Diwali Top Picks: From Reliance, SBI To SJVN, Coforge, Top 10 Stocks To Buy This Samvat 2080

Diwali festival is set to light up across India from November 10 and will continue till November 14, 2023. There will also be a one-hour auspicious Muhurat Trading held on November 12 on the day of Laxmi Pujan. During this auspicious occasion, brokerage JM Financial has selected 10 stocks from diverse segments as top picks to buy. These stocks are expected to give double-digit returns from 15% to 25% going forward.

They are -- Reliance Industries, State Bank of India, Titan Company, Sun Pharma, Ashok Leyland, Coforge, SJVN, Sapphire Foods India, Go Fashion India, and STYLAM Industries. Some of the stocks are high dividend-paying ones and belong to all three baskets largecaps, midcaps and smallcaps.

Here's what JM Financial highlights about these 10 stocks:

1. Reliance Industries: (Target Price: Rs 2,700)

JM believes Reliance Industries' net debt concerns are overdone, and also because RIL has industry-leading capabilities across businesses to drive robust 14-15% EPS CAGR over the next 3-5 years. The company's s guidance on keeping reported net debt to EBITDA below 1x (0.8x in Mar 23) also gives comfort.

Brokerage also believes RIL could still drive a robust 14-15% EPS CAGR over the next 3-5 years with Jio's ARPU expected to rise at 10% CAGR over FY23-28 with ARPU being on a structural uptrend given the industry structure, future investment needs, and the need to avoid a duopoly market. Further, strong growth momentum continues in the company's Retail business as RIL is driving omni-channel capabilities across segments.

2. State Bank Of India (SBI): (Target Price: Rs 665)

SBI continues to see strong traction in retail and SME segments. Domestic loan growth has slowed a bit, and in the interim, the bank has increased its focus on the overseas loan book. They reiterated guidance of ~12-14% loan growth for F24. SBI's core fundamentals continue to be stable while delivery on the growth front along with sustained margins and controlled credit costs should drive movement in the stock.

It added that, State Bank of India's core fundamentals continue to be stable while delivery on the growth front along with sustained margins and controlled credit costs should drive movement in the stock.

3. Titan Company: (TP: Rs 3,650)

With the company aggressively ramping up its network and with regulatory tailwinds, Titan is expected to continue to gain market share in its key jewellery business.

Ahead of the Strong Festive and Auspicious Marriage Season, the brokerage expects strong earnings momentum likely in the upcoming 2nd Half of this FY24. Titan wedding jewellery segment with sizeable market share. 2) Driving stronger growth in the high-value diamond jewellery space. 3) Focusing on Expansion.

Also, JM remains confident of the high-teens earnings trajectory continuing for the Bengaluru-based company in the medium term, given strong execution. The ongoing urban discretionary slowdown does not seem to have hit the company's customer base.

4. Sun Pharmaceuticals: (Target Price: Rs 1,300)

The upward trajectory of speciality business continues with an increasing volume share of Ilumya and Winlevi (Winlevi has garnered a 26% share among the top 10 branded drugs).

Further, JM's note said, "We expect SUNP's global specialty business to be ~USD 1bn in FY24 which should further aid overall profitability. US FDA re-inspection for Halol and Mohali, in our view, could be in FY24-end / early FY25. We remain optimistic about the filing of Deuruxolitinib in CY23. We believe domestic growth will revert to an early double digits as patent expiry of sitagliptin in the base and NLEM impact normalises. While R&D spending on specialty increased to ~36% in 1Q, overall R&D expenses are expected around the lower end of the guidance. Key risk: Any change in Regulatory Landscape - Any pricing erosion / Any delay in key launches."

5. Ashok Leyland (AL): (Target Price: Rs 200)

The company is likely to be the key beneficiary of the expected traction in the domestic CV industry, driven by traction in the macroeconomy. Management indicated that demand momentum is expected to improve going ahead and the outlook for MHCV demand remains strong (FY24: 8-10% YoY) led by govt. infra spends and healthy replacement demand. AL aims for a higher share in MHCVs (to c.35%) led by network expansion (in the North and East) and addressing product gaps.

Given AL's market share in the north and eastern markets is relatively low, the company is focusing on the northern
and eastern markets via expanding its dealership network and launching suitable products to expand its market share.

While AL has maintained its market share above 30% in the MHCV segment for the past six quarters, it has been aiming for a 35% kind of market share in the long term.

6. Coforge: (Target Price: Rs 5,920)

Seasonal weakness in 3Q will likely drive a tepid next quarter before growth picks up in 4Q, JM Financial added, "We build these as we moderate our FY24E cc revenue growth to 13.5% (12.5% USD), at the lower end of 13- 16% guidance (unchanged)."

It added, "Our FY24-25E EPS is down by 14%/6%, due to higher ESOP expenses and expectations of a more gradual uptick in margins. Notwithstanding these moderations, Coforge's earning visibility (24% EPS CAGR over FY23-26E) remains one of the highest in the sector, in our view. We therefore shed our conservative stance that mid-caps should necessarily trade at a discount to their larger peers."

7. SJVN: (TP: Rs 80)

SJVN is fast expanding its footprint in the field of renewables and aims to add 1.0-1.5GW capacity annually to give a thrust to its renewables endeavours, SJVN registered a wholly owned subsidiary SJVN Green Energy Limited in Mar'22. Its renewables portfolio at present stands at 3.74GW, which includes operational (103.2MW), under construction (1,270MW), pre-construction (850MW), survey & investigation (1,489MW) and pre-award (33MW) projects. Along with a stable portfolio of hydro assets (installed + upcoming) SJVN, has set an ambitious target of achieving 19GW of solar capacity by 2040, which will constitute 39% of its total installed capacity.

With an installed hydro capacity of 1,912MW and under construction projects of 7,519MW (hydro, renewables & thermal power), the company's total generation is set to grow by 3x in FY26.

8. Sapphire Foods India: (Target Price: Rs 1,560)

KFC's performance has been relatively resilient vs. PH, and among the two franchisees, Sapphire's execution has been quite commendable - absolute ADS, SSSG and ADS CAGR are higher vs. Devyani over FY19-23.

JM added, SSSG is unlikely to see a recovery in 2Q, given that it's a seasonally weak quarter owing to various festivities (in July/August) because of which non-vegetarian consumption is lower, especially in Sapphire's territories (viz., North/West). From the medium-term perspective, the management remains confident about 5-7% SSSG. Also, KFC's brand equity in the chicken segment is extremely strong and its differentiated chicken offering provides it an edge over the competition.

9. Go Fashion India: (Target Price: Rs 1,540)

The pace of store expansion to remain healthy for the company and is on track to achieve FY24 guidance:

In terms of EBOs, the company remains on track (added 25 in 1Q, and we expect 28-30 store additions in 2QFY24) to achieve its guidance of additions of c.120 stores p.a. Further, given the thrust on value-added products, the newer stores are larger in size (c.450+ sqft) to provide optimum space for these product lines. It is also in the process of beefing up its business development team, in line with its strategy to accelerate store expansion to 150-170 stores p.a. from FY25 (higher vs. our current estimate of 120 stores p.a.).

10. Stylam Industries: (Target Price: Rs 2,070)

Stylam is gaining market share in both the domestic and export markets, and we expect this trend to continue. In the past five years (FY18-23), it has reported strong revenue/EBITDA/PAT CAGR of 23/26/37% respectively, aided by an increasing value-added mix.

JM said, "We believe there is ample scope for the company to expand its geographic reach and deepen its market penetration in the existing domestic and export markets, offering good revenue growth visibility. Valuation remains inexpensive at 24x its FY24 Earnings relative to its peers."

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.