Diwali 2024 stock picks: Ashika Group recommends 7 stocks with up to 33% upside

Brokerage house Ashika Group has released seven stock picks that investors can look to buy this Diwali for up to 33 per cent potential upside. 

Let's take a look:

Oil and Natural Gas Corporation | Target: ₹350 | Upside: 26%

The brokerage highlighted ONGC’s competitive advantage from its vast proven reserves accumulated over six decades. In FY24, ONGC made nine new discoveries, with five more in Q1 FY25, maintaining a Reserve Replacement Ratio (RRR) above 1 for 18 consecutive years. ONGC’s capex rose 14 per cent to ₹34,551 crore in FY24, exceeding its target. For FY25 and FY26, it projected an annual capex of ₹32,000-33,000 crore. ONGC is also advancing key offshore and onshore projects, including the KG Basin and Mumbai High, to boost production and modernise facilities, ensuring sustainable energy growth.

The brokerage noted that ONGC expects 10-15 per cent output growth, driven by increased production from the KG DW 98/2 block and other developments like the Daman upside and monetisation of stranded gas reserves. Over the next three years, ONGC projects a 12 per cent growth in crude oil and a 27 per cent growth in natural gas volumes, largely supported by the KG 98/2 project. Additionally, the windfall tax exemption for KG 98/2 and securing premium gas prices are expected to enhance future earnings, alongside improved crude oil realisations and the monetisation of new discoveries.

Kaynes Technology | Target: ₹7,000 | Upside: 25%

Incorporated in 2008, Kaynes Technology is a leading end-to-end and IoT solutions-enabled integrated electronics manufacturing company. The company provides conceptual design, process engineering, integrated manufacturing, and life-cycle support for major players in the automotive, industrial, aerospace and defence, outer-space, nuclear, medical, railways, Internet of Things (IoT), Information Technology (IT) and other segments.

Kaynes holds an order book of ₹5,040 crore, expecting 60-70 per cent execution within the year. It has secured multi-year contracts and aims to expand its OSAT and PCB businesses, with contributions expected from FY27. The company has signed four MoUs for OSAT and anticipates significant export orders, particularly in the medical sector, with approvals from leading providers in the US and Europe. Kaynes' FY24 performance highlights its execution strength in the EMS sector. Growth in its strong order backlog and new initiatives, alongside partnerships like Globetronics, will drive sustainable growth and enhance its product capabilities.

Eris Lifesciences | Target: ₹1,700 | Upside: 28%

Eris Lifesciences is a domestic branded formulation pharmaceutical company also involved in the biocon business. Recently, it acquired Swiss Parenterals, which reported FY23 revenue of ₹280 crore with a 37 per cent EBITDA margin. Eris ranks among the top 20 domestic formulation companies in the Indian Pharmaceutical Market (IPM), moving up from 29th since its IPO seven years ago. As of June 2024, it ranks third in the IPM for new product count and value, noted the brokerage.

For FY25, the brokerage pointed out that Eris targets a revenue of ₹3,000 crore, a nearly 49 per cent increase, and an EBITDA margin of 35 per cent. The domestic branded formulation segment aims for ₹2,600 crore in revenue with a 36 per cent EBITDA margin, supported by a planned ₹120 crore capex across biotech segments. Eris intends to strengthen its balance sheet by reducing its debt-to-EBITDA ratio to below 2x within 18 months, with expectations of net debt falling below ₹2,600 crore by FY25 and ₹2,000 crore by FY26, it added.

Isgec Heavy Engineering | Target: ₹1,850 | Upside: 33%

The brokerage stated that ISGEC is poised for growth, driven by increased government spending, policy reforms, and a revitalised private sector. The company boasts extensive production capabilities across various machinery and equipment, which bolsters its growth potential. As of Q1 FY25, ISGEC's consolidated order book stands at ₹7,741 crore, with projects accounting for 69 per cent and manufacturing 31 per cent. The company has shifted its strategy to focus on lower-duration projects, moving away from longer-term contracts like Flue Gas Desulfurization (FGD) orders. This strategic pivot aims to improve margins, especially as ₹1,400-1,500 crore of low-margin legacy orders are executed in FY25, Ashika further stated.

With double-digit revenue growth anticipated for the next two years, ISGEC is targeting an EBITDA margin of 11-12 per cent over the next 3-4 years, up from the current 8 per cent. The company's emphasis on sustainability and operational efficiency is expected to enhance its competitive edge, it added.

Nazara Technologies | Target: ₹1,130 | Upside: 25%

The brokerage highlighted Nazara Technologies as a leading player in the e-sports sector across India and South Asia, mainly through its subsidiary, Nodwin. Nazara has focused on inorganic growth, increasing its stake in Kiddopia to 100%, which is now a top three-grossing app for kids in the US. The recent acquisition of PokerBaazi, India’s largest online poker platform, positions it for rapid growth, with revenue and EBITDA CAGRs of 75% and 100%, respectively, the brokerage said. 

Additionally, acquisitions of Fusebox, Soap Central, and Deltias Gaming are expected to boost revenue. Strategic partnerships with organisations like ComicCon India further enhance its growth prospects in the evolving gaming and e-sports landscape, said Ashika.

EMS | Target: ₹1,080 | Upside: 30%

The brokerage highlighted that EMS has a strong presence in the electrical contracting sector, focusing on turnkey projects across India. The company specialises in constructing substations and providing EPC services for building and road works. EMS is currently focusing on WWSP and WSSP projects, expanding its capacity from 4 MLD to 60 MLD, and plans to bid on larger projects ranging from ₹1,500 crore to ₹2,000 crore.

As of Q1 FY25, EMS's order book reached ₹1,800 crore, supported by a bid pipeline of ₹4,000 crore. The company projects a revenue growth of 30-35% for FY25, driven by significant opportunities in the sewerage sector, where there is a notable gap in established networks. With a robust order book-to-sales ratio of 3.4x, EMS expects efficient capital utilisation, resulting in lower debt and improved EBITDA margins, it added.

Axiscades Technologies | Target: ₹640 | Upside: 26%

The brokerage highlighted that Axiscades Technologies has faced only moderate impacts from the global ER&D industry slowdown, thanks to its strategic focus on diversifying its customer base over the past two years. The company is well-positioned in aerospace and defence, with these sectors contributing about 60% of its revenues. As of Q2 FY25, Axiscades' total order book stands at USD 83 million, bolstered by new deals in engineering services and defence.

It further stated that the Mistral segment, which has achieved a 20% CAGR over the last five years, has planned over ₹800 crore to ₹1,000 crore for certified prototypes in Indian defence programs. Additionally, it is pursuing design wins with potential future production worth ₹2,500 crore to ₹3,000 crore. The order book at the beginning of Q2 FY25 is ₹375 crore, with 60% scheduled for execution this financial year. The company has also reduced finance costs by repaying ₹110 crore in borrowings, it noted.

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.