Diwali 2024 Stock Picks: HDFC Bank, M&M to Hyundai Motor — Arihant Capital lists 15 stocks to buy for Samvat 2081

Diwali 2024 Stock Picks: The Indian stock market has enjoyed a remarkable run in Samvat 2080. The Nifty 50 has gained 25 per cent since last Diwali despite headwinds such as stretched valuations, sticky inflation, geopolitical tensions and elevated interest rates.

The biggest reasons for the rise of the Indian market are the durability of the country’s economic growth and an influx of retail investors. The medium to long-term outlook of the market remains attractive.

Brokerage firm Arihant Capital Markets remains upbeat about the prospects of the Indian market.

“India, with its rapidly growing economy, diverse market, and demographic advantages, presents a compelling investment opportunity for domestic and international investors. As one of the fastest-growing major economies in the world, India has showcased resilience and adaptability, making it an attractive destination for various sectors,” said Arihant Capital Markets.

The brokerage firm has shared 15 stocks to buy this Diwali. Take a look:

Stocks to buy for Samvat 2081

HDFC Bank | Target price: ₹2,002

As the maturity levels increase for the newer bank branches, newer customer accounts will benefit from the bank’s increased rate offerings in time deposits, which showed growth. Also, at 35.3 per cent levels, the bank’s CASA is adequate enough to maintain higher spreads.

“We maintain our positive stance on the bank, and barring some standalone contraction in medium-term estimates, we see long-term economies of scale playing out for the group and recommend buying at current levels with a target price of ₹2,002 on a SOTP basis,” said Arihant.

Mahindra & Mahindra (M&M) | Target price: ₹3,334

The business keeps up its strong performance in its main business areas, with the automotive section leading the way in SUV volumes, up 24 per cent.

The forecast for the home market is becoming better for the agriculture industry, which is resulting in excellent market share and margin execution.

Additionally, sales of farm machinery have increased by 34 per cent, suggesting room for more expansion. Though there have been some difficulties, the logistics division is making progress, and by the end of the current quarter, management hopes to break even in the express sector.

“We continue to rate the company as ‘accumulate’, but with a revised SOTP-based target price of ₹3,334 per share against the previous target price of ₹3,285,” Arihant said.

Hyundai Motor India maintains strong ties with other Hyundai Motor Group affiliates, creating synergies in the supply chain, manufacturing, and product development across the automotive OEM value chain.

The company plans to utilise its local manufacturing strength to make the company the largest foreign production hub for Hyundai Motor Company, targeting emerging markets such as Southeast Asia, Latin America, Africa, and the Middle East.

“We assign a forward P/E ratio of 27 times to HMI, compared to the 26 times multiple given to Maruti. We recommend a buy rating with a target price of ₹2,345 for the stock, based on estimated earnings for September 2026,” said Arihant.

AGI Greenpac | Target price: ₹1,734

The brokerage firm pointed out that AGI Greenpac is in the process of acquiring HNG (a case hearing is pending in the Supreme Court), which offers a huge earning upside potential. Post-acquisition, the company will become the largest glass manufacturer in India. Once the operations are normalized, the acquisition will provide a huge jump to the company’s EPS (earnings per share).

Currently, the company has more than 500 institutional clients, including marquee names like Kingfisher, Pepsico, United Spirits, United Breweries, and Radico. After the acquisition, the company will become the biggest glass manufacturer in India by capacity. These can be restarted when management feels it is the right time. “The company has huge upside potential as HNG’s numbers will boost earnings and strengthen AGI’s market presence. We believe AGI is an attractive buy with a two-year horizon and a price objective of ₹1,734,” said Arihant Capital.

The brokerage firm believes Meghmani Organics is poised for recovery with new products like Titanium Dioxide, Nano Urea and high value insecticides, alongside easing agrochemical headwinds from H2FY25, supporting margin expansion.

“Completed capex and improved cash flow will aid debt reduction. We believe it is an attractive buy at these levels with a price objective of ₹195,” said Arihant.

“We believe increasing demand for electronics, home appliances and other white goods will drive Styrenix’s growth in the near term. Global spreads have also seen improvement and are moving positively. We have a tactical buy on the stock with a price target of ₹3,000,” Arihant said.

Arihant believes strong demand from OEMs has led the management to guide strong revenue growth guidance of 15 per cent revenue growth in FY25 while targeting revenue of over ₹22,000 million by FY26 (CAGR 15 per cent) on transitioning from small to larger and critical parts.

“We have used a DCF model to value the stock. It has healthy and consistent cash flow generation over the forecasted period. We value consolidated business at EV/EBITDA multiple of 5.8 times to FY27E EBITDA of ₹3,672 million to FY27E EPS of ₹101,” said Arihant.

Laxmi Organics has laid out ambitious expansion plans for the next four years by FY28, while new product launches and operational leverage are seen kicking in and improving margins.

“The company will be witnessing the doubling of revenues of each of the essential and specialities segments, with the Specialities segment’s contribution in revenue and EBITDA increasing from current levels, causing the EBITDA to increase up to three times by FY28 over FY24 EBITDA,” said Arihant.

Saregama is positioning itself as a diversified IP company focused on long-term growth in music, video, and live entertainment.

Management projects a 30 per cent CAGR in revenue (excluding Carvaan) over the next three years and expects profits to double in 3-4 years, highlighting significant growth potential across its business segments.

Sheela Foam | Target price: ₹2,614

Sleepwell and Kurlon remain the most in-demand brands in major suburbs, which are largely organised.

Their attempt to organise the unorganised space in non-urban areas with dedicated launches has also been exceptionally well received as a business that will expand rapidly in these markets.

Though their international businesses are facing stagnancy and margin pressure, they are undertaking to eliminate these issues over the next one to two years, and we should see margins return to these geographies in the medium term.

Additionally, they are also improving the manufacturing footprint with debottlenecking, price hikes, and new product launches to cater to new, previously unexplored markets.

The brokerage firm observed that for the next two to three years, the company expects to earn a pre-sales growth of 30-35 per cent, which would be driven by a strong project pipeline which includes its launch of two new projects in the uber-luxury segment one in Downtown Dubai and other at Nepean sea road. Besides, they would also launch new phases and towers in its existing projects at Naigaon, Mira Road, Goregaon, Vasai and Kalyan.

“We remain positive on Sunteck’s growth ahead given its brand recall, strong balance sheet and also its plan to double its GDV and earn pre-sales of 30-35 per cent in the next two to three years. The growth is expected to be driven by upcoming projects in MMR region and its Dubai project,” said the brokerage firm.

Mahindra Lifespace is well-positioned and has strong brand recall value, along with a steady Balance sheet. The brokerage firm sees healthy demand for the real estate residential and commercial segments.

“The company’s focus continues on growing in mid-premium and premium segments. Going ahead, Mahindra has the potential to grow, which would be driven by strong scalability, a healthy launch pipeline, the addition of new projects, and the benefit of the real estate upcycle trend,” said the company.

Protean is the only company in India that provides all four facets of digital identity under one roof: Aadhar authentication, e-KYC, e-signatures, and online PAN verification. The growth of online PAN verification and e-signature services is notable. Protean provides digital signature services that streamline the signing process for documents, with a projected increase in revenue from this segment.

“As the only CRA (Central Recordkeeping Agency) for NPS and APY from 2010-2018, Protean has a significant market share of around 97 per cent. Revenue primarily comes from account opening, transaction charges and annual maintenance charges, ensuring a steady flow of income,” Arihant pointed out.

“Given the leading position of Protean in various services, strong revenue growth outlook, scope for profit margin expansion and negative net debt, we remain positive on the stock. We believe the stock could touch ₹2,890 over the next two years. Return ratios – RoE and RoIC – are expected to improve by 883bps to 19.3 per cent and 1665bps to 24.8 per cent, respectively, by FY27E,” said Arihant.

“The company continues to focus on building its growth book, with the resolution of its legacy book. With the increasing focus on retail lending, the company is expected to show positive performance in coming quarters, with an improvement in margins. This will further help them to improve their asset quality,” Arihant said.

“Further, their yields are expected to improve with the increase in their retail portfolio. NBFC further approved the merger of PEL and PCHFL on May 24. Going forward, their AUM is expected to grow by 15 per cent,” said Arihant.

“We are positive about the growth prospects of the cement industry as there are opportunities that would be driven by real estate and infrastructure development as well as private capex investment. The company’s focus remains on driving volume-led growth, improving utilisation, and continuous capacity addition is positive,” said the brokerage firm.

“On the financial front, we expect its revenue/EBITDA to grow by 11.3 per cent and 15.6 per cent CAGR over FY24-26E and maintain our buy rating with the target price of ₹2,394,” the brokerage firm said.

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