Domestic brokerage and research firm HDFC Securities, while sharing its top picks, has recommended two stocks that investors can look to buy, which are from Consumer Electricals and Engineering sectors with the time horizon of over two quarters. The two stock picks are KEI Industries Ltd and Ion Exchange (India) Ltd.
HDFC Securities’ top stock picks –
KEI Industries: KEI has transformed into a midsized cables and EPC company in the past decade. From volatility in margins given its modest scale earlier, it has moved to stable base and is in the right business growth segments, highlighted HDFC Securities.
“The company is a play on housing, capex and also engineering exports in India. It has high return ratios, free cash flows and low debt to equity (0.2x as on FY22). We believe it can sustain its 20% earnings CAGR during FY22-24E with further improvement in return ratios,” the note stated.
“We think the base case fair value of the stock is ₹1,340 and the bull case fair value of is ₹1,430. Investors can buy the stock in ₹1,198-1,221 band and add more on dips in ₹1,081-1,103 band,” the brokerage recommended.
KEI Industries Limited (KEI), established in the year 1968, has emerged as one of the leading manufacturer of cables and wires.
Ion Exchange (India): “The expansion of the membrane facility and greenfield expansion of chemicals capacity (environment clearance awaited) are likely to be strong growth drivers for IEIL especially when the demand drivers for its products/services remain robust. We expect IEIL’s Revenue/EBITDA/PAT to grow at 10/13/12% CAGR over FY22-FY24E, led by increased execution of orders,” it said.
Ion Exchange (IEIL) specializes in water and environment management. IEIL is also engaged in manufacturing ion exchange resins, speciality chemicals for water and waste water treatment as well as non-water applications.
“We believe investors can buy the stock in ₹1,790-1,820 band and add on dips to ₹1,630-1,650 band for a base case fair value of ₹1,996 and bull case fair value of ₹2,138 over the next 2 quarters,” HDFC Securities added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
