Even as the markets are rallying and stocks are getting more expensive based on fundamentals, it is hard to find value in the markets. However, broking firm Sharekhan has suggested to buy a few stocks, which it believes has a reasonable upside from these levels.
Bharat Electronics Ltd
Brokerage firm Sharekhan has a buy on the stock with an upside potential of around 10 to 15% from these levels.
Bharat Electronics Ltd (BEL) is a government majority owned enterprise that is into defence and electronics. Recently, the company declared its quarterly results and according to Sharekhan the net profits strongly beat estimates led by much higher-than expected Operating Profit Margins and better-than-expected execution.
"Management iterated its stand on investment in Research and Development and would invest 10% of revenues going ahead. Bharat Electronics Ltd remains our preferred pick in the defence sector on account of its strong manufacturing and Research and Development base, good cost control, growing indigenisation, and strong balance sheet with improving return ratios. The stock is trading at reasonable valuations of 13.9 times and 13.0 times its FY2023E and FY2024E earnings, respectively. With improving growth visibility, we retain our Buy rating on the stock with an unchanged target price of Rs. 196."
The shares of Bharat Electronics Ltd were last seen trading at Rs 175 on the NSE.
Tata Consumer Products
The firm also suggests buying the shares of Tata Consumer Products at the current levels and sees an upside potential of 10 to 15% from the current levels. Tata Consumer Products is a top company with brands like Tata Tea, Tata Salt and Tetley to name just a few.
"Gaining market share in the branded tea and staples segment, scaling up the acquired ventures such as NourishCo and Soulfull, gradual improvement in out-of-home consumption and a foray into new categories through relevant launches remain key growth catalysts in the near term, besides acquisitions.
With consistent double-digit revenue growth, steady rise in margin and stable working capital management, Tata Consumer Products expects return ratios to consistently improve in the coming years. The stock is currently trading at 53 times its FY2023E earnings. We maintain a Buy recommendation on the stock with a revised price target of Rs. 875," broking firm Sharekhan has said. Shares of Tata Consumer were last seen trading at Rs 758 on the BSE.
This is another stock that Sharekhan is bullish on. The firm sees an upside potential to Rs 205 on the shares of NMDC from the current market price of Rs 177.70.
"NMDC's valuation of 3.8 times its FY2023E EV/EBITDA (excluding value of the steel plant at 0.5x CWIP) is attractive as it is at a steep discount of 28% to average EV/EBITDA multiple of 5.3x for global mining peers despite earnings visibility and strong return ratios (RoE/RoCE of 22.1%/24.5%).
Value unlocking from the demerger and potential strategic sales of the steel plant (could add Rs. 30-32/share to NMDC's valuation as the street is ascribing only 50% value to CWIP of Rs. 18,560 crore). Hence, we maintain our Buy rating on NMDC with a revised target price of Rs. 205. We highlight here that likely stake dilution by the government through OFS could act as an overhang on NMDC's stock price in the near term," the broking firm has said.
Views mentioned herein are taken from the brokerage report of Sharekhan. Neither the author, nor the brokerage nor Greynium Information Technologies would be responsible for losses incurred based on the article. Please consult a professional advisor. Investing in stock markets is risky.