Stocks to buy: NCC, Som Distilleries among three fundamental stock picks by HDFC Securities

HDFC Securities Retail Research has listed out three stocks that it expects to give up to 10% returns in the short to medium term based on strong fundamentals and growth potential. These fundamental picks by HDFC Securities include NCC, Som Distilleries and Breweries and Allsec Technologies.

The brokerage house suggests buying these stocks and adding on dips for a time horizon of two to three quarters.

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Here are fundamental picks by HDFC Securities:

NCC | Buy | TP: ₹164.25

NCC has a well‐diversified order book, robust execution capabilities, strong focus on debt reduction and improvement in working capital. The company’s management has maintained 20% revenue growth guidance for FY24 and aims to achieve over 15% revenue growth in the long run. Softening of raw materials prices are likely to improve margins going ahead. 

HDFC Securities expects revenue, EBITDA and PAT to grow at a CAGR of 18%, 18.2% and 28% over FY23‐25E. 

“We think the base case fair value of the stock is ₹164.25 (10.75x FY25E EPS) and the bull case fair value is ₹183.5 (12x FY25E EPS) over the next two‐three quarters. Investors can buy the stock in the band of ₹145‐150 and add more on dips to ₹130.50 band (8.5x FY25E  EPS),” HDFC Securities said.

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Som Distilleries and Breweries | Buy | TP: ₹357

HDFC Securities Retail Research believes Som Distilleries and Breweries’ prospects seem exciting at this juncture as it has delivered strong operating performance over the past few quarters and the management is aggressively targeting market expansion in a growing liquor market. Company’s performance in H1FY24 was a beat on all fronts. 

“We believe the domestic market offers various opportunities in terms of sub-geographic penetration and market diversification. The management of Som Distilleries and Breweries is cognizant of the same as it intends to seize the opportunity and increase the company’s market share by exploring untapped markets, through product innovations and undertaking capex. Going ahead, we expect the company to report 28%/34%/36% CAGR in its revenue/EBITDA/ PAT respectively over FY23-25E,” said the brokerage firm. 

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It suggests investors can buy the stock in ₹320-328 band and add more on dips in ₹285-292 band. It has a base case target price of ₹357 per share and the bull case target of ₹387 per share for a time horizon of 2-3 quarters.

Allsec Technologies | Buy | TP: ₹745

HDFC Securities believes that expected acceleration in the company’s revenue growth momentum, stability in margins, strong consistent execution, delivery on guidance and strong cash generation would support valuations. 

It suggests investors can buy in the ₹675-689 band and add on dips in the ₹606-618 band. It believes the base case fair value of the stock is ₹745 and the bull case fair value of the stock is ₹829 over the next 2-3 quarters.

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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.

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Updated: 08 Nov 2023, 11:19 AM IST