Stocks to buy for long-term: HAL to Ashok Leyland — ICICI Direct is bullish on THESE three shares

Stock market today: Indian benchmark indices recovered on Thursday after a sluggish start, with the Sensex gaining 210 points and the Nifty 50 advancing 0.28%. Initial declines, driven by worries over US President Donald Trump’s new auto import tariffs, were mitigated as the IT sector trimmed its losses, helping stabilize the broader market.

The benchmark BSE Sensex, after opening 58.93 points lower at 77,262.42, made a strong recovery to reach 77,695.49, gaining 406.99 points or 0.53% by 10:07 AM. Similarly, the Nifty 50, which initially dipped 13.55 points to 23,473.30 at the opening, rebounded to 23,596.20, climbing 109.35 points or 0.47% in early trade.

Indian equity indices snaps 7-day winning streak and ended lower on March 26. At close, the Sensex fell 728.69 points or 0.93 per cent to close at 77288.50, and the Nifty went down by 181.80 points or 0.77 per cent to end at 23486.85.

Analysts expect increased market volatility today due to global trade uncertainties and the upcoming expiry of Nifty 50’s March derivatives contracts. As a result, investors are likely to adjust their positions by either closing them out or rolling them over.

Brokerage firm ICICI Direct has suggested these three shares to buy for long-term - Hindustan Aeronautics (HAL), Ashok Leyland and City Union Bank.

Stocks to buy for long-term

Hindustan Aeronautics (HAL)

Set to soar. GE Aerospace has delivered the first of 99 (nos.) F404-IN20 engines to HAL for the light combat aircraft Tejas Mk 1A (Delivering for India Today and Into the Future | GE Aerospace News). In our view, this development allays concerns on the execution front. We expect revenue growth of 25–28% through to FY27E, based on the order book (OB) estimated at more than INR 1.3trn. Besides, there are further orders of 97 (nos.) Tejas Mk 1A and 156 (nos.) LCH Prachand in the pipeline. As a result of reduced execution concerns and lower risk on our earnings estimates, we roll back our WACC to 11% (earlier 12%), resulting in a revised TP of INR 5,000 (earlier INR 4,065). We upgrade HAL to BUY (from Add) and recommend it as our top pick among DPSUs.

City Union Bank

New LOS to boost efficiency, scale and risk management. We recently interacted with senior management and select business heads of City Union Bank (CUBK). The bank reiterated its growth guidance of 12–14% YoY for FY25 and acceleration to 15–16% YoY for FY26. We are impressed by the new LOS/IT system and scalability/uniformity it brings to the business, underwriting and monitoring. The quality of leads has improved dramatically and causes of rejections are well understood by the business teams instilling institutional learning. CUBK aims to improve the share of ‘green’ cases, from currently 15–20% to 35–40% over the medium term, leading to better efficiency and productivity. The initial results have been encouraging with a rise in throughput and miniscule (<0.4%) SMA2+NPA. The interaction has boosted our confidence on ~15% loan growth estimates (unchanged) for FY26E. Its recent 50–75bps rate cut in saving balances, in select buckets, should partly cushion NIM. The bank assured of no adverse impact on its derivative book.

Ashok Leyland

Switch Mobility switches focus to India. Ashok Leyland (AL) is considering ceasing manufacturing and assembly operations at its step-down subsidiary Switch Mobility’s, Sherburn facility in the UK amid economic uncertainties in the nation’s bus manufacturing sector. The company is reevaluating the current model, and plans to reduce its presence in the UK market and improve focus on Indian operations. Switch Mobility India is expected to be EBITDA break-even in FY25, and PAT break-even over the next 4–6 quarters. While downsizing Switch UK and focusing on Indian manufacturing operations may be positives from a long-term standpoint, increase in promoter pledge may remain an overhang on the stock in the near term. We maintain ADD, with an unchanged DCF-based target price of INR 250, implying 12x FY27E EV/EBITDA.

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