Sharekhan New Picks Offering Impressive Return: Buy 2 Stocks From Automobile, Bank Sector

Sharekhan has picked two stocks from banking and automobile sectors. The analyst has assigned buy call to Apollo Tyres Ltd and AU Small Finance Bank (AUSFB). According to Sharekhan, "we maintain a Buy on Apollo Tyres Limited (ATL) with a revised PT of Rs. 372, led by expected market share gains by the company in key segments and markets and attractive valuations."

Meanwhile, the analyst said about the banking, "AUSFB outlined how the bank is attractively positioned to capture a large untapped MSME opportunity in the fastest growing Indian economy along with building strong competitive moats for sustained growth in a risk calibrated manner."

1. Buy AU Small Finance Bank

The last trading price of AU Small Finance Bank is Rs 682 apiece with an intraday gain of 1.32%. The stock's 52-week high is Rs 732 apiece and 52-week low is Rs 467 apiece, respectively.

The bank has a market capitalisation of Rs 45,420 crore. The stock has given 98% return in last 5-years and 68% return in last 3-years.

Sharekhan has assigned a target price of Rs 800 to AU Small Finance Bank. If you buy AU Small Finance Bank at the current market price, you can get potential 17% return.

According to Sharekhan, "We believe AUSFB has a clear road map for its sustainable profitable growth path with the right strategy in place on both asset as well as liability sides along with strong execution capabilities. Thus, we retain our Buy rating on the stock with an unchanged PT of Rs. 800. The stock is currently trading at 5.2x/4.4x/3.7x its FY2023E/FY2024E/FY2025E ABV. We believe strong earnings growth and longevity of the franchise would support the rich valuations."

Key Risks: Economic slowdown due to which slower loan growth and higher-than-anticipated credit cost.

2. Buy Apollo Tyres Ltd

Sharekhan has assigned buy rating to the stock with a target price of Rs 372 apiece. If you buy the stock now at the current market price of Rs 315 apiece, you can get potential 18% return.

The company has a market capitalisation of Rs 20,059 crore. The stock has given 85% return in last 3-years, 46% in last 1-year, and 15% in last 3-months.

According to Sharekhan, "Tyre demand has improved significantly in domestic and European operations. ATL is well-positioned to gain market share in India and Europe, given its strong brand, R&D, technology, and distribution network. We expect the company to benefit from its strategy by deleveraging its balance sheet, improving capacity utilisation, and focusing on firm capital allocation and cash management in the near term. Strong growth coupled with a leadership position in key markets and segments will likely re-rate valuation multiples. The stock trades at attractive valuations at a P/E multiple of 10.7x and an EV/EBITDA multiple of 5.4x its FY2025E estimates. We retain a Buy rating on the stock with a revised PT of Rs. 372.

Key Risks: Apollo derives about 30% of its revenue from its European operations, which exposes it to currency risks. Any adverse movement in the INR-Euro pair would affect financial performance.

Disclaimer

The stocks have been picked from the brokerage report of Sharekhan. 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 taking any investment decision.