Samvat 2079: The 10 stocks for the new year from HDFC Securities

One of India's largest integrated private healthcare service providers has begun a low-capex brownfield expansion whereby it plans to add 500-700 beds via an asset-light model by taking over management and operations of existing hospitals. It will also launch pharmacies in Saudi Arabia. There are plans to increase share of the India business to 40 percent in the next three years. HDFC Securities finds the stock's current valuation attractive and at a steep discount to Indian peers. It also expects divestment and restructuring of the GCC business to unlock value.

A leading defence PSU, Bharat Dynamics is in the process to set up three new units in Telangana, Maharashtra and Uttar Pradesh to cater to the increased demand from armed forces. Current order book is worth nearly Rs 13,000 crore and the company is also exploring export markets. Consistent order flow, focus on indigenisation and internal efficiencies would fuel earnings growth for the stock, according to the brokerage.

BEL's order backlog as of June 30 this year stood at Rs 55,333 crore which is 3.3x its trailing 12-month revenue. HDFC Securities expects the company to surpass its current year guidance of 15 percent revenue growth and EBITDA margins between 21-23 percent. The company's financial profile remains strong due to healthy profitability, zero net debt and robust debt coverage metrics. HDFC Securities expects net profit to grow at a compounded rate of 10 percent over the next two years.

The MP Birla Group cement company intends to increase its capacity to nearly 30 million tonnes from the current 20 million tonnes by 2030. The company's manufacturing units in Uttar Pradesh and Madhya Pradesh have been recognised as mega projects by the government and are eligible for special incentives. HDFC Securities believes that the cost savings measures undertaken by the company will aid revenue and profit growth. It also expects power and fuel costs to be more favourable for the company in the second half of this financial year.

The third-largest pharma company in the domestic formulations market is likely to launch key products in the second half of this financial year. It also expects to launch four complex generics injection products in the next financial year. The brokerage anticipates a 9.5 percent compounded revenue and 19.5 percent compounded net profit growth rate over the next two financial years. The US business is also likely to grow at an 18 percent compounded rate over the next two years.

Shares of the largest manufacturer of Nitric Acid in the country have more than doubled over the last 12 months. It also reported its highest ever quarterly revenue and profitability last year. HDFC Securities expects the company's revenue to compound 14 percent while margins to remain in the 18-20 percent range over the next two years. High regulatory entry barriers, better capacity utilisation, and strong return ratios are some other key positives.

India's second-largest private bank by asset size has significantly reduced its corporate exposure and grown its loan book with a focus towards retail. Additionally, it is one of the largest financial services conglomerate as the business of its subsidiaries also continues to grow. With the Indian banking industry on the cusp of a credit upcycle, ICICI Bank is one of the best placed, according to HDFC Securities. It also expects subsidiaries to add good value to the overall valuation.

HDFC Securities likes RVNL's asset-light business model which enables the company to keep its balance sheet stress free and inventory days lower. It expects constant flow of business for the company due to the thrust on improving the infrastructure for rail transportation. The company also has a dividend yield of 5 percent and HDFC Securities finds its valuations attractive given the prospects. However, a potential government Offer for Sale can be a near-term overhang.

Present in the TV broadcasting space for over two decades, the company has expanded its basket of channels to 33 as of date. HDFC Securities expects compounded revenue growth of 11.2 percent over the next two years. With cash worth Rs 1,100 crore on its books, offers scope to invest in the linear or OTT space. Future growth prospects, healthy cash balance and reasonable valuations keep the brokerage positive on the stock.

HDFC Securities expects strong growth for the express logistics industry and sees TCI Express to be well positioned to capitalise on the same. It expects the company to generate free cash flows worth Rs 310 crore until financial year 2025. With improving profitability, the brokerage also expects return ratios like Return on Equity and Return on Capital Employed to remain elevated.