PNB, Granules India among 4 stocks to buy

The volatility in the market has gone up with India vix trading around 15-16 levels. While the trade in market is lacklustre this week, Sharekhan has put out its stock recommendations.

Here are 4 stocks on which Sharekhan by BNP Paribas has given a buy recommendation:

Punjab National Bank

Recommendation: Buy | CMP: ₹54 | Target: ₹64

We remain positive on PNB as the bank is likely to deliver strong earnings driven by healthy PPoP (Pre-Provision Operating Profit) growth (led by faster loan growth, higher margins) and normalisation of credit costs. We expect RoAs (return on assets) of 0.7% for FY24E and 0.8% for FY25E, driving RoE (return on equity) of 10% and 12% for the respective years going ahead.

Strong recoveries which have started to outpace slippages and lower fresh slippages formation going ahead would help to normalize credit costs.

We believe that the correction in the stock (~15%) provides good opportunity to add due to improved business outlook. The stock currently trades at 0.7x/0.6x/0.6x its FY2023E/24E/25E ABV.

Key Risks: Economic slowdown due to higher-than-anticipated credit cost especially from the corporate book and SME portfolio could affect earnings.

Hindustan Aeronautics

Recommendation: Positive | CMP: ₹2,527 | Target: 16-18%

We reiterate a positive view on Hindustan Aeronautics Limited (HAL) given a healthy order book of about ₹84,000 crore, order intake guidance of Rs. 50,000 crore for the next 6-12 months and robust order pipeline of more than ₹1.2 lakh crore.

We expect the company’s revenue/PAT to grow at a CAGR of 9.5%/~20% over FY2022-2024E. growth. The company is debt-free and has a strong cash and equivalents and healthy return ratios. The stock is currently trading at ~17.6xFY2024E EPS.

Key Risks: 1. Fluctuations in raw material prices and delays in availability of critical components could impact execution. 2. Opening up of the defence sector to private players may intensify competition in the future.

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Granules India

Recommendation: Buy | CMP: ₹328 | Target: ₹400

We upgrade our rating on Granules India to Buy from Hold as we believe Granules India is well-poised to benefit from diversified supply of its Paracetamol API secured away from China in the recent quarters.

The China +1 strategy besides its ability to pass on price increases to few customers for paracetamol will help them to safeguard escalated price levels for its PAP API for Paracetamol from China over the medium term. The stock price has fallen by 12% since its Q2FY23 update. Hence, at CMP, the stock trades at a relatively attractive valuation of 11.7x/10.0x its FY2024E/FY2025E EPS.

Key Risks: Delay in product approvals or the negative outcome of facility inspections by the USFDA can affect future earnings prospects, and delay easing of input prices.

Jyothy Labs

Recommendation: Buy | CMP: ₹200 | Target: ₹240

We retain our Buy rating on Jyothy Labs Limited with a revised price target of Rs. 240. The stock is trading at 23.9x/19.7x its FY2024E/FY2025E earnings, which is at a discount to large consumer goods stocks.

We expect double-digit revenue growth momentum to sustain in the quarters ahead. However, with the expected pick-up in rural demand, the volume growth trajectory should improve in the next one to two quarters.

Key Risks: Any late recovery in the HI category or market share loss in some of the key categories (dishwashing and fabric care) would act as a key risk to our earnings estimates.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.