Stocks Investment: Coal India, Dalmia Bharat, Cipla, Canara Bank Are Top 4 Picks Of Motilal Oswal In Jan 2024

Record high performances in 2023, have led IMF to call India a 'star performer' and projected the country to contribute 16% to global growth. Currently, the country's macro and policy momentum are witnessing upbeat growth, surpassing global economies, and the year 2024 is likely to see further new heights in domestic equities including benchmarks Sensex and Nifty. Amidst a robust outlook, Motilal Oswal has recommended buying four stocks in January 2024.

In its monthly market report, Siddhartha Khemka, Sr Group Vice President - Head of Retail Research Of Motilal Oswal said, "Domestic equities ended the year 2023 on a buoyant note. December recorded the best gains since July'22, with key indices reaching new highs. Investor sentiments got a big boost with hopes of an early rate cut in 2024 and strong economic data."

He revealed that in 2023, buying was seen across the sector with Energy, Metals, PSU Banks, and Infrastructure gaining 10-14%. Niche sectors like defence, power, and fertilizers also rallied on the back of strong order and government subsidies.

Further, he said, "Indian economic indicators remain strong as real GDP has grown faster than expected in the last three quarters, registering 7.7% YoY growth in 1HFY24, leading RBI to revise its GDP growth target to 7% in FY24, from 6.5% earlier."

Accordingly, Motilal's analyst expect the Nifty EPS CAGR to be around ~20% over FY23-25, with scope for further rerating. He said, "Macro and policy momentum for India at the moment is seeing the highest growth among major economies, led by global liquidity tightening nearing its end, healthy domestic macro/micro environment, strong domestic/retail participation, and expected political continuity in 2024 General Elections."

Also, several key factors will influence the market in 2024. Khemka added, "We believe the ongoing pre-election rally will continue, and any rate cut will further boost market sentiments. We expect BFSI, Industrials, Real Estate, Auto and Consumer Discretionary to do well going forward."

Hence, Motilal's analyst likes below mentioned four stocks:

1. Coal India:

Domestic power demand is expected to grow at 1.1x GDP & reach 1,750bu of power generation in FY24. Coal is targeting production of 780mt in FY24E (up 12% YoY). While revival in demand & rise in international prices have pushed E-auction premiums to the level of 80-100% over the last few months. COAL sells 10% of the total volume via auction.

Coal India is well-placed to capitalize on growth in the power sector. It also offers an attractive dividend yield of 5.6%.

Motilal sets a target price of Rs 430.

2. Dalmia Bharat:

Dalmia has been consistent in capacity expansion over the past decade, with ~15% CAGR. It aims to increase cement grinding capacity to 110-130mtpa by FY31. Also, under the Dalmia 2.0 initiative, the company has prioritized 4 key areas: growth, financial performance, sustaining trust, and organizational development.

Motilal expects 34% PAT CAGR over FY23-26, driven by higher sales volume (11% CAGR), cost savings initiatives, & lower tax rates. The brokerage sets a target price of Rs 2,800.

3. Cipla:

Motilal is positive on Cipla given its robust growth in the prescription market, efforts to enhance the North American product pipeline, and improving profitability in consumer health business.

Cipla is focusing on increasing its market share in the DF business by deepening its penetration in tier 2 to 6 cities. It plans to launch 1 peptide in the near term and 3 more peptide products in FY25 in the US market. Motilal expects the company to deliver a 16% US sales CAGR to $982m over FY23-25.

Also, Motilal expects 11%/19% Revenue/PAT CAGR over FY23-25E. CIPLA has raised its EBITDA margin guidance to 23-24% for FY24. The brokerage sets a target price of Rs 1,450 apiece on the stock.

4. Canara Bank:

The PSU bank's earnings are growing at a steady run rate led by stable revenue and lower provisions. NIMs are expected to remain at 3-3.05% as MCLR re-pricing offsets the pressure on funding costs, while loan growth is expected to be healthy led by Corporate, Retail, and Agri segments.

Notably, the lender's asset quality ratios have improved and the management expects to further reduce net NPAs at an accelerated pace.

Given the above factors, earnings for the Bank are expected to grow at a more sustainable pace. Motilal expects RoA/RoE of 1.1%/17.6% in FY25. The brokerage has set a target price of Rs 550.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.