Stocks to buy: Granules India, Jay Bharat Maruti among three fundamental stock picks by HDFC Securities

Stocks to buy: The Indian stock market indices, Sensex and Nifty 50, traded lower on Thursday dragged by selling in IT, pharma and financial stocks amid mixed global cues. 

Broader markets outperformed the frontline indices as the Nifty Midcap 100 and Nifty Smallcap 100 indices were trading in the green.

The market is likely to remain volatile amid persistent selling by foreign institutional investors (FII) and rising US bond yields. Concerns over high valuations of Indian markets continue to weigh on sentiment. Moreover, investors will also focus on domestic corporate earnings for the December quarter.

HDFC Securities has three fundamental stock picks that it expects to give decent returns in the medium to long term. Based on strong fundamentals, the brokerage recommends buying Granules India, Jay Bharat Maruti and Shree Digvijay Cement Co Ltd and add these stocks on dips for a time horizon of 2-3 quarters. 

Also Read: Bajaj Auto share price rallies over 2% after upbeat Q3 results; Should you buy, sell or hold the stock?

Granules India | Buy | TP: ₹470.5

Granules India has been witnessing strong growth for its formulation business, mainly in regulated markets like US and UK. H2FY24 is expected to witness signs of recovery, led by new product launches and volume growth driving strong sales growth coupled with productivity measures which would lead to decent earnings growth for the company in the medium term, according to HDFC Securities. 

The brokerage firm estimates revenue, EBITDA and PAT to grow at CAGR of 9.7%, 11.2% and 12% respectively, over FY23-26E. US business is expected to grow at a robust pace led by steady base business, market share gains and new limited competition launches in the medium term. As most respiratory inhaler products are going to be limited competition, it will lead to sustainable margin expansion in the US. 

We feel investors can buy the stock in the range of ₹430-434 and add more on dips to ₹384 (13.25x Dec-25E EPS) for base case target of ₹470.5 (16.25x Dec-25E EPS) and bull case target of ₹507 (17.5x Dec-25E EPS) over the next 2-3 quarters, HDFC Securities said.

(Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!)

Jay Bharat Maruti | Buy | TP: ₹150

Jay Bharat Maruti has come a long way in its growth journey to become an industry and market leader in its niche business space. In collaboration with Maruti Suzuki India, Jay Bharat Maruti manufactures high-end auto components and assemblies.

HDFC Securities expects Jay Bharat Maruti’s revenue and PAT to grow at 7% and 18% CAGR over FY23-FY26E. The key triggers for the company will be the huge expansion plan of Maruti Suzuki over the next 7-8 years, strong market position in sheet metal-based components, established relationship with Maruti Suzuki and fundraising plans to meet the capex requirement.

It believes investors can buy the stock in ₹134-137 band and add on dips in ₹120-122 band for a base case fair value of ₹150 and bull case fair value of ₹161 over the next 2-3 quarters.

Also Read: DLF share price gains nearly 4% as net profit rises 26% YoY in Q3

Shree Digvijay Cement Company | Buy | TP: ₹129 

Due to healthy demand of the products in Gujarat region, Shree Digvijay Cement Company’s plant is operating at more than 100% of its capacity and is expected to operate at similar rates in the near term till the additional capacity is commissioned. Also the company is continuously improving its plant performance by debottlenecking & asset optimisation and keeping the cost under control; this increases productivity and profitability of the company.

HDFC Securities believes along with this higher sales volume due to expansion and improving profitability could result in rerating of the company. Also the PE investor True North may look at exiting the company at some point in future. The recent deal of Ambuja taking over Sanghi Ind (capacity 6.1 mn tonnes) happened at EV of $99 per tonne. Shree Digvijay Cement Co’s EV/Tonne for FY24 works out to $69.3. 

It believes investors can buy the stock in the range of ₹116-120 band and add on dips to 102-105 band, for base case fair value of ₹129 and bull case fair value of ₹144.5, and for a time horizon of 2-3 quarters.

Catch Live Market Updates here

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 taking any investment decisions.