With Diwali just around the corner now, it is time to beat the blues of this year just like the Sensex and Nifty have done in the recent days. For this year’s Muhurat Picks, brokerage and research firm ICICI Direct has cherry-picked stocks from sectors that are bound to do well in the post coronavirus era as an economic recovery gathers pace. Some stocks are from the resilient sectors like pharmaceuticals that have so far not let the pandemic spoil their momentum. The brokerage firm sees an upside potential of as high as 30% in some of these seven stocks.
The Ramco Cements
Target – 1,000 (21% upside)
With a total capacity of 18.5 MT, The Ramco Cements is an efficient player in the cement industry. Although most of the presence that the firm commands is in South India, it has been stepping foot into east India. “Ramco has capex commitment of | 3,730 crore for FY2020–22E, predominantly for its proposed capacity expansion projects to meet the increasing demand,” ICICI Direct said. The brokerage firm is estimating a 12.1% CAGR for the company till financial year 2023. Currently the stock is trading at Rs 840 per share.
SBI Life Insuarance
Target – Rs 1,000 (27% upside)
SBI Life Insurance has a market share of 20%. In terms of business growth, SBI Life has reported the highest NBP growth among top private insurers at ~27% CAGR in the last four years, thereby increasing its market share, said ICICI Direct. The joint venture between SBI and BNP Paribas Cardif has a strong distribution chain and improving digital footprint which has aided business growth. “Therefore, we expect premium accretion at ~15% CAGR in FY20-22E to Rs 53028 crore,” the report added. SBI is also a play on the growing insurance industry in India.
Target – Rs 430 (18% upside)
Mahindra Logistics has seen a sharp recovery to the pre-coronavirus levels, faster than peers. “For its non-Mahindra SCM business (50% of SCM business), the management is witnessing positive traction in e-commerce, FMCG, pharma verticals,” analysts at ICICI Direct said. Logistics space is also expected to see strong demand from the farming sector and Mahindra Logistics’ innovative logistical solutions give it an edge. The business has a strong pipeline of partners and an improving liquidity position. Currently the stock trades at Rs 378 per share.
Target – Rs 850 (16% upside)
KPR Mill is an integrated business player, going from fibre to fashion that has displayed consistent revenue growth and positive operating margin trajectory with strong return ratios, the report said. Net sales of the company are expected to grow 8.5% CAGR while net profit may grow 15% CAGR.KPR Mill also has a strong presence in the EU market. “KPR, with a vertically integrated model from yarn to garmenting seems well set to benefit from the shift in demand from China to other low cost Asian countries,” ICICI Direct said. Shares are currently trading at Rs 767 per share.
Target – Rs 2,300 (30% upside)
The company operates in the niche wellness & health product segment. Zydus Wellness operates brands like Sugar Free and Nurtralite in this space, while Everyuth, is focused towards skin care products. The company acquired Heinz India’s consumer business, subsidiary of Kraft Heinz, in January 2019. With this, Zydus’ product portfolio widened to Glucon-D, Complan, Nycil and Sampriti. This put Zydus in a strong position and a healthy product pipeline. On the debt front ICICI Direct expects the company will be able to repay its entire debt in the next one year. Zydus Wellness currently trades at Rs 1,752 apiece.
Target – Rs 635 (16% upside)
Syngene operates as a contract research organisation, supporting R&D programmes of global innovative companies. ICICI Direct estimates that net profit of Syngene will grow 24% CAGR till FY22E. “Global pharma players are facing structural issues from the impending patent cliff, a shrinking product pipeline, rising R&D costs and growing competition. To maintain the structural balance and improve profitability, they are inclined to outsource a substantial part of the R&D work,” the report said. Stocks currently trade at Rs 543 per share.
Target – Rs 900 (16% upside)
Pharmaceutical firms have outperformed the broader markets this fiscal year. Cipla caters to 80 markets with a global portfolio of over 1500 products. “We continue to focus on the management’s long-drawn strategy of targeting four verticals viz. One-India, South Africa & EMs, US generics & specialty and lung leadership,” said ICICI Direct. Formulations business was 54% of financial year 2020 revenues for Cipla. ICICI Direct expects domestic formulations to be driven by improved productivity of newly inducted field force and product launches. Cipla’s shares currently trade at 791 per share.
(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)
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