HDFC Securities’ top picks: 2 stocks to buy over next 2-3 quarters

Market


Domestic brokerage and research firm HDFC Securities has suggested two stocks that investors can look to buy that are from banking and capital goods sectors. The top stock picks are Karur Vysya Bank Ltd and Kirloskar Pneumatic Co Ltd over the next 2-3 quarters. 

HDFC Securities’ top stock picks

Karur Vysya Bank: KVB with improved loan book quality, steady NIM trajectory, granular deposit franchise, adequate capitalization and improving line of sight on lower credit costs looks promising, as per the brokerage, adding the bank is available at 0.7x FY24E ABV, which gives decent room for upside.

“We feel that investors can buy Karur Vysya Bank Ltd between 71-73 and add more on dips to 63 band. We expect the Base case fair value of 81 and the Bull case fair value of 88 over the next 2 quarters,” it suggested.

Kirloskar Pneumatic: “KPCL is a debt free company with modest capex requirements. We expect its revenue/EBITDA/PAT to grow at 19/20/26% CAGR over FY22-FY24E, led by revival in industrial activity, and increasing export orders. RoCE/RoNW are expected to improve to 22.5/16.5% by FY24E,” the note stated.

HDFC Securities believes investors can buy the stock on dips in 525-535 band and add more in 465-475 band for a base case fair value of 617 and bull case fair value of 657 over the next 2-3 quarters.

KPCL is a diversified product company, serving key sectors viz. Industrial, Oil & Gas, Infrastructure and Food Processing. The company was hitherto focussed on domestic markets but is now looking to expand geographically. It has made inroads in the Middle East Oil & Gas market and looking to increase its export revenue share from less than 5% to 15-20% over the next few years.

The management is targeting to achieve 2000cr revenue in the next 2-3 years which entails a CAGR of 17-18%. KPCL has a strong market share in compressor business and is well positioned to capitalise on the upcoming opportunities in the infrastructure space, the brokerage added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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