Diwali Value Stock Picks: Bharti Airtel among 5 stocks that may rally up to 41% in Samvat 2077

Indian share markets were highly volatile in the last one year where both domestic and global developments swayed the investor sentiment. Since the last Muhurat trading session (October 27, 2019), BSE Sensex has added 672 points, while the Nifty 50 has risen 130 points. In the past one year, Indian and global stock markets have witnessed major events such as Union Budget, RBI policy, US-China trade talks, Brexit deal, and the deadly Coronavirus pandemic, which led to a lockdown in most of the countries all over the world.

In January 2020, BSE Sensex hit an all-time high of 42,273.87, and then plunged to a 52-week low of 25,639 on March 24 after the government announced nationwide lockdown to contain the fast-spreading COVID-19. Similarly, the broader Nifty 50 index zoomed to 12,430 in the first month of this calendar year and then plummeted to 7511 levels in March. So far to date, the headline indices have recovered over 55 per cent from their respective 52-week lows.

A K Prabhakar, Research Head at IDBI Capital Markets and Securities Ltd has selected a few stocks as Diwali 2020 value picks with up to 41 per cent upside.

Alembic Pharmaceuticals: It will take Alembic Pharmaceuticals to jump up to 41 per cent from the previous close to touch the target price of Rs 1,360 apiece. According to the brokerage firm, the stock is trading at a P/E ratio of 17.5x FY21 Bloomberg EPS estimates which looks attractive. The company’s EBITDA margin improvement of 4bps on-year in FY20 was primarily on account of operating leverage with higher revenue. Fixed costs like other expenses, employee costs are lowered.

Bharti Airtel: Telecom giant Bharti Airtel has a strong market share in the premium subscribers (postpaid/high pre-paid) which places it well to take advantage of increasing data consumption and expected increase in ARPU. A K Prabhakar sees a 37 per cent rally in the stock price with a price target of Rs 620 apiece for 12 months. “Airtel is trading at an EV/EBITDA of 7x/6.1x and P/E ratio of 33x/19x FY22/FY23 based on Bloomberg consensus which we believe provides extremely good risk-reward,” Prabhakar said in a report.

Johnson Controls: The brokerage firm expects a 36 per cent rally in Johnson Control stock price as with the launch of new model ‘Kaze’ in split and window AC it has entered the mass premium segment to reach out to more customers. The stock is trading at 30x PE at FY23E Bloomberg estimates. The company has expanded its distribution reach to 10,000 retail touchpoints.

Bayer CropScience: IDBI Capital expects 28 per cent rally in 12 months in the agrochemical major. It has given a target price of Rs 6,850 apiece. The report noted that the company enjoys a unique position in the domestic agrochemical space due to its ability to offer new innovative products. Bayer Crop’s acquisition of Monsanto India resulted in a bigger entity in agrochemical and seed. “This will unlock the growth potential of Indian agriculture as a global producer and exporter of food, feed and fiber,” it said. It also highlighted that anti-China sentiment may drive a shift of manufacturing hubs from China to India, which would benefit the company in a long run.

Nestle India: IDBI Capital has pegged a target price of Rs 20,820, implying an upside of 22 per cent from the previous close. The management of the company has guided for Rs 2,600 crore capex (equivalent to total CAPEX done over the last 8-9 years) over the next 3-4 years to develop a new factory in Sanand, Gujarat, and enhance existing capacities. “We forecast Net Sales/EBITDA/PAT to grow at a CAGR of 11%/14%/15% over CY19-22E,” the brokerage firm added.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)