HDFC Securities Suggests Buy These 6 Stocks, Sees Potential Gains Up To 53%

Stocks to Buy – CMP, Target Price, Potential Upside

 

1. Multi Commodity Exchange of India Limited (MCX)

MCX is a  commodity derivatives exchange that facilitates online trading of commodity derivatives transactions, thereby providing a platform for price discovery and risk management. The Exchange operates under the regulatory framework of SEBI.

According to the brokerage, MCX options ADTV continues to rise (+60% QoQ) while futures ADTV declined -5.2% QoQ. The options ADTV stood at INR 314bn, which is up ~5.2x YoY. The futures volume decline was led by crude (-22% QoQ). The effective ADTV (futures+options) is up 44% YoY, reaching INR 366bn in Q2FY23. MCX revenue is expected to increase by 11.6% QoQ and the margin will expand to 48.4% (+310bps QoQ).

"We prefer MCX in the exchanges space, aided by continued traction in options volume, healthy new product pipeline (index and gold mini options), approval of FPI participation and expected cost-savings due to change in tech vendor. The extension of the support timeline by the existing technology vendor will ensure a smooth transition. Maintain BUY, with a TP of INR 1,900, based on 35x June-24E core EPS," the brokerage said. 

2. Teamlease Services Limited

TeamLease Services is one of India's leading human resource companies offering a range of solutions to more than 3500 employers for their hiring, productivity and scale challenges. 

According to the HDFC securities,  Teamlease is expected to post a good quarter, led by ~5% volume growth. We expect the net addition of ~9K associates in general staffing and ~4K NETAP trainees. Revenue is expected to grow 5.3% QoQ and EBITDA margin will expand by 50bps QoQ to 1.8% due to recovery in staffing and HR services margin. The pick-up in economic activity and the festive season has led to higher demand for temp/flexi staffing. However, some signs of weakness were visible in IT hiring, which impacted specialised staffing growth. 

"Overall, we expect ~15-20% organic volume growth in the general staffing business. Fixed markup in the general staffing business will keep the staffing margin under check while margin expansion will come with a change in revenue mix and higher automation. We estimate +23/32% revenue/EPS CAGR over FY22-24E. Maintain BUY, with a TP of INR 4,070, based on 35x June-24E EPS," the brokerage has said.

3. Indiamart Intermesh Limited

IndiaMART is India's largest online B2B marketplace, connecting buyers with suppliers. With 60% market share of the online B2B Classified space in India, the channel focuses on providing a platform to Small & Medium Enterprises (SMEs), Large Enterprises as well as individuals. 

According to the brokerage, IndiaMart will witness strong supplier addition, led by higher investment in sales and partner network. We expect the addition of 9.5K paid suppliers, which is in line with the target range of 8-10K/quarter. The churn is also expected to reduce for the monthly bracket while the silver and platinum annual customers continue to remain sticky. 

"We expect revenue to increase by 6.7% QoQ, led by supplier additions and an increase in ARPU (+1.2% QoQ). The EBITDA margin will expand 105bps sequentially to 29.6%, led by operating leverage. The operating margin is expected to improve gradually and the exit rate for FY23E will be healthy (~32%)," the brokerage said.

It added, "We have marginally tweaked our margin estimates, resulting in a ~2% cut in estimates. The collections will remain strong (INR 2,600mn, +16.4% YoY), setting the stage for healthy growth in FY24E. We expect revenue/EPS CAGR of +21/30% over FY23-25E. Maintain BUY with a DCF-based target price of INR 5,500, implying EV/EBITDA of 33x June-24E." 

4. Tanla Platforms Limited

Tanla Platforms Limited develops and markets computer software. The Company offers internet of things, voice, messaging, and other cloud communication solutions. The company serves customers worldwide. 

According to the brokerage, Tanla Platforms is expected to report a mild recovery in the enterprise segment while the platform business continues to remain strong. The Enterprise business will report 2.8% QoQ growth but it will register a decline on a YoY basis due to the ongoing ramp-down in one top account. Total revenue is expected to increase by 3.4% QoQ and EBITDA margin is likely to expand marginally by 48bps to 16.8%. The gross margin will rise for the enterprise segment and improve marginally to 17%, while the platform segment will operate in a similar range of 90%. The management is expecting the EBITDA margin to reach ~18-19% in the next two quarters, led by expansion in enterprise GM. The impact of the ILD price increase will be visible in H2FY23E. "We reduce our gross margin estimate for the enterprise business due to higher competition, resulting in an 8/6% cut in FY23/24E EPS. We maintain our BUY rating on Tanla, with a TP of INR 1,020 based on 22x June-24E EPS," the brokerage said. 

5. Info Edge (India) Limited

Info Edge has an in-depth understanding of the Indian consumer internet domain. With years of experience in the domain, strong cash flow generation and a diversified business portfolio, it is one of the very few profitable pure-play internet companies in the country.  Company owns Naukri.com, jeevansaathi.com, 99acres.com, shiksha.com & various other domains.

According to the brokerage, Naukri growth will normalise to 2.8% QoQ, after posting six quarters of strong growth (>10%). The other segments 99acres/Shiksha will report ~4% QoQ growth. The IT sector hiring is coming off a high base but hiring activity in other sectors like the BFSI, travel, auto, etc., will remain strong. Standalone revenue is expected to increase by 2.8% QoQ and EBITDA will decline 23bps QoQ to 31.9%. The ad spend will remain higher for 99acres and Jeevansathi; Naukri's margin will remain in the 58-59% range. 
"We expect 27/22/-8% revenue CAGR in Naukri/99acres/Jeevansathi and an EBITDA CAGR of 41% over FY22-24E. We have a BUY rating on Info Edge and a SoTP-based TP of INR 5,000. We have assigned 45x EV/EBITDA to Naukri and 5/3/5x P/S to 99acres/Jeevansathi/investments (ex-Zomato and PB)," the brokerage said. 

6. AGS Transact Technologies Limited

AGS Transact Technologies Limited offers payment processing solutions. The company provides services such as transaction switching, automated teller machine outsourcing, cash management, and digital payment solutions such as transaction processing services and mobile wallets. 

According to the brokerage, AGS is expected to report a strong quarter with 10.9% QoQ growth, led by a recovery in ATM transactions, growth in cash management and POS business and higher services revenue in the banking automation segment. The EBITDA margin will be at 26.7% (vs 27% in Q1FY23) and EBITDA at INR 1.24bn (+9.6% QoQ). The company will post a PAT of INR 0.22bn and interest cost for the quarter will be at INR 0.37bn.

"We expect +10/16/14% revenue CAGR in ATM Business/Digital Payments/Banking Automation and an EBITDA CAGR of 14% over FY22-24E. We have a BUY rating on AGS, with a TP of INR 123, based on 12x Sep-24 EPS," the brokerage has said.

Disclaimer

The stocks have been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.