Siyaram Silk Mills, Goodyear India are HDFC Securities’ top fundamental picks

Despite a bearish outlook, the Indian stock market, unlike many of its global counterparts, has performed well in 2022. Currently, the benchmark indices are near their record high territories and some experts believe that the valuations are also high. They believe we may see some more correction in the market in the time to come.

Understanding the current economic situation and performance of certain companies, HDFC Securities has selected Goodyear India and Siyaram Silk Mills as its top fundamental picks for next 2-3 quarters.

1. Goodyear India

Recommendation: Buy in ₹1,090-1,110 band and add on dips in ₹970-990 band | Target price: ₹1,201

The company shares were trading at ₹1,143 at 2:30 pm on Friday. With a normal monsoon and signs of a bounce back in the rural economy, Goodyear India, a leader in India’s tractor tyre industry, can grow in terms of profit and revenue in the coming time. The government will also be focusing on pumping in more money in the rural sector to increase farm income, agriculture modernisation, and rural income. Apart from growth prospects in terms of rising demand, the company will also benefit from the drop in natural rubber prices, higher/stable price in tyre replacement market, etc. Backed by GTRC, one of the world’s leading tyre company, GIL is a debt free company and reported good financial numbers in recent years, finds HDFC Securities.

However, a below monsoon next year, slump in the growth of tractor industry, and rising competition with domestic market players like Apollo tyres, MRF, Ceat, JK, etc can be a risk for the company’s growth.

2. Siyaram Silk Mills

Recommendation: Buy in ₹547-557 band and add more on dips in ₹490-498 band | Target Price: ₹619

The company shares were trading at ₹557.25 at 2:30 pm on Friday. With its strong marketing and branding techniques, the company’s brands have earned a high brand recall value among people. SSML has an upper edge in India’s fast-growing clothing industry due to its extensive distribution network. Company owns brand names such as Siyaram, J Hampstead, Oxemberg, and Cadini. The company enjyes a strong capital allocation track record in the textile and clothing industry of the country. Key drivers of the company are its strong balance sheet, deep penetration with consistent and focused approach toward brand building.

HDFC Securities believes that the company has positive growth prospects due to its strategy of heavy investment behind its brands and enhance its product mix. HDFC Securities has recommended the base case fair value of the stock to be at ₹619 and the bull case fair value at ₹666. It recommends investors to buy the stock in the range of ₹547-557 and they can purchase some more if its dips in ₹490-498.The company is expected to reach the base case fair value in next two quarters.