The brokerage firm InCred Equities has included large-caps Tata Consultancy Services (TCS), Bajaj Finance, Lupin, and Hero MotoCorp in its most recent report on high-conviction stock ideas for September 2024. Additionally, Ajanta Pharma, Ashok Leyland, Aurobindo, and Tech Mahindra have been removed off the brokerage's list. It said that it will maintain a positive outlook and set a goal of 26,736 for the Nifty 50 index. Comfort comes from rainfall progress and tax buoyancy. The rebound of consumer demand throughout the festive seasonand the outcomes of the assembly election will be watched.
The entire Indian subcontinent was covered by the southwest monsoon by 2 Jul 2024, as reported by the brokerage. In Jul 2024, there was a 6.1% year-on-year growth in the index of eight core industries. The strong growth was primarily driven by electricity generation, steel, and refinery production. With above-average monsoon rainfall, festive demand recovery is the centre of attention.
“We remain constructive on markets and maintain our blended Nifty 50 target of 26,736, with a bull-case probability of 30%, factoring in the favourable macroeconomic tailwinds. Our preference for large-caps stays intact,” said InCred Equities in its report.
In its report, the brokerage emphasized the recent performance, noting that Aditya Birla Sunlife AMC (ADD), InterGlobe Aviation or Indigo (REDUCE), and Ajanta Pharma (ADD) have been standout performers compared to Nifty 50 since the beginning of the series in September 2022. Conversely, Exide Industries (REDUCE), Clean Science and Technology (REDUCE), and BCL Industries (ADD) have underperformed compared to Nifty 50.
As part of its High-conviction Ideas – September 2024, InCred Equities has a bullish outlook on Aditya Birla Sunlife AMC, Bajaj Finance, BCL Industries, Bharat Forge, Container Corporation of India, Cyient DLM, Dabur India, Globus Spirits, HDFC Bank, Hero MotoCorp, Lupin, Mahindra & Mahindra Finance, Maruti Suzuki, Skipper, State Bank of India, TCS, and Zydus Lifesciences, rating them as "ADD." Conversely, the brokerage has a bearish stance on Clean Science, Exide Industries, Interglobe Aviation, PG Electroplast, SBI Cards, and Tata Steel, rating them as "Reduce."
Let's examine the current valuation of recent additions for stocks like TCS, Bajaj Finance, Lupin, and Hero MotoCorp.
The brokerage said that a rebound in the communication and media (CMT) vertical and the continuance of incremental revenue addition in North America (NA) and the financial services (FSI) vertical, which were both seen in 1QFY25—a first since 3QFY23 and 4QFY23—could enhance the company's development trajectory.
The brokerage states that itchoose Bajaj Finance due to its better growth, conservative underwriting, and excellent return ratios, and the increased certainty of demand with few asset quality problems.
“We have an ADD rating on the stock with a target price of ₹9,000, corresponding to ~5x FY26F P/BV. Bull-case valuation: Assuming a 10% beat to our estimates and stable multiple of ~5x, the target price can be ₹9,200,” the brokerage said.
Based on the brokerage's analysis, Lupin's valuation at 28.5x FY26F earnings is considered reasonable, especially considering the improvements in margin profile, net debt, and return ratios (RoE/RoCE of approximately 20%). The valuation is expected to be driven by strong revenue in the US business, which will be supported by a healthy product pipeline and margin improvement.
“Our target price of Rs.2,329 is 30x FY26F EPS. We retain our ADD rating on the stock. The earlier-than-expected competition in gSpiriva or gAlbuterol is the key downside risk. Our bull-case target price is ₹2,500 (32x FY25F EPS),” the brokerage said.
“We have an ADD rating on the stock with a SOTP-based target price of Rs.5,812. We value the 2W business on DCF basis, while rival Ather’s investment value at its recent PE fund raising at an US$1.3bn valuation led to a per share valuation of ₹162. Hero Fincorp investment at 3x FY24 P/BV led to a valuation of Rs.280 per share post 20% holding company discount, ” explained InCred Equities.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
