This week, we bring you a list of stocks where analysts are expecting fireworks. We identify Diwali picks with siginficant upside from ICICI Direct, KR Choksey, Edelweiss and HDFC Securities.

ICICI Direct’s Top picks for Diwali are Laurus Labs and Havells India, among others.

1. Laurus Labs: ICICI Direct gives this pharmaceutical company a ‘Buy’ call with a target price of Rs 675, indicating an upside of 38.8%. The brokerage mentions a buying range between Rs 485-510. The company has 11 manufacturing units with 74 drug master files, 32 abbreviated new drug applications filed and 192 patents granted. In addition, it has also acquired Richore Life Sciences to diversify in the area of recombinant animal-origin-free products.

Analyst Pankaj Pandey says, “Formulations are expected to do well on account of product launches in anti-diabetic (FY23) and CV portfolio (FY24) in the US and Europe.” He adds, “Laurus has multiple planned capacity expansions in the portfolio based on complexity and scale towards strengthening and diversifying the business.” He remains optimistic about the company on the back of its focus on custom synthesis business, stable order book, increasing reactor volume, expansion, product launches, and capacity expansion.

2. Havells India: Pandey also gives a ‘Buy’ call to this home appliance manufacturer with a target price of Rs 1,650 and mentions buying range of Rs 1,220-1,320. This indicates an upside of 41.5%. He says, “Havells has a strong presence in the organised product category with market share ranging at 6-20%.” He also adds that the company is constantly working on new product launches and increasing penetration in tier-two and tire-three cities.

The electronic goods manufacturer has plans to spend Rs 700- 800 crore in FY23 to expand manufacturing capacities. ICICI Direct expects Havells to report a revenue CAGR of 16% over FY22-24 led by new product launches, and dealer expansion, and with softening of raw material prices estimates that profit will register a strong CAGR of 20% over FY22-24. 

KR Choksey’s Diwali Picks include Aarti Industries and Devyani International.

1. Aarti Industries: KR Choksey maintains a ‘Buy’ call on this specialty chemicals company with a target price of 1,094, indicating a significant upside of 61.4%. Vikrant Kashyap and Saptarshi Mukherjee say, “Aarti Industries has been witnessing higher volume offtake and better realisation for its products.” They add, “Aarti’s continued focus on value-added products coupled with operating leverage has been helping the company to maintain better profitability.”

According to Kashyap and Mukherjee, the specialty chemicals manufacturer has planned a capex of Rs 30 billion over FY23-24 to capitalise on the robust demand of the specialty chemical sector. The analysts remain positive on the company as it continues to focus on the large opportunity arising from import substitution and supply chain diversification by global majors.

2. Devyani International: Kashyap and Mukherjee also keep a ‘Buy’ rating on this quick service restaurant (QSR) company with a target price of Rs 230, indicating an upside of 19.9%. The analysts are positive about the company’s prospects given its aggressive store addition plans, expansion into newer markets, cost efficiency, faster store rollout, and timely price hikes. They also add, “the company reached the landmark of 1,000+ stores in Q1FY23 and the management has guided for 1,000 stores addition in the next four years. Faster store addition and expansion in newer cities will provide visibility for growth.”

Kashyap and Mukherjee also expect the footfall into the QSR company’s stores to continue to improve as out-of-home consumption recovers. They say that an improvement in the dine-in channel has led to an increase in average daily sales. They expect the company’s revenue to grow at a CAGR of 40.5% over FY22-24. 

Edelweiss’ Diwali picks include Cholamandalam Investment & Finance Co  and Max Healthcare Institute.

1. Cholamandalam Investment & Finance Co: Edelweiss keeps its ‘Buy’ rating on this non-banking finance company (NBFC) with a target price of Rs 827. This indicates an upside of 16.1%. Analysts at Edelweiss expect the company’s new businesses to drive growth in the coming quarters. These new businesses are the consumer & small enterprise loan segment, secured business & personal loan segment and small & medium enterprise loan segment. The analysts believe that the NBFC’s management has shown an ability to scale up new businesses fairly quickly while maintaining its return ratios and asset quality. They also add that the company “has been able to deliver robust return ratios while maintaining a robust growth trajectory”. 

The analysts expect the NBFC’s asset quality to recover from the spike in non-performing assets in FY22 due to Covid-related issues and change in asset quality reporting norms for NBFCs. They see collections normalising and asset quality drastically improving by FY24. They expect the company’s net profit to grow at a CAGR of 23% over FY22-24.

2. Max Healthcare Institute: Edelweiss also maintains its ‘Buy’ rating on this healthcare facilities company with a target price of Rs 470. This indicates an upside of 14.4%. The analysts at Edelweiss are optimistic about the company as its non-Covid business is recovering on the back of the normalisation of outpatient department (OPD) footfalls and annual price revisions. They see this leading to an improvement in the overall average revenue per bed occupied (ARPOB). They also anticipate revenue from international patients to reach pre-Covid levels as international travel resumes. 

The analysts expect EBITDA margins to steadily improve as they see the hospital’s plans to reduce the bed occupancy of its institutional business to 15% in two years from 31%. The pricing in the institutional business segment is at a 30-40% discount compared to other segments. “The healthcare company aims to add over 4300 beds in the next five to seven years”, they note. Overall, its a strong outlook for Max Healthcare given its rising ARPOB, expansion plans, and focus on scaling up. 

Bharat Dynamics and Deepak Fertilisers & Petrochemicals Corp are among HDFC Securities’ Diwali picks. The brokerage mentions ‘till next Diwali’ as the time horizon for the targets.

1. Bharat Dynamics: HDFC Securities recommends a ‘Buy’ call for this Aerospace and defence company with a target price of Rs 1,022, and recommends adding more till a dip of Rs 774. The target implies an upside of 6.9%. The analysts say, “The company benefits from the government’s thrust on indigenous guided weapon system production, supporting a healthy order pipeline and revenue visibility.” They also note that the defence player has a strong manufacturing base and possesses execution capabilities to capitalise on the government’s Make in India and Atmanirbhar Bharat policies.

The analysts add, “Strong revenue visibility, backed by a robust pipeline, large projects being awarded (Akash and next-gen anti-tank guided missiles are expected to be awarded soon) and a focus on indigenisation and internal efficiency are likely to fuel earnings growth.” They expect revenue and profit to grow at a CAGR of 26.7% and 17.7% respectively over FY22-24.

2. Deepak Fertilisers & Petrochemicals Corp: HDFC Securities also gives this agrochemicals company a ‘Buy’ call with a target price of Rs 1,058 and recommends adding more till a dip of Rs 791. The target price indicates an upside of 2.6%. The analysts expect a revenue CAGR of 14% led by strong growth and estimate an EBITDA margin in the range of 18-20% over the next two years. They believe that strong revenue and a steady margin could drive a 17.5% CAGR in net profit. 

The analysts say, “The long-term growth of the company is expected to be underpinned by a change in its product mix, headroom availability of additional capacities emerging from better operational management, and de-bottlenecking, along with greenfield expansions.” They remain optimistic on the back of strong growth, high regulatory entry barriers, improving capacity utilisations, and a strong uptick in return ratios.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)