10 stocks recommended with robust fundamentals and margin of safety in valuation to offer superior returns to investors by HDFC Sec

TOP PERFORMERS FROM OUR LAST SAMVAT PICKS

Barring a single recommendation, all the rest of Samvat 2079 picks were not only able to achieve their intended targets but also managed to scale much higher levels.

It has been a stellar samvat for many PSU companies and stock prices of many PSUs have risen multi fold. The performance heightened lately especially after a recent tacit endorsement by the honourable prime minster in the parliament, albeit half-jokingly! We had picked 2 PSU stocks as part of our recommended 10 stocks last year.

RVNL

Railway PSU stocks have enjoyed strong support from the Indian government, which provided funding and backing for critical railway infrastructure projects.

The consistent demand for railway services in India ensured a stable revenue stream for RVNL. The company has been performing well on all the fronts from Inflows of orders to execution of the current order book, with the consultancy services helping in margin expansion. The government thrust on improving the rail transportation by adding new lines and extending/revamping electrification has led to significant jump in the order inflows and visibility going forward.

Bharat Electronics

BEL, one of our Diwali 2022 picks has performed exceptionally well, surpassing our expectations, backed by parameters like strong order inflow guidance of receiving big orders from Indian Army and non-defence orders from opportunities in CBTC and super SCADA systems. The company has also guided for strong margin outlook and the Defence acquisition council has granted acceptance of necessity to various proposals envisaging investment of approx. ₹78 bn across armed forces.

Aster DM Healthcare

Aster DM, a prominent healthcare company in India and the Middle East did exceptionally well. Most of the players in the industry registered healthy growth in revenue and profitability coupled with improvement in return ratios led by better occupancy and healthy growth in ARPOB.

Aster DM Healthcare stock was in demand on recent murmur of potential sale of its India business, on top of its efforts to restructure its Gulf (GCC) business to unlock value for its shareholders. The entire proceeds from the sale will accrue to the Indian entity and that is likely to be distributed as a special dividend/buyback.

TCI Express

This was the only recommendation that did not reach its target. The company struggled to grow its topline and bottomline through the year even as it faced excessive price competition from new age players and the shift to organised players took longer than expected.

Going forward, we expect markets to be volatile till the 1st half of 2024 even as the outcome of state and Central elections will be watched closely as would be the repercussions of the two geo political events. Though the local fund inflows have remained robust, we would need resumption of FPI flows once the global risk appetite revives. We continue to favour domestic oriented businesses and favour opportunities in the sectors like Materials, Pharma, Oil & gas, Small Finance banks, Petrochemicals, consumption, Power EPC and restructuring plays for the next year. With a focus on these themes, here are our 10 picks for Samvat 2080. These stocks have robust fundamentals and some margin of safety in their valuation to offer superior returns to investors.