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Muhurat trading: Top stocks to buy on Diwali for Samvat 2079

Muhurat Trading Stocks 2022: The Indian stock exchanges – BSE and National Stock Exchange (NSE) – will conduct a one-hour special Muhurat trading session on the occasion of Diwali on Monday, October 24, 2022.

The trading session would be held between 6:15 pm and 7:15 pm and the pre-open will begin at 6:00 pm, both the bourses informed in separate circulars last week. All trades executed in this Diwali Muhurat trading session shall result in settlement obligations.

The auspicious one-hour session will mark the beginning of the new Samvat 2079 – i.e. the ancient Hindu calendar year which starts on the day of Diwali. In the trading community, the customary Muhurat session is believed to bring wealth and prosperity throughout the year.

Indian markets are shut throughout the day on Diwali but are only open for an hour for Muhurat trading on account of Laxmi Pujan on this day.

Historically, the BSE started the Muhurat trading in 1957 and the NSE began conducting it in 1992.

Festive offer

Heading into the special trading session, domestic brokerages such as HDFC Securities, Kotak Securities and Prabhudas Lilladher have come out with their respective reports on stocks to buy this Diwali for bumper returns.

These brokerages have recommended the stocks on the basis of various fundamental and technical factors, ranging from large cap to broader market categories.

Top stocks to buy for Samvat 2079

HDFC Securities

Bharat Electronics: Buy – Target: Rs 123; Upside: 22%

Orders inflow is expected at Rs 18,000-20,000 crore in FY23E. The company has maintained its revenue growth guidance of 15 per cent and EBITDA margin guidance of 21-23 per cent for FY23E. The chips supply situation is better now than in the previous year. Therefore, we expect FY23E revenue growth and margin to surpass the given guidance.

We recommend investors to buy the stock at Rs 101 and add more on dips at Rs 87 (22.0x FY24E EPS) for a target price of Rs 123 (31x FY24E EPS) till next Diwali.

Birla Corporation: Buy – Target: Rs 1,069; Upside: 19%

BCL is committed to increasing its annual cement production capacity to approximately 30 million tons (mt) by 2030. Its current production capacity stands at 20 million tons. This ambitious expansion plan promises a buoyant outlook for the company by ensuring improved profitability, cash flow and efficiency.

We recommend investors to buy the stock at Rs 896 and add more on dips at Rs 784 (6.3x EV/EBITDA FY24E, $63.9/T FY24E) for a target price of Rs 1069 (7.7x EV/EBITDA FY24E, $78.8/T FY24E) till next Diwali.

Bharat Dynamics: Buy – Target: Rs 1,022; Upside: 19%

BDL is continuously engaged in new product development and upgradation of existing products to meet customer requirements. Its order book stood at ~Rs 13,000 crore, implying net order inflows of ~Rs 3,500 crore in Q1FY23. The majority of its order inflow, to the tune of ~Rs 2,970 crore, is generated by the Astra Beyond visual range Air to Air missile. The order book is executable in the next 2-3 years. Key new domestic orders in the pipeline are worth ~Rs 8,000 crore.

We recommend investors to buy the stock at Rs 858 and add more on dips at Rs 774 (20.5x FY24E EPS) for a target price of Rs 1022 (27.0x FY24E EPS) till next Diwali.

Kotak Securities

Mahindra & Mahindra (M&M): Buy – Target: Rs 1,500; Upside: 22%

Given the strong order book on account of successful new launches, we expect the automotive segment to deliver a strong performance in the coming quarters. The company expects to lead the EV (electric vehicle) revolution in India through the three strategic pillars of brand, design and technology.

Our Fair Value of Rs 1,500/share is based SoTP (sum-of-the-parts) basis. Attractive valuations and reasonable growth prospects drive our BUY rating.

Reliance Industries Ltd (RIL): Buy – Target: Rs 2,980; Upside: 26%

RIL can explore reorganisation of the company into three independent entities for its three different business verticals. Reorganisation will help the company in achieving three mutually linked objectives of (1) structure, (2) succession and (3) segregation. In our view, three independent listed entities for RIL will be in the areas of energy, retailing and telecommunications.

We assume RIL will list its retailing (Reliance Retail and related entities) and telecommunications (Jio Platforms and related entities) over the next 2-3 years. We assume all the three members of the next generation will be present on the board of RIL while actively managing a particular vertical at the same time.

RIL has created significant value for investors by reinvesting into businesses. We expect earning per share to increase by 24.4 per cent in FY23E and by 19.1 per cent in FY24E. Sum-of-the-parts (SoTP)-based Fair Value is Rs 2,980.

Infosys: Buy – Target: Rs 1,750; Upside: 19%

Infosys will be at the forefront of driving the digital journey of clients. Low exposure to legacy services, solid digital credentials & ability to structure & winintegrated & complex transformation deals are positives & will power industry-leading growth. Infosys can benefit from increased focus on cost takeout priorities by clients.

Sufficient levers available to keep margins in 21-22 per cent band. Infosys has raised revenue growth guidance to 15-16 per cent from 14-16 per cent earlier for FY23. EBIT margin can further improve as supply-side pressures ease. This will translate into strong EPS Compound annual growth rate over the next three years.

Maintain BUY rating, valuing the stock at 25x September 2024E EPS. Fair Value increases to Rs 1,750 on rollover.

Prabhudas Lilladher

Bharti Airtel: Buy – Target: Rs 1,032; Upside: 32%

Bharti is a play on strong recovery in telecom sector, led by consolidation and higher ARPU. Led by supportive government policies, we expect sector’s wireless revenue to increase at 17.7 per cent CAGR over FY22-25E (as ARPU will rise from Rs 134 to Rs219 in FY25E). Focus on premiumisation and customer focused strategies led to highest Adjusted Gross Revenue (AGR) in Q1FY23 for Bharti over one/two-year growth at 25.1 per cent/30.3 per cent vs Jio’s 20.6 per cent/18.7 per cent. We expect Bharti’s EBIDTA to increase at 21.8 per cent CAGR over FY22-25. Reiterate ‘BUY’ with SOTP based PT of Rs 1,032.

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Avenue Supermarts (DMart): Buy – Target: Rs 5,121; Upside: 24%

D’Mart remains our top pick to play the shift from unorganized to organized market in food and grocery led by 1) consolidated industry with only 2/3 players having huge entry barriers 2) Significant scope to grow in existing catchments with potential of 1500 stores, as against having 302 stores currently 3) Focus on everyday low prices 4) Growing success of D’Mart ready with expectation to turn EBITDA positive by FY25 5) 42% PAT CAGR over FY22-25, as strong sales are expected post covid from new stores opened during covid 6) Margin accretion from rise in the share of general merchandise and apparel segment. ‘Buy’ with a DCF based target price of Rs 5121.

Jubilant Ingrevia: Buy – Target: Rs 860; Upside: 58%

Jubilant Ingrevia (JUBLINGR) is well placed to capitalize on long term growth opportunities given (1) 60 new products pipeline (2) strong traction in CDMO (3) import substitution (4) China+1 policy and (5) commensurate capex outlay of Rs 20.5bn over FY22-25. Specialty chemicals (SPCM) segment to lead earnings growth aided by highest capital allocation (Rs 13bn). Its vertical integration across value chain drives cost and market leadership (global top 2 in pyridine-beta, vitamin B3) besides enables it to move up the value chain. EBITDA contribution from higher value segments (SPCM + NHS) is expected to increase to ~67 per cent by FY25E from ~53 per cent in FY22, as SPCM/NHS EBITDA grows at ~27 per cent/11 per cent CAGR, while concentration of its commodity vertical (Chemical Intermediates) reduces to 33 per cent by FY25E. Strong balance sheet (Net Debt/Equity at 0.1x) despite ~Rs 18bn cash outflow on capex over FY23-25E and earnings mix improvement led by higher value and structural growth segments will drive rerating in the stock, in our view. Reiterate ‘BUY’ on SoTP based target price of Rs 860 (implied consol Sep’24E EV/EBITDA of 13x and PE of 22x).

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The views expressed in this article with regard to the stocks are those of the respective brokerages. Please consult your financial advisor before investing.

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