Add These 5 Stocks For Potential Upside Up To 51%, Says HDFC Securities

Leading brokerage firm HDFC Securities has placed Add rating on 5 stocks namely Max Financial Services Limited, ICICI Securities Limited, Symphony Limited, Colgate Palmolive (India) Limited, and Havells India Limited. The brokerage sees gains of up to 51% from the stock's current level considering the given target price to the stocks.

Stocks, CMP, Target Price, Rating, Potential Upside

Sr.No	Stocks	CMP (in Rs)	Rating	Target Price (in Rs)	Gains (in %)
1	Max Financial Services	698.5	Add	1035	49
2	ICICI Securities	502.1	Add	755	51
3	Symphony	854.5	Add	1150	35
4	Colgate Palmolive	1586.85	Add	1650	4
5	Havells India	1325	Add	1165.95	14

1. Max Financial Services Limited (MAXL)

MAXL posted a flat VNB at INR3.73bn despite a 7% YoY degrowth in total APE, led by sharp improvement in VNB margins to 31.4% (+213bps YoY). "While we are encouraged by sharp uptick in NPAR savings business at 38% in mix, we argue this will mean-revert towards 30%. We flag any further dip in MAXL's wallet-share in AXSB as a business concern. We await regulatory clarity on the transaction value for AXSB to acquire the residual 7% stake in MAXL; we believe the IRDAI will not relent on unfair transaction pricing," the brokerage has said.

It added, "We raise our VNB estimates by 7.4%-8% for FY23E-24E to factor in higher margins and expect APE/VNB CAGRs of 14.5/15.6% and operating RoEVs in the range 21-22% over FY23-25E. We retain ADD with a lower TP of INR1,035 (Sep-24E EV + 11.8x Sep-23E VNB) to build in 10% discount around uncertainties."

The brokerage sees a potential upside of up to 49% from its current level. The stock last traded at Rs 698.50 per share on NSE. The stock is trading near its 52-week low. It hit the 52 week low level on 14 October 2022 at Rs 665.55. Its 52-week high is Rs 1,080.70. It has given 28.73% negative return in a year. In 3 and 5 years, it has given 70.2% and 24.44% positive returns.

2. ICICI Securities Limited (ISEC)

ISEC printed an 11% growth in retail broking revenue on a weak base (Q1FY23: -20% QoQ), owing to weak cash volume sequentially (illustrating dependence on cash volume), partly offset by robust derivatives volume. "We draw comfort from ISEC's renewed focus on building digital capabilities; however, given the high dependence on cash delivery volume, we believe that its revenue will remain cyclical and face headwinds from new age tech brokers. We believe that the uptick in customer activation on the Super app concomitant with higher cross-sell is likely to drive better terminal value. Given the healthy retail participation and attractive valuation, we retain our positive stance on ISEC, maintaining ADD with a target price of INR755," the brokerage has said.

The brokerage sees a potential upside of up to 51% from its current level considering its given target price. The stock on NSE last traded at Rs 502.10 per share, down 0.91% as compared to its previous close. In the past 5 days, the stock fell 1.15% and in the past 3 months, it gains 7.6%, respectively. Over a year, the stock gave a negative return of 34.94%. Whereas, in the 3 years, it has given 75.87% positive return.

3. Symphony Limited

Symphony's domestic business delivered a beat on revenue, led by a positive channel sentiment. Domestic revenue came in at INR 1,900mn, up 54% YoY, flat on three-year CAGR basis. Secondary sales in H1FY23 were strong, which cleared the inventory of two failed seasons. "Beat in domestic revenue came during the non-seasonal quarter (purely channel filling led); thereby, we maintain our yearly estimates. Exports were at INR 250mn (HSIE INR 75mn) vs. INR 50mn YoY; quarterly lumpiness continues. In Q2, revenue performance of CT was impacted by order deferment, which remains an overhang on the consolidated performance. Consolidated gross margin contracted 56bps YoY to 44.9%. Higher A&P spends including one-off market research expenses, freight costs, warranty expenses and overhang in CT business impacted the consolidated EBITDA margin. We remain positive on the domestic business outlook (led by low channel inventory); however, due to weak profitability for CT, we cut our FY23/24/25 EPS by 5/3/3%. We value the stock at 35x P/E on Sep'24E EPS and derive a TP of INR 1,150. Maintain ADD," the brokerage has said.

The brokerage sees a potential upside of up to 35% from its current level considering its given target price of Rs 1,150 per share. On NSE, the stock last traded at Rs 854.50 per share, down 3.46% as compared to its previous close. In the past 5 days, the stock surged 0.83% and in the past 3 months, it fell 5.83%, respectively. Over a year, it fell 19.44%, in the 3 years it fell 75.87%, and in 5 years it fell 40.47%, respectively.

4. Colgate Palmolive (India) Limited

Colgate reported an in-line performance to our revenue and EBITDA estimates. Net revenue grew by 3% YoY (HSIE 3%), 4% on three year CAGR. Volume declined ~2% YoY, a three-year CAGR of 1%. Rural demand remained weak and high retail inflation impacted volume growth. However, MT and ecomm sustained a healthy trend. GM contracted 308/257bps YoY/QoQ to 63.8%, a miss on our estimates of 66.2%. EBITDA margin, however, at 29.4%, saw a lower contraction of 23bps YoY due to lower-than-expected A&P spends, which were at ~11% of revenue. "The current inflationary and rural pressures are impacting the already slow growing oral care category. Demand trend would sustain a similar trajectory in the near term, while margin recovery is expected. We value Colgate at 36x P/E on Sep-24E EPS to arrive at a TP of INR 1,650. Maintain ADD," the brokerage has said.

The brokerage sees a potential upside of up to 4% from its current level considering its given target price. Friday, the stock fell 1.17% and ended at Rs 1,586.85 per share on NSE. The stock hits 52 week high level in September 2022 at Rs 1,695.95. Its 52-week low is Rs 1,375.60 as on 25 January 2022. The stock has given a 2.2% positive return in the past 1 week, whereas, over a year, the stock fell 0.42%. In 3 & 5 years, it has given 2.99% and 51.58% positive returns.

5. Havells India Limited

Havells posted a marginal beat in revenue, owing to better C&W revenue, while profitability remained weak. Absorption of high-cost inventory and higher-than-expected losses in Lloyd impacted the overall operating print. The company has been consistently delivering revenue outperformance amongst peers; however, it has been sustaining the margin miss as well (fifth quarter of margin contraction). The question one needs to ask is whether more weightage should be given to Havells' superior core business or its weakening capital allocation towards Lloyd. "With the housing/home improvement theme sustaining along with benign raw material, we still bet on the superiority of the core business. We cut down our EPS by 10/4/3%, largely due to the miss in Lloyd profitability. With consistent miss in numbers, we cut down our target P/E multiple to 48x (50x earlier) on Sep-24. Our TP is INR 1,325 (earlier INR 1,400). Core business performance will still be better than peers and recovery will also be faster. We maintain ADD rating on the stock," the brokerage has said.

According to the given target price, the stock is likely to surge 14% from its current level. The stock's current market price stood at Rs 1,165.95 per share on NSE, down 3.62% from its previous close. It fell 6.98% in the past 1 week, whereas in a month, it fell 11.29%. In a year, the stock has given 9.32% negative return. However, in the past 3 and 5 years, it has given 69.08% and 113.02% positive returns, respectively.

Disclaimer

The stocks have been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.