Stocks to buy: Federal Bank, Neogen Chemicals among top four stock picks by Kotak Equities for June

The Indian stock market indices hit record highs on Monday, with the benchmark Sensex surging above the 77,000-mark and the Nifty 50 scaling above 23,400 level, amid upbeat sentiment.

In the month of June, the equity market will continue to track inflation data, actions and commentaries of key central banks, bond yields, crude price movement and geopolitical developments. The market focus will move beyond elections and the factors that would be relevant for the market would include the economic agenda of the new government and the FY25 union budget. 

“Robust FY24 GDP growth, healthy earnings growth, strong domestic flows, stable macro factors, control over inflation and above-normal monsoon expectation would continue to support the domestic equity markets. However, overall valuations remain on the higher side,” said analysts at Kotak Institutional Equities in a report.

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The brokerage firm expects earnings of the Nifty-50 Index to grow 10% in FY25E and 14% in FY26E (FY24 growth was 20%). OMCs alone contributed 29% of the incremental profits of FY24. In FY25E, it expects banks, diversified financials, IT services and metals & mining to provide bulk of the incremental profits for the Nifty-50 Index. It expects Nifty 50 index EPS of ₹1,092 in FY25E and ₹1,248 in FY26E. 

In its top investment ideas for June 2024, Kotak Equities recommends four stocks to buy in June. These stocks are Federal Bank, Gravita India, India Shelter Finance Corporation and Neogen Chemicals. The brokerage firm has a ‘Buy’ call on these four stocks.

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Federal Bank | Buy | TP: ₹190

Federal Bank reported flat earnings, led by higher provisions for staff costs. The lender continues to do well on asset quality, despite a steady increase in higher-yielding loan products. The bank has indicated that it has made substantial progress on its succession planning, Kotak Equities noted.

The brokerage firm maintains Federal Bank as a preferred pick among mid-tier banks. It has a ‘Buy’ rating on Federal Bank shares and raised the target price to ₹190 per share from ₹185 earlier.

Gravita India | Buy | TP: ₹1,225

Gravita India reported a healthy 9% YoY growth in net profit in the quarter ended March 2024. Volume growth of 14.3% YoY was impressive amid the ongoing logistics disruption in the Red Sea. The brokerage firm forecasts 22% CAGR in PAT over FY24-FY27E and expects earnings per share (EPS) to grow by 26.8% in FY25E and 22.9% in FY26E. 

Kotak Equities has a ‘Buy’ call and raised Gravita India share price target to ₹1,225 from ₹1,200 earlier.

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India Shelter Finance Corporation | Buy | TP: ₹700

India Shelter Finance Corporation’s asset quality performance improved YoY. Coupled with a lower base, this encourages the company to sustain its high loan growth guidance. The Street may have concerns of low seasoning of its book, Kotak Equities said.

It retained a ‘Buy’ rating on India Shelter Finance shares and raised the fair value to ₹700 per share from ₹685 earlier.

Neogen Chemicals | Buy | TP: ₹1,870

Neogen Chemicals reported much-improved earnings for Q4FY24, following a particularly weak Q3FY24. First phase of battery chemicals capacity commissioned. The expansion plan is on track for H2FY26 and the growth story remains on track. Working capital remains a concern. Positive outlook for growth across both battery chemicals and base business, the brokerage firm said.

It has a ‘Buy’ call on Neogen Chemicals shares with a revised DCF based target price of ₹1,870 per share.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.