBI Securities said, " During FY23-FY25E period, Sales/EBITDA/PAT is expected to grow at a CAGR of 16.0%/31.2%/40.0% to Rs 4,100.0 crore/Rs 377.2 crore/Rs 172.2 crore respectively."

The target price is set at Rs 1,072.

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.