Diwali 2024 stock picks: HDFC Institutional Equities, which expects moderate returns from key stock indices by next Diwali, has come out a portfolio of 10 stocks including two largecaps, four midcaps and four smallcaps that it believes investors can buy this Diwali for relatively limited downside and superior upside potential.
They included Bank of India, L&T Finance Ltd, NCC Ltd, PNB Housing Finance Ltd and Reliance Industries Ltd. Others in the list included State Bank of India, National Aluminium Company Ltd, Jyothy Labs Ltd and JK Lakshmi Cement Ltd.
Bank of India
The brokerage said Bank of India boasts a strong capital adequacy ratio, improved NIMs, and enhanced asset quality, led by lower gross and net non-performing assets (GNPA & NNPA). The BOI stock is trading at 0.6 times FY26 adjusted book value, which HDFC Institutional Equities said is an attractive entry point.
“We expect the valuation to improve given improved financials and better outlook. We recommend investors to buy the stock in the Rs 96-106 band for a target price of Rs 132,” it said.
JK Lakshmi Cement
HDFC Institutional Equities expects the cement demand to pick up pace by H2FY25. Taking into consideration the capacity expansion and strengthening operational performance by JK Lakshmi Cement, it expects the company to report a healthy performance in the coming years. HDFC Institutional Equities said it sees revenue growth of 7.6 per cent, Ebitda growth of 15.7 per cent and PAT growth of 13.9 per cent compounded annually over FY24-26.
“We believe investors can buy the stock in Rs 738-819 band (15x FY26E EPS) for a target of Rs 936 (18 times FY26E EPS) till next Diwali,” HDFC Institutional Equities said.
Jyothy Labs
HDFC Institutional Equities said Jyothi Labs has successfully undergone a substantial transformation from a promoter-driven, south-centric, single-product entity to a professionally managed, and multi-product company operating nationwide. As a result, the company’s revenue has grown at 12.7 per cent CAGR between FY20-24. Margin expansion is being driven by better product mix and improving operating efficiencies, it said.
HDFC Institutional Equities said it expects revenue growth of 12 per cent, Ebitda growth of 15 per cent and PAT growth of 17 per cent between FY24-26. It recommended a buy on Jyothy Labs in the band of Rs 480-533 for
target price of Rs 600 till next Diwali.
L&T Finance
L&T Finance, over the years, has been constantly reducing its dependence on the wholesale lending business by aggressively expanding its well diversified retail financing business. HDFC Institutional Equities sees a 18 per cent growth in advances over FY24-FY26.
“We believe the stock is available at reasonable valuations for a reason of possible asset quality hiccups in wholesale lending though the focus on this business has been falling. We recommend investors to buy the stock in the Rs 153-170 band for a target price of Rs. 219 (2.0x FY26 ABV) till next Diwali,” it said.
Nalco
HDFC Institutional Equities said sees strengthening of aluminum price due to tightness in global supply and recovery in demand. Margins are expected to improve with ramp up of coal production at Utkal D and E mines, it said.
NALCO is one of the lowest cost producers of alumina globally and has integrated operations with an increase in alumina refinery capacity.
“The company is well positioned to benefit from the strong alumina prices. We expect revenue/Ebitda/PAT to increase at a CAGR of 9.7 per cent/32.8 per cent/29.2 per cent over FY24 to FY26E. We believe investors can buy the stock in Rs 198-220 band for a target of Rs. 270 (15x FY26E EPS) till
next Diwali,” HDFC Institutional Equities said.
Navin Fluorine International
Navin Fluorine is expected to grow its revenue by 23.5 per cent compounded annually, led by robust growth from CDMO and specialty chemical segments and healthy growth from HPP business over FY24-27.
The company’s performance was weak in FY24 due to lower revenue from CDMO and HPP business. HDFC Institutional Equities estimated 750 bps expansion in margin for Navin Fluorine due to better product mix and scale up of specialty chemical business over the next three years.
“Strong revenue growth coupled with margin improvement could drive 35 per cent CAGR in net profit over the same period. Company is focusing on acquiring customers, expanding its range of products, and increasing volume and efficiencies to drive operating leverage. Amid challenging environment, NFIL is focusing on growth in sales volumes and maximising capacity utilisation,” it said.
The management is confident of a recovery in Ebitda margin close to 25 per cent levels by the end of FY25.
“We recommend buy on Navin Fluorine in the band of Rs 3,059-3,396 for a target price of Rs. 3948 (40.5x FY26E EPS) till next Diwali,” HDFC Securities said.
NCC
Positive tailwinds with government’s focus on infrastructure development by various schemes will aid NCC’s growth. Given the all-time high order book, execution ramp-up, and robust balance sheet HDFC Institutional Equities expects NCC to capture healthy growth in the medium term.
The brokerage sees revenue for NCC to grow at 16 per cent, Ebitda at 21 per cent and PAT at 39.6 per cent over FY24-26E. Investors can buy
the stock in the band of Rs 273-303 for a target of Rs 363 (18 times FY26E EPS) till next Diwali, it said.
NCC has a well-diversified order book, robust execution capabilities, strong focus on debt reduction and improvement in working capital. Segment diversity is one of the key differentiators at NCC, the brokerage said.
PNB Housing Finance
HDFC Institutional Equities said it sees a 18 per cent CAGR in PNB Housing Finance’s loan book over FY24-26E. It sees NII to rise 16 per cent and PAT 15 per cent over the same period. The return on asset (RoA) of the company is expected to improve to 2.2 per cent by the end of FY26. The domestic brokerage recommended investors to buy the stock in the Rs 893-991 price band for a target price of Rs 1,160.
RIL
Given the large technological advancements and ambitious growth targets, Reliance’s Retail, Telecom, and new energy segments are poised to become the upcoming growth drivers over the next two to three years, HDFC Institutional Equities said.
The company aims to double its Ebitda in the next five years, powered by 5G opportunities, increased investments in AI/data centers, further expansion in Retail and the start of PV/battery facilities in New Energy.
“The company could report a consolidated revenue/Ebitda/PAT CAGR of 19%/14%/16% over FY24-26E. Investors can buy in the Rs 2,447-2,716 band for a target of Rs 3,243 (23.5x FY26E EPS) till next Diwali,” it said.
SBI
HDFC Institutional Equities said SBI is equipped to sustain growth, given its surplus liquidity (Rs. 3.7 lakh crore) and a comfortable LDR (76.5 per cent).
It built in marginal NIM compression over FY24-26E on the back of a turn in the rate cycle during H2FY25. “We recommend investors to buy in the Rs. 733-813 band with a target price of Rs 960 (1.8x Mar-26 ABVPS),” it said.
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