Diwali is around the corner and we all are excited to share the festive happiness by giving special and personalized gifts to all our near and dear ones.
While gifting is an important part of this wonderful festival which adds to the excitement and enthusiasm, this Diwali, why not make the most of the auspicious mahurat trading and gift yourself the joy of long-term returns?
Though the stock market is closed on Diwali, a special trading window called the Diwali Muhurat Trading session is initiated for an hour. And this Diwali it’s between 6.15 pm to 7.15 pm.
As choosing the right stocks for your auspicious muhurat trade can be extremely difficult, let us give you the gist of a few companies that may spark your interest.
1. Axis Bank CMP Rs 830 (Target Rs 970, Time Frame 12 months)
Axis Bank is amongst the largest private sector bank in India in terms of asset size with a balance sheet size of over Rs 11 tn. It has a network of over 4,700 branches and extension counters across the country.
Forecasts:
- Management is confident that the bank can continue to improve share in its focus segments like unsecured retail loans (4% QoQ in Q1FY23), credit card outstanding (14% QoQ in Q1FY23) and mid-corporates (5% QoQ in Q1FY23).
- Management is confident of delivering NIM of 3.7-3.8% over the next 8-10 quarters.
- Axis Bank remains on a strong footing to drive loan growth going ahead which should lead to gradual RoA/RoE expansion to 1.5%/15.8% by FY24E.
Valuation- Strong growth in advances and deposits, lower cost of funds, and healthy cumulative provisions should continue to support the bank’s earnings in the coming quarters. Axis Bank is currently trading at 1.5x FY24 P/B, which is a steep 35% discount vs ICICI Bank.
2. Tata Motors CMP Rs 399 (Target Rs 520, Time Frame 12 months)
Tata Motors is the market leader in the domestic CV space, commanding 42.5% market share as of Q1FY23 with a presence across M&HCV as well as LCV segments. Tata Motors is also present in all segments of passenger vehicles (PVs) domestically, where excellent customer response to its revamped product portfolio and new launches have led to a sharp outperformance vis-à-vis industry, with Tata Motors recording 220 bps increase in domestic market share to 14.3% as of Q1FY23 vs. 12.1% as of FY22 end.
Forecasts:
- Tiago EV is Tata’s third electric PV and its first electric hatchback. Tata is expanding its EV availability from ~85 to ~165 cities as it expects good acceptance of Tiago EV in tier-2/3 cities. Tata intends to expand its electric PV portfolio from 3 EVs at present to 10 by FY26. EVs now form 8% of Tata’s India PV volumes. Tata has the potential to gain a share as EV adoption rises.
- Notwithstanding the near-term macro challenges for JLR, Tata Motors appears to be an attractive proposition given a strong cyclical recovery in Indian trucks and PVs, an improved franchise in Indian PVs, and a strong EV focus.
- JLR’s financials should improve, with the focus shifting to the higher-margin Land Rover brand.
Valuation- Tata Motors is taking the lead in EVs with a strategy to position them as premium vehicles and yet make them affordable. Its SOTP-based target price of Rs 520. The stock is trading at ~4.3x FY24 EV/EBITDA.
3. VaTech Wabag CMP Rs 269 (Target Rs 420, Time Frame 12 months)
Va Tech Wabag being one of the leading players in water technology is specialized in treating municipal, industrial, sludge treatment, and seawater desalination projects through various business formats EPC, DBO, BOOT, O&M, HAM, and One City One Operator.
Forecasts:
- Domestic and overseas order pipeline remained buoyant. The company is focusing on technological projects which are backed by multi-lateral funding agencies or the central government.
- Its robust order book thriving on strong market leadership, execution ramp-up, and operational efficiencies would help it capitalize on the forthcoming opportunities. The company expects order momentum to continue over the next fiscal with its focus on winning international orders and works related to the industrial domain.
- In domestic markets, it is optimistic about strong order intake from various schemes such AMRUT, smart cities mission, Swachh Bharat Mission, Jal Jeevan mission, etc.
Valuation- Considering, the government’s focus on water-related investments, it provides healthy order intake tailwinds for the company going ahead. At the CMP, the stock trades at a P/E of 9x its FY24E earnings, which we believe is undemanding considering its optimistic net earnings growth outlook and improving balance sheet.
4. APL Apollo Tube CMP Rs 1116 (Target Rs 1360, Time Frame 12 months)
APL is the largest structural tubes manufacturer in India with a market share of 50%. The company has consistently expanded its capacity from 53,000 TPA in FY2006 to 2.6 mtpa in FY2020 through the organic and inorganic route. The company derives 48% of its volume from building material housing, 26% from building material commercial, 21% from infrastructure, and 5% from industrial and agricultural sectors.
Forecasts:
- APL Apollo Tubes remains an attractive bet led by growing application and rising consumption of structural steel tubes in residential & commercial buildings, warehouses, factories, agriculture, and other infrastructure works.
- The primary structural steel tube market is expected double to 6 mtpa by FY25 as the volume would shift towards the primary market from the secondary. Steel tubular technology is gaining acceptance in construction projects. APL has the capacity (to reach 4mtpa soon) and product portfolio to tap growth opportunities in the structural steel tube market.
- APL’s ~Rs. 800 crore Raipur plant is expected to get commissioned in Q3FY23 with high-margin products. The management expects that the ramp-up at this plant would drive up the volume to 4 mt by FY25 (32% CAGR over FY22-25E), improve the value-added product mix to 70-75%, and more than double its EBITDA to Rs 2,000 crore by FY25 (versus Rs 945 crore in FY22).
Valuation- APL is expected to sustain a high earnings growth momentum supported by robust double-digit volume growth and margin expansion. At the CMP, the stock trades at 28.7x FY24E earnings.
5. Sona BLW Precision Forging Ltd. CMP Rs 486 (Target Rs 640, Time Frame 12 months)
Sona BLW Precision Forging is one of the leading automotive technologies and has emerged as a major industry player since its inception in 1995. It designs, develops, and distributes highly engineered, mission‐critical automotive systems and components with next‐generation applications.
Forecasts:
- Its legacy products (driveline/starter motors) are expected to grow by ~44 pct/22 pct revenue CAGR over FY22‐24, while its value‐added products will help Sona expand its product range in autonomous/premium vehicles.
- Its product portfolio benefits from EVs owing to the increased complexity of both of its products, driving almost a 2x content increase in differential assemblies.
- Strong order book- During Q1FY23, the Company continued its strong business momentum with net order booking at Rs 205 bn (~9x FY22 sales) which includes EV segment of Rs 137 bn (67 pct) and a non-EV segment of Rs 68 bn (33 pct).
- Sona has consistently delivered healthy margins and return ratios v/s leading automotive players globally. The company has generated ROCE of ~20.7x in FY22 v/s 16.4x in FY18 despite an increase in capex by ~3x over the last 4 years.
Valuation- Sona BLW is likely to be the fastest growing India-based Auto ancillary company with 34 pct PAT CAGR over FY22-24E and having significant exposure to EV segment. It has reputed client credentials with a highly profitable self-funded business model which warrants premium valuations. At the CMP of Rs 487, the stock trades at a PE of 42x.
Conclusion:
On this auspicious occasion of Diwali, we hope that you make the most of this Muhurat trading session. May you enter the new year with abundant prosperity, enthusiasm, and joy. We wish you all a very happy Diwali and a prosperous new year.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
