Diwali 2023 Picks - 10 Fundamental Stocks Listed By Motilal Oswal For Samvat 2080; Raymond, SBI And More

Motilal Oswal Report

Despite global uncertainties, India remains a shining star and is expected to maintain its outperformance. Nifty is trading at a 12- month forward P/E of 17.6x, which is at a 13% discount to its 10-year average, thus providing comfort. We believe that over the next couple of quarters, sector rotation could be an important driver along with the overall market uptrend. We also believe valuations will become an important factor in stock selection to drive outperformance in portfolios.

We present below our key themes and ideas for Samvat 2080.

Dalmia Bharat Ltd. (Current market price: Rs 2,105 / Target price: Rs 2,800 / upside potential: 33%)

Dalmia Bharat is benefiting from:

1. a robust increase in cement prices, particularly in the East, where prices have risen by Rs 40-50/bag, and

2. an improvement in demand.

We expect ~11% volume compound annual growth rate over FY23-26, and estimate Ebitda/tonne of Rs 1,045/ 1,150/ 1,250 in FY24/FY25/FY26 driven by a reduction in opex (operating efficacy and softening fuel prices).

Raymond Ltd. (Current market price: Rs 1,890 / Target price: Rs 2,600 / upside potential: 38%)

Raymond in last two-three years has strengthened its leadership team and restructured its group. Demerger and promoter’s capital infusion strengthened balance sheet.

It has a collection of established brands like Raymond, Park Avenue, ColorPlus, Ethnix which it plans to grow through capex-light franchisee mode.

Kaynes Technology Ltd. (Current market price: Rs 2,455 / Target price: Rs 3,100 / upside potential: 26%)

Kaynes is a prominent end-to-end and IoT-enabled integrated electronics manufacturer, with strong order book growth (96% CAGR over FY20-23) and a higher share of Box Build (~40% in H1 FY24) and printed circuit board assembly (54%).

We estimate 41%/56% CAGR in revenue/adjusted profit after tax over FY23-FY26, driven by healthy order book and a better margin profile (increasing mix of high order).

SBI - (Current market price: Rs 574 / Target price: Rs 700 / upside potential: 22%)

Investment Rationale:

SBI has strengthened its balance sheet by creating higher provisions. It raised its provision coverage ratio (including TWO) to 92% in Q2 FY24 and held a higher (~99.5%) provision coverage on corporate non-performing asset.

Among PSU banks, SBI remains the best play, with a healthy PCR, tier-I of ~12%, strong liability franchise, and improved operating profitability.

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