Stocks to buy: Narayana Hrudayalaya, Zen Technologies, among top fundamental stock picks by HDFC Securities

The Indian stock market traded higher on Monday with the benchmark Nifty 50 index hitting a fresh record high level in early trade, led by positive global market cues.

The BSE Sensex hit an all-time high of 73,994.7 on March 2, while the NSE Nifty 50 scaled its record high of 22,440.90 today. The Nifty Midcap 100 index gained 0.2%, while the Nifty Smallcap 100 was down over half a percent.

The gains in equity markets came on the back of a strong rally in US and Asian markets along with better-than-expected Q3FY24 GDP data which came at 8.4% YoY. The strong growth number lifted sentiment and triggered a short covering rally on Dalal Street last Friday. 

However, concerns regarding the excessive valuations in the midcap and smallcap space still prevail, analysts said.

Also Read: TVS, Eicher, Bajaj Auto, Tata Motors preferred picks of Jefferies as auto companies see divergent February sales trend

HDFC Securites’ Institutional Research has selected a few stocks as its fundamental picks, which are believed to give decent returns in the time frame of the next two to three quarters. These stock picks include Narayana Hrudayalaya, Zen Technologies, JTL Industries, and Ujjivan Financial Services.

Narayana Hrudayalaya | Buy | TP: ₹1,467 

A higher maturity mix in hospitals, steady performance of flagship hospitals in India and improving profitability of new hospitals solidifies Narayana Hrudayalaya’s position in India. Prioritizing debottlenecking and brownfield expansion at its existing centres and expansion in Cayman support growth going forward, said the brokerage firm.

The brokerage expects Narayana Hrudayalaya’s revenue, EBITDA and PAT to grow at CAGR of 14%, 15.2% and 14.3% over FY23-26E. 

It recommends buy on the stock in the band of ₹1,342 - 1,358 and add more on dips to ₹1,211 for a base case fair value of ₹1,467 and bull case fair value of ₹1,557 over the next two to three quarters. 

Zen Technologies | Buy | TP: ₹955

Zen Technologies expects to win a majority of the orders in the anti-drone systems market due to its ability to make software and hardware changes to tackle evolving threats. It is expected to report strong performance in the future, led by its strong indigenization capabilities, healthy order book, promising order inflow pipeline, and strong execution capabilities

Considering the revenue visibility for the next few years, HDFC Securities feels that some more rerating is possible. It feels investors can buy the stock in the ₹856 - 880 band and add more on dips to the ₹763 - 777 band for the base target of ₹955 and a bull case target of ₹1,032 over the next two to three quarters. 

Also Read: Stocks to buy: HUL, Kotak Mahindra Bank, Tata Steel among 10 stocks that can jump 5-23% in the next 3-4 weeks

JTL Industries | Buy | TP: ₹278.75

JTL Industries’ ongoing growth is expected to continue in FY24 and onwards, driven by capacity expansion, strong demand from the company’s product, improvement in production quality, and expected traction in exports, HDFC Securities said. 

It believes investors can buy the stock in the ₹252.85 - 260.55 band and add on dips to ₹228.70 - 235.70 band for a base case target of ₹278.75 and a bull case target of ₹300.5 for the next 2-3 quarters

Ujjivan Financial Services | Buy | TP: ₹649

HDFC Securities has envisaged a 25% CAGR in net interest income (NII) and 23% in net profit over FY24-26E for Ujjivan Financial Services, while the loan book is estimated to grow at 31% CAGR over the same time frame.

The brokerage firm feels that investors can buy the shares of Ujjivan Financial Services between ₹583 – 595 and add more on dips to the ₹531 – 542 band. It expects the base case fair value of ₹649 and the bull case fair value of ₹717 over the next 3-4 quarters.

Catch Stock Market Live 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.