From telecom to healthcare to information technology, the brokerage picked five bets from the large and mid-cap segments for bumper returns on a long-term basis.
Stocks to Buy in October: Indian market is expected to follow global market trends and as the broader market valuations are rich, opportunities arising from market correction can be used to add quality stocks from a long-term investment perspective, domestic brokerage firm Kotak Securities said in its market outlook report.
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From telecom to healthcare to information technology, the brokerage picked five bets from the large and mid-cap segments for bumper returns on a long-term basis. The stock picked are SBI Cards, Airtel, Apollo Hospital, Cummins India, and HCL Tech.
Below is the list of stocks along with the investment rationale:
SBI Cards and Payment Services (SBICARD) – BUY – CMP: 893; Target: 1150; Upside: 29%
Rationale: Around 105 per cent earnings growth, 22 per cent year-on-year OP profit growth, and around 30 per cent YoY decline in provisions. Solid growth signals: spend growth at 80 per cent YoY, card growth at around 20 per cent YoY growth. Credit cost is benign and at pre-Covid levels with unchanged NPL ratios. Opportunity size is a function of cash to digital and a play on economic growth
Bharti Airtel – BUY – CMP: 808; Target: 830; Upside: 3%
Rationale: Reported strong operational print in 1QFY23; results were in line with estimates. FCF (Free Cashflow) post lease and interest payment increased to Rs 6700 cr. ARPU increase, subscriber-mix improvement & 5G rollout to benefit Airtel and expect the company to report EPS of Rs23.1 & Rs40.6 in FY23E & FY24E, respectively.
Cummins India – BUY – CMP: 1216; Target: 1360; Upside: 12%
Rationale: Q1 results – Commodity price headwinds mask stellar business growth levels. Terms strength of demand growth as being at unprecedented levels. Upside risks emanate from new products in domestic & export markets. Revise down near-term estimates to account for the very weak start to the margin.
Apollo Hospitals – BUY – CMP: 4402; Target: 4850; Upside: 10%
Rationale: Healthy core performance; Hospital margins improve 200 bps sequentially to 23.9% in Q1FY23. Offline pharmacy going strong; 24/7 investments to rise further. The company has a lesser need for significant capex over the next few years. Best placed to benefit from the evolving landscape; Roll forward to Jun 24E.
HCL Technologies – BUY – CMP: 955; Target: 1165; Upside: 23%
Rationale: HCL is addressing gaps in the SaaS portfolio with focused bets. Execution is comforting. Apps have the potential to grow in high-teens. Healthy practice capture high-growth areas & balance in a portfolio of services. Aspires to challenge the hegemony of big players in apps, a mammoth task. The stock trades at an attractive valuation of 16x FY24E EPS, a dividend yield of 5%.
