Sensex and Nifty have gained a little over 1% so far in September but have managed to hit fresh all-time highs repeatedly. S&P BSE Sensex has scaled 58,553 while the NSE Nifty 50 hit 17,436 for the first time ever. Although the benchmark indices have moved range-bound since reaching fresh record highs, stock-specific action has continued. With uncertainty surrounding how high Dalal Street can climb as tapering talk starts in the United States and the third wave of covid-19 disrupts global economies, Yes Securities has picked 4 stocks that it believes can give returns in the range of 40-81% over the next 12 months.
Aditya Birla Capital – Buy
Target price: Rs 205
Aditya Birla Capital’s share price began this year strongly, surging 50% between January and the first week of March. However, since then, the stock has slipped 15%. Analysts at yes Securities said they believe Aditya Birla Capital is at an inflexion point with all franchises expected to do well in the next 3 years. Analysts added that Aditya Birla’s management has guided that in the NBFC business, retail and SME mix to increase to nearly 65% by financial year 2023-24 while in the housing finance business, affordable housing share to increase to ~65%, and for the cash cow business of AMC, the expectation is to have a sustained ROE in the range of 35-40% in next 3 years. The target price set by Yes Securities would see the stock rally 81% from current levels.
Sundram Fasteners – ADD
Target price: Rs 1,324
Share price of Sundram Fasteners has already zoomed 77% so far in 2021, outperforming the benchmark Nifty 50. “Sundram fasteners has showcased a healthy financial performance in the past (FY10- 20 PAT CAGR of ~15.5%) and dividend pay-outs (25%+),” Yes Securities said. They added that improvement in business across verticals is likely to keep ROEs at18%. “We believe company is likely to see accelerated growth between FY22-25 as both automotive and non-automotive verticals will do well, which would also lead to re-rating in the stock. Given the quality play, the stock is currently trading at an attractive valuation of 23x FY24E P/E and 13.5x FY24E EV/EBIDTA,” they added. From current levels, the stock will need to rally 43% to reach the target price.
The company has diversified its business in recent years and expanded its geographical presence beyond India. The stock price has, however, not been rewarding for investors, falling 4% so far this year. “We are positive on Kansai largely backed by expected improvements in structural drivers such as shift towards organized sector, housing push in semi-urban and rural areas, shorter painting cycles, governments focus on increasing rural income and increased consumer awareness in rural areas,” the brokerage firm said. Kansai commands ~40% market share in Industrial segment. “We expect ROE to move to reach 17% by FY23E. Given quality play, the stock is trading at an attractive valuation of 33x FY24E P/E,” Yes Securities said. The stock will have to jump 48% from the current price to reach the expected target price.
Zydus Wellness – Buy
Target price: Rs 3,360
The FMCG firm’s share price has surged 28% from the middle of March to date after having fallen significantly between January and March. “Zydus has a good track record of creating brands and then scaling it up. We expect a continuation of same for next few years supported by strong macro tailwinds and changing consumer behaviour,” Yes Securities said. The company is in a leadership position in 4 out of the six brands it runs. “Given quality play, stock trading at an undemanding valuation of 30x FY24e, lower than its peer set trading between 40x-60x of FY24,” the brokerage firm said. The stock is expected to surge 40.5% to reach the predicted target price.