Stocks to buy for long term: Pankaj Pandey of ICICI Securities recommends these 5 shares to buy today

Stocks to buy for long term: The Indian stock market has seen healthy gains this year so far due to factors including the durability of domestic economic growth, the influx of retail investors, policy continuity, easing inflation, and the prospects of the start of the rate reduction cycle in the US and India.

As of September 4, the benchmark indices, Nifty 50 and Sensex have surged 16 per cent and 14 per cent, respectively, year-to-date. This rally is expected to gain further momentum, with anticipated rate cuts this month likely to serve as a fresh catalyst for the market.

However, experts caution that stretched market valuations could limit further gains. In addition, geopolitical tensions and the upcoming US Presidential Election remain key factors influencing market movement. Despite these risks, experts identify several stocks with the potential to deliver solid returns over the next year.

Pankaj Pandey, the head of research at ICICI Securities advises buying quality stocks at this juncture for the long term. He recommends the following five stocks to buy today for the next one year. Take a look:

Sonata Software | Previous close: ₹668.50 | Target price: ₹770 | Upside potential: 15%

Pandey pointed out that Sonata Software is poised for robust long-term growth, expecting accelerated momentum from H2FY25.

The company aims for $1.5 billion in revenue by FY27, supported by a healthy IT services pipeline, large deal traction and GenAI.

Despite challenges from delayed pipeline conversion and margin pressures, Sonata sustained momentum with three large deals and 14 client additions in Q1FY25.

“Management expects 20 per cent of the revenues from GenAI services in the next three years. While margins face near-term pressure due to delays and investments, recovery to mid-20s levels is expected by FY26, with IT services projected to grow at a 12.8 per cent CAGR over FY24-26E,” said Pandey.

Piramal Pharma | Previous close: ₹213.03 | Target price: ₹230 | Upside potential: 8%

The company specifically focuses on CDMO by incremental spending on high-value services.

“Global tailwinds in the CDMO space, like the US Biosecure Act, improvement in funding scenario with anticipation of US rate cuts, and a vacuum created by Global M&A could be significant triggers in the near future,” said Pandey.

The biggest advantage vis-à-vis peers is its global manufacturing network, which covers the entire value chain in the CDMO cycle.

“In complex generics, the company is focusing on penetrating new markets by setting up distribution partners, whereas consistent efforts are being made to drive traction on the consumer healthcare side by adding new products,” Pandey said.

PCBL | Previous close: ₹510.20 | Target price: ₹ 600 | Upside potential: 18%

PCBL is a leading manufacturer of carbon black, which is used as a reinforcing material in tyres.

PCBL also derives nearly 11 per cent of its sales volume from speciality carbon black, which fetches high margins and is used in paints, plastics, etc.

It has a healthy margin profile (nearly 16 per cent) and a capital-efficient business model (return on equity, or RoE, of more than 15 per cent).

“We hold a positive view on PCBL, driven by healthy underlying double-digit volume growth in carbon black space led by greater export play, an increasing share of speciality grade carbon black, efficiencies and turnaround in sight at its recent acquisition, i.e.Aquapharm and big opportunity in sight in Nano Silica,” said Pandey.

Kalpataru Projects International | Previous close: ₹1,400.05 | Target price: ₹1,630 | Upside potential: 16%

The head of research of ICICI Securities pointed out that Kalpataru Projects commands a strong order backlog of ₹57,195 crore, up 21 per cent YoY, ensuring strong double-digit revenue growth.

On the margins front, the company is winning orders at double-digit margins, which will positively impact the margins from the second half of the financial year (H2FY25E) onwards.

“The company has set a target of ₹23,000 crore of order inflows in FY25E. KPIL gas secured orders of ₹7,015 crore (L1 of nearly ₹5,000 crore),” said Pandey.

“KPIL has maintained its margin guidance of 8.5-9 per cent at the EBITDA level. Divestment of non-core assets with strong operating performance will help the return on equity (RoE) to increase from 10.3 per cent in FY24 to 15.5 per cent in FY26E,” Pandey said.

Star Health and Allied Insurance Company | Previous close: ₹630.25 | Target price: ₹730 | Upside potential: 16%

Star Health is the largest standalone health insurer, with a market share of nearly 31 per cent.

Existing moats in terms of focussed approach, distribution strength and network tie-ups coupled with technology adoption remain core positives.

Anticipated favourable regulation could act as a catalyst for valuation in the near term.

Boost in penetration of general insurance (at 1 per cent of GDP in FY23), the anticipated reduction in GST on insurance products (currently at 18 per cent) is expected to increase the attractiveness and affordability of insurance products, thereby aiding business growth.

“Management aspires to double GWP (gross written premium) to ₹30,000 crore by FY28E, implying growth of nearly 19 per cent CAGR,” said Pandey.

“Levers for growth include enhancing the agency network, diversifying the channel mix, increasing pricing for a few products (nearly 30 per cent of the portfolio) and focusing on the SME and MSME segments,” Pandey said.

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