Ahluwalia Contracts from realty – civil construction industry, Indraprastha Medical Corporation from hospital sector, Linc from stationery are the three top stock picks that domestic brokerage and research firm HDFC Securities has suggested that investors can look to buy with the time horizon of two to three quarters.
HDFC Securities’ top stock picks –
1) Ahluwalia Contracts: ACIL continues to see robust prospects in healthcare, data centers, industrial structures apart from government buildings. Competitive intensity remains elevated and ACIL remains very selective in bidding for projects.
Despite near term headwinds of high input costs, margin is expected to improve from FY24E with softening of commodity prices, a narrower gap of indices with input prices, slightly lesser competitive intensity and new projects bid at elevated input price assumption.
The promoter family remains closely involved in the business with welldefined responsibilities and clear understanding of future roles. ACIL’s robust and diversified order book, strong bidding pipeline, timely execution could help to bring more orders going forward.
Investors could buy the stock in the ₹511- 521 band and add more on dips to ₹457-465 (10x FY25E EPS). The brokerage feels the Base case fair value of the stock is ₹564 (12.25 times FY25E EPS) and the Bull case fair value is ₹610 (13.25 times FY25E EPS) over the next two to three quarters. At the CMP of ₹516 the stock trades at 11.2 times FY25E EPS.
2) Indraprastha Medical Corporation: During the pandemic, lock downs impacted the healthcare companies in India severely. There was a significant drop in patient footfall— be it a single speciality, multi-speciality, tertiary-care hospitals or even diagnostics businesses.
Financial performance of IMCL was also impacted due to the same, however, as the situation has stabilized, the company’s business has also got back on track. There was 45% jump in revenue in FY22 and margins again also improved to ~13% in FY22 v/s 6.6% in FY21.
The company has negligible debt on balance sheet and has been paying healthy dividends to its shareholders. We have envisaged 18% CAGR in revenue and 32% CAGR in net profit over FY22-25E.
HDFC Sec believe the base case fair value of the stock is ₹93 (7 times FY25E EPS) and the bull case fair value of the stock is ₹99.5 (7.5 times FY25E EPS) over the next 2-3 quarters.
Investors can buy the stock in the range of ₹82-84 and add on dips to the range of ₹72-74 (5.5 times FY25E EPS). At the LTP, the stock is trading at 6.3 times FY25E EPS.
3) Linc Ltd: On the back of its renewed commitment to growth, the brokerage expects the company to report revenue and PAT growth of 24% and 90% (partly due to low base) over FY22-25E.
Lower working capital requirements and improving profitability has improved company’s cash generation while also bolstering its return profile. Linc aims to maintain a healthy, deleveraged balance sheet in the future by financing its operations largely through cash accruals.
The management of the company has envisioned to transform Linc into a FMCG company by increasing its reach, enhancing its brand visibility and embarking on innovations to de-commoditize its business. Consistency in performance would make Linc a strong candidate for re-rating, as per the brokerage.
“We think the base case fair value of the stock is ₹661 (17.5 times FY25E EPS) and the bull case fair value is ₹715 (19 times FY25E EPS). Investors can buy the in stock ₹591-601 band (16 times FY25E EPS) and add more on dips in ₹525-533 band (14 times FY25E EPS),” the note stated.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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