Stocks to buy: HDFC Securities recommends HG Infra and Styrenix as its fundamental stock picks

Indian stock market indices, Senex and Nifty 50, traded flat on Tuesday amid mixed global cues. Gains in metals, PSU banks, realty and auto stocks were countered by selling in pharma, IT and FMCG stocks.

Broader markets traded higher with the Nifty Smallcap 100 index gaining 0.8%, while the Nifty Midcap 100 index rose 0.2%. 

HDFC Securities has recommended two smallcap stocks to buy based on strong fundamentals and their potential to deliver decent returns in short-to-medium term.

These smallcap stocks to buy include HG Infra Engineering and Styrenix Performance Materials. The Retail Research at HDFC Securities recommended buying these stocks at current market price and then adding on further dips. The time horizon for these trades is 2 to 3 quarters.

Also Read: Stocks to buy: Sumeet Bagadia recommends 5 breakout stocks today — May 14

Here are HDFC Securities’ fundamental stock picks:

HG Infra Engineering | Buy | TP: ₹1,392

HG Infra Engineering has maintained a robust order book and de-risked its business by reducing its reliance on road orders by venturing into Rail, Metro and Solar projects. On the order inflow front, the company expects ₹11,000 - 12,000 crore, with ₹8,000 crore, ₹1,000 crore and ₹2,000 crore from highways, solar and water/ railways, respectively. Its FY25 revenue growth guidance stands at ~15-20% with an EBITDA margin of ~16%. 

HDFC Securities expects the company’s revenue, EBITDA and PAT to grow at 15%, 13% and 5% CAGR respectively over FY24-FY26. It believes investors can buy the stock in the price band of ₹1,169 - 1,193 and add on dips in ₹1,058 - 1,079 band for a base case fair value of ₹1,300 and bull case fair value of ₹1,392 in the next 2-3 quarters.

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Styrenix Performance Materials | Buy | TP: ₹1,972

Styrenix Performance Materials is one of the leading players in ABS with diversified customers. It has a debt free cash-rich balance sheet. In FY24, the company reported healthy performance despite 6% decline in sales due to lower realisations. Operating margin improved marginally to 11.9% and net profit was down 5.4%. Company has embarked upon large capex in a phased manner and that would help register strong revenue growth in the coming years.

The brokerage firm estimates 13.4% CAGR in revenue along with operating margin at around 12-13% over FY24-26E. The company is likely to register 17.5% CAGR in net profit over the same period. 

It is positive on Styrenix Performance shares given strong balance sheet, large capex programme, wide customer base across industries and robust dividend policy. 

“We feel investors can buy Styrenix in the band of ₹1,660 - 1,682 and add more on declines to ₹1,496 for base case fair value of ₹1,836 and bull case fair value of ₹1,972 over the next 2-3 quarters,” HDFC Securities said.

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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.