Diwali 2023 Stock Picks: Motilal Oswal lists Titan, M&M, among 8 other fundamental picks for this festive season

Moreover, Samvat 2079 – which was defined by the period between October 24, 2022 to November 6, 2023, saw Nifty 50’s new lifetime high in an increasingly uncertain and volatile global environment.

Resilient economic conditions, healthy corporate earnings, foreign capital inflow and retail participation drove the market. Further, a moderation in inflation and expectations that global interest rates may have peaked in the last few months supported equities. 

Also Read: Diwali 2023 Stock Picks: Bharti Airtel, Coal India among top 5 buys from Stoxbox

Samvat 2080 Outlook

Going forward, Samvat 2080 will be defined by several key events including state-level elections that are scheduled in November-December, followed by the general elections in May 2024. Global factors such as economic growth, interest rates, bond yields, inflation, geopolitical issues will also be keenly watched by investors.

According to domestic brokerage firm Motilal Oswal Financial Services, Nifty earnings are expected to maintain their growth at 18 per cent CAGR or compound annual growth rate over FY23-25. Nifty is trading at a 12- month forward P/E of 17.6x, which is at a 13 per cent discount to its 10-year average. 

‘’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,” said Motilal Oswal in its report.

According to the brokerage, the four key themes which will define Samvat 2080 are credit growth – which remains healthy at 15-16 per cent. Secondly, discretionary spending – over which auto, hotels, and jewelry sectors are expected to witness high demand. 

Thirdly, the government’s infra capex will benefit the cement and industrial sectors. Real estate players stand to benefit with residential demand in the top eight cities scaling to nine-year highs.

Also Read: Diwali 2023: How should you trade stocks, gold, commodities during special Muhurat session?

Lastly, the growth in niche sectors such as electronic manufacturing services (EMS) and new age fintechs – which stand to benefit from consumption boom and capex drive.

With a focus on these themes, the brokerage has released its 10 Diwali stock picks for Samvat 2080. Motilal Oswal has selected the quality stocks which have robust fundamentals and are well-placed to yield good returns for investors in the next one-year time frame.
 

Diwali 2023 Stock Picks by Motilal Oswal

Let’s take a look at the top 10 fundamental stocks for Diwali by brokerage Motilal Oswal:

1.State Bank of India (SBI): Upside: 22 per cent; Target Price: ₹700

-SBI has strengthened its balance sheet by creating higher provisions. It raised its PCR (including two) to 92 per cent in 2QFY24 and held a higher (~99.5 per cent) provision coverage on Corporate NPAs. Among PSU banks, SBI remains the best play, with a healthy PCR, Tier I of ~12 per cent, strong liability franchise, and improved operating profitability. EPS CAGR (FY23-25E): 18.4 per cent; RoE ((FY24E): 19.1 per cent.
 

2.Titan: Upside: 19 per cent; Target Price: ₹3,900

-Titan, with a 7 per cent market share in jewellery industry, is at the forefront in terms of growth among organized players. Emerging businesses, fragrances & fashion accessories, and Indian dress wear are expected to record double-digit growth. EPS CAGR (FY23-25E): 27.6 per cent; RoE ((FY24E): 30.9 per cent.

3.M&M: Upside: 19 per cent; Target Price: ₹1,770

-M&M has one of the highest exposures to the rural market (~65 per cent of volumes), which is likely to recover considering the rural cash flows. M&M’s reorientation of its SUV business to maintain its DNA and brand positioning has led to a robust demand momentum for its SUVs. ‘’We expect a 16 per cent volume CAGR in Passenger UVs over FY23-25”, said Motilal Oswal. EPS CAGR (FY23-25E): 20.4 per cent; RoE ((FY24E): 21.8 per cent.
 

4.Cipla: Upside: 21 per cent; Target Price: ₹1,450

-Cipla’s robust pipeline with complex products (inhalers, peptides, injectable, etc.) should drive consistent growth in the US generics segment. This along with a steady outperformance in branded generics market (of India/SA) would enable 19 per cent earnings CAGR over FY23-25E. EPS CAGR (FY23-25E): 18.9 per cent; RoE ((FY24E): 14.6 per cent.

5.Indian Hotels: Upside: 22 per cent; Target Price: ₹480

-RevPAR (revenue per available room) growth for Indian Hotels has been strong in October 2023, and is displaying a healthy demand visibility for November 2023. Management has guided for a double- digit RevPAR growth in FY24. A favourable demand-supply scenario, and a rebound in foreign tourist arrivals should boost occupancy going forward. EPS CAGR (FY23-25E): 20.7 per cent; RoE ((FY24E): 14.6 per cent.
 

6.Dalmia Bharat: Upside: 33 per cent; Target Price: ₹2,800

-Dalmia Bharat is benefiting from a robust increase in cement prices, particularly in the East, where prices have risen by ₹40-50/bag, and an improvement in demand. ‘’We expect ~11 per cent volume CAGR over FY23-26, and estimate EBITDA/t of ₹1,045/ 1,150/ 1,250 in FY24/FY25/FY26 driven by a reduction in opex (operating efficacy and softening fuel prices),” said Motilal Oswal. EPS CAGR (FY23-25E): 32.8 per cent; RoE ((FY24E): 5.3 per cent.

7.Kaynes Technology: Upside: 26 per cent; Target Price: ₹3,100

-Kaynes is a prominent end-to-end and IoT-enabled integrated electronics manufacturer, with strong order book growth (96 per cent CAGR over FY20-23) and a higher share of box build (~40 per cent in 1HFY24). ‘’We estimate 41 per cent/56 per cent CAGR in revenue/Adj. PAT over FY23-FY26, driven by healthy order book and a better margin profile (increasing mix of high value order),” said Motilal Oswal. EPS CAGR (FY23-25E): 64.5 per cent; RoE ((FY24E): 16.1 per cent.
 

8.Raymond: Upside: 38 per cent; Target Price: ₹2,600

-Raymond in last 2-3 years has strengthened its leadership team & 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.
EPS CAGR (FY23-25E): 18.4 per cent; RoE ((FY24E): 20.2 per cent.

9.Spandana Spoorty: Upside: 22 per cent; Target Price: ₹1,100

-Spandana Sphoorty has pivoted from consolidation to the growth phase to pursue customer acquisition-led growth, with addition of 350k borrowers (up 180 per cent YoY) in 2QFY24. With reinforced processes, it is now ready to capitalize on the strong opportunity in the MFI sector. ‘’We estimate a 34 per cent AUM CAGR over FY23-FY26, and an RoA/RoE of 4.4 per cent/17 per cent in FY26,” said Motilal Oswal.
 

10.Restaurant Brands Asia: Upside: 16 per cent; Target Price: ₹135

-Restaurant Brands Asia has has worked on its products, new categories and value segment to attract traffic in the last couple of years. The business may see a turnaround in the next 2-3 years. With an aggressive store addition (17 per cent CAGR over FY23-26), Restaurant Brands Asia is well placed to deliver a strong 26 per cent/45 per cent CAGR in revenue /EBITDA over FY23-26E for India business, according to Motilal Oswal.
 

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.

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Updated: 09 Nov 2023, 06:16 AM IST