Will Dalal Street's top 5 stocks of 2020 continue their dream run in the new year?

The company is among the top performers in the market rally but analysts expect the stock to correct in the near term. “There is big increase in their contracted capacity and the pricing of solar power has become similar to thermal power, the company also gets a good ESG score because of that,” said Abhimanyu Sofat, head of research at IIFL Securities. “Justifying valuation is difficult, so it may correct 20 per cent more and one can look at buying the stock at lower levels,” said Sofat.

The company has benefited because of strong demand for APIs and traction in the formulations business, said analysts. “... dual source qualification by global pharma players and import substitution from China could generate structural demand from Indian APIs manufacturers after the Covid-19 outbreak. Aarti Drugs, being a pure-API player with 50+ molecules in the product basket is well placed to grab this opportunity,” said Axis Securities. The brokerage in a note recently set a target price of Rs 825 on the stock.

The stock has surged more than four-fold this year as investors binged on pharma companies involved in exporting APIs. However, Kotak Institutional Equities said in a recent note that it would await better entry points to buy the stock. Hyderabad-based Laurus trades at 10 times FY22 estimated EBITDA and 15 times FY22 estimated EPS with operating leverage benefits now fully captured with a re-rating unlikely, said Kotak Institutional.

The stock is being seen as a strong opportunity in the pharma sector as it is a pure- play new chemical entity based contract development and manufacturing organisation. “SPL’s eminently successful execution track record of NCE-based projects, bestin-class EBITDA margins and robust return ratios are a testimony to the quality of business, coupled with added momentum from formulations and its robust launch pipeline. Investment in Rising Holdings brings significant synergies for SPL’s formulations business for joint development and distribution,” said Monarch Networth Capital in a note last week. The brokerage has initiated coverage on Suven Life with a target price of Rs 580.

The stock, which listed in 2019, is being eyed because it is expected to benefit from rising share of digital ad spending. “Affle is well placed to capture growth from increasing smartphone penetration and velocity of e-commerce transactions that would drive a shift towards mobile-based digital advertising in emerging markets,” said Dolat Capital.