Stocks to buy: NTPC, BEL among 6 stocks that may yield double-digit returns in about one year, say brokerages

Stocks to buy: The April-June (Q1) results for India Inc. have been mixed so far, providing little encouragement for the Indian stock market, which is at record-high levels amid growing concerns over valuations.

Equity benchmark Nifty 50 almost touched the psychologically significant mark of 25,000 for the first time on Monday, July 29. The index, however, failed to sustain gains and came off high level due to profit booking.

On Tuesday, July 30, the Nifty 50 moved up nearly half a per cent in morning trade. It traded 0.4 per cent up at 24,932 around 11:05 am.

Experts say retail participation will keep the market up even as market valuations are a concern. Institutional investors appear to be focussing on high-quality stocks, which is a healthy sign for the market.

"Sustained capital flows into mutual funds and retail investor enthusiasm will keep the market resilient. Elevated valuations continue to be a concern, particularly in the broader market. A healthy trend in the market now is that high-quality stocks with good earnings visibility are gaining strength on institutional buying," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Based on the recommendations of several brokerage firms, here is a list of six stocks that can rise 12-17 per cent in about one year. Take a look:

Brokerage firm: Motilal Oswal Financial Services

Bharat Electronics (BEL) | Last traded price: ₹321.35 | Target price: ₹360 | Upside potential: 12%

Motilal Oswal pointed out that BEL's Q1FY25 results came ahead of estimates, driven by better-than-expected revenue and PAT. Revenue growth was led by a strong order book, which stood at ₹76,700 crore. Order inflows stood at ₹4,960 crore.

The brokerage firm underscored that BEL has maintained its guidance on revenues and order inflows despite a strong execution in Q1.

Motilal kept its estimates unchanged and expects a CAGR of 19 per cent, 19 per cent and 22 per cent in revenue, EBITDA (earnings before interest, taxes, depreciation and amortization) and PAT (profit after tax), respectively, over FY24-27. Given the company's control over working capital, it expects OCF (operating cash flow) and FCF (free cash flow) to remain strong over FY24-27. The company has a cash surplus of ₹3,900 crore (as of FY24), providing scope for further expansion in capacities.

Zen Technologies | Last traded price: ₹1,609.05 | Target price: ₹1,820 | Upside potential: 13%

Motilal expects a CAGR of 63 per cent, 57 per cent and 57 per cent in revenue, EBITDA and PAT, respectively, during FY24-27, led by order inflow growth of 37 per cent, EBITDA margin of 37.5 per cent, 37 per cent and 37 per cent for FY25, FY26 and FY27, respectively, and enhanced control over working capital due to improved collections.

"With substantial revenue growth, healthy margins, and stable working capital, we expect ZEN’s RoE (return on equity) and RoCE (return on capital employed) to improve to 38 per cent and 38 per cent by FY27, respectively," said Motilal.

Motilal values the stock at 40 times Jun’26E EPS (earnings per share). The brokerage firm has marginally revised its estimates to factor in the company's Q1 performance and maintains a buy rating on the stock with a revised target price of ₹1,820 from ₹1,775 earlier.

"We expect the company to grow at a much faster pace than the industry, have a very strong margin, and expand its capabilities across other defence segments. The current valuation of ZEN is still cheaper than that of other comparable companies in the private defence sector and ZEN has the advantage of a faster CAGR, stronger margins and reasonable NWC," said Motilal.

Brokerage firm: JM Financial

NTPC | Last traded price: ₹393.90 | Target price: ₹451 | Upside potential: 15%

JM Financial underscored NTPC's revenue for Q1FY25 stood at ₹48,500 crore, up 13 per cent year-on-year and 2 per cent quarter-on-quarter. It was 9 per cent up against JM Financials' estimates and 5 per cent above consensus estimates due to 11 per cent higher generation.

The company's EBITDA and adjusted PAT, too, exceeded the brokerage firm's estimates.

The plant load factor (PLF) for coal-fired plants stood at 80.39 per cent versus the national average of 76.19 per cent driven by higher energy and peak power demand.

"Given the revival in margin-accretive thermal capex (26GW capacity addition by FY32) and momentum in new growth areas, viz. nuclear power (allotted 2.8GW) and coal mining (86MTPA capacity), we maintain our buy rating on the stock with a revised target price of ₹451 valuing at three times FY26E regulated equity of the thermal business and 12 times FY26E EBITDA of the renewable energy business," said JM Financial.

Cholamandalam Investment and Finance Company | Last traded price: ₹1,433.40 | Target price: ₹1,650 | Upside potential: 15%

According to JM Financial, Cholamandalam's management guided for the operational expenditure to decline in new businesses as it scales up. At the same time, credit costs are likely to normalise in the second half on the back of healthy collections due to a good monsoon.

The brokerage firm believes that the new businesses (SME, CSEL and SBPL) and expansion of LAP and HL into rural areas will continue to aid strong growth momentum from now on, and margins will start improving as VF book is gradually re-priced and mix shift continues toward high-yielding segments.

"The five-year trajectory as indicated by management: (i) 25-30 per cent AUM growth, (ii) margins expansion led by high-yield product expansion and rural expansion followed by rate cuts, (iii) improving operational efficiencies, and (iv) steady credit cost target of nearly 1-1.2 per cent; was the key positive that instilled confidence on achieving strong RoA-PBT of 4 per cent over the next five years," said JM Financial.

"Given the strong execution track record, we believe this will contribute to sustained strong performance going forward. We revise our earnings estimates upward for FY25E/FY26E by +4 per cent/+7 per cent and continue to value CIFC at 22 times FY26E EPS, entailing a target price of ₹1,650," said JM Financial.

Brokerage firm: Nuvama Wealth Management

Arvind | Last traded price: ₹374.30 | Target price: ₹431 | Upside potential: 15%

Nuvama observed that Arvind reported a weak Q1FY25 earning after a strong showing in Q4FY24, mainly due to the labour strike in Santej, which lasted 21 days. The strike impacted operations, and the company could not fulfil some orders. Potential revenue and EBITDA loss were around ₹200 crore and 60 crore, respectively.

The brokerage firm underscored that the impact of the strike is a one-off thing—a blip in the smooth running of operations. Despite this hit, management is confident of achieving the guided growth of double-digit revenue growth for the year driven by the AMD (advance material division) and garments segments.

"Factoring in the one-off impact from the strike, we are adjusting FY25E and FY26E revenue by -3 per cent and +1 per cent, respectively; this along with a rollover to Q1FY27E yields a revised target price of ₹431 ( ₹375 earlier) at 7.5 times EV/EBITDA," said Nuvama.

Colgate Palmolive (India) | Last traded price: ₹3,210 | Target price: ₹3,745 | Upside potential: 17%

Nuvama pointed out that Colgate’s Q1FY25 revenue, EBITDA, and profit after tax (PAT) were up 13 per cent, 22 per cent, and 24 per cent year-on-year (YoY), respectively, ahead of its, and consensus estimates.

The toothpaste business posted double-digit sales growth driven by high-single-digit volume, whereas Hindustan Unilever’s oral care revenue growth was mid-single digits driven by pricing.

The brokerage firm said Colgate's toothbrush segment has grown in solid double digits with high-single-digit-volume growth. Colgate has started to gradually benefit from the likely rural recovery; this is evident given rural markets have outpaced urban markets for the second time in a row.

"We anticipate balanced growth in FY25 versus pricing led in FY24. We are increasing multiple to 55 times (versus 50 times) and rolling forward to Q1FY27E lifting target price to ₹3,745 (earlier ₹3,305," said Nuvama.

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