Mahindra Lifespace, Crisil among top bets by HDFC Securities
3 min read . Updated: 24 Feb 2023, 06:59 AM IST
Premium- HDFC Securities has picked Mahindra Lifespace, Crisil and Ethos as its top picks with an investment horizon of 2-3 quarters. Read on to know what their outlook and target prices are on the stocks:
Indian market has been trading lower this whole week, with Nifty, Sensex falling 3% in 5 sessions. Higher US inflation number and US Fed minutes indicated higher for longer interest rates scenario, which sent jitters across global markets.
Domestically, India Q3 GDP data will be announced next week and is expected to be on the lower side. But amid the somber overall investor sentiment, there are a pockets of opportunities, experts feel.
Here are three stock picks by HDFC Securities with an investment horizon of 2-3 quarters:
Mahindra Lifespace Developers
Recommendation: Buy in ₹382-390 range | Target: ₹438
Mahindra Lifespace Developers Ltd (MLDL) is the real estate and infrastructure development arm of the Mahindra Group.
Mahindra Lifespace Developers is well-placed to leverage the tailwinds in industrial real estate business and plug-and-play infrastructure across multiple corridors and upcycle in residential business with strong additions in land bank for residential projects. MLDL is one of the few organised players with a strong balance sheet and benefits from attractive cost of capital which enhances its competitive position.
With presence in both residential and industrial sectors, coupled with prudent financial and professional management, track record of execution, healthy collections and robust business development pipeline; the company is set to improve its reported revenue and earnings. Given minimal inventory, negligible debt (considering deferred land payments); the company is well placed to acquire new projects to ride the upcycle.
We are positive on the company and have arrived at NAV-based base case target price of ₹438 and bull case target of ₹459 over the next two-three quarters. Investors can buy the stock in the band of ₹382-390 and add more on dips to ₹330-337 band.
Crisil
Recommendation: Buy in ₹3,160-3,210 band | Target: ₹3,510
Crisil is the oldest and a leading domestic credit rating agency in India.It is majorly owned by by S&P Global which is world's foremost provider of transparent and independent ratings, benchmarks, analytics, data, research, commentary and ESG solution.
We expect CRISIL’s revenue/EBITDA/PAT to grow at 11/11/14% CAGR over CY21-CY24E, led by improving macros, market share gains, cost rationalization, and synergies from acquisitions. It is likely to trade at a premium to its peers given its strong parentage, return ratios and diversified revenue mix. We believe investors can buy the stock in ₹3,160-3,210 band and add on dips in ₹2,840-2,890 band (32.5x CY24E EPS) for a base case fair value of ₹3,510 (40x CY24E EPS) and bull case fair value of ₹3,775 (43x CY24E EPS) over the next 2-3 quarters.
Ethos
Recommendation: Buy in ₹1001-1020 band | Target: ₹1125
Ethos Limited (Ethos) is India’s largest luxury and premium watch retail player having market share of ~20% in the luxury watch retail segment and ~13% in the premium and luxury watch retail segment in India.
Going ahead, we expect Ethos to report revenue/EBITDA/PAT CAGR of 30%/39%/62% over FY22-25E. The growth is to be driven by improvement in realisation and same store sales growth (SSG) rate, new store additions and increasing contribution from CPO business.
The long-term growth tailwinds for luxury watch industry in India coupled with Ethos’ dominant position in the luxury retail watch market makes Ethos an attractive long term bet in our opinion. Given the aggressive store additions (~40) over the next two years and requisite inventory build-up, the return profile of Ethos in the near term may appear modest. However, favourable long term macroeconomic factors, portfolio of best-in-class brands and management’s strong execution track record should lead to higher operating efficiencies over medium to long term.
We think the base case fair value of the stock is Rs. 1125 (28x Dec’24E EPS) and the bull case fair value of is ₹1227 (30.5x Dec’24E EPS). Investors can buy the stock in ₹1001-1020 band (25x Dec’24E EPS) and add more on dips in Rs. 872-886 (22x Dec’24E EPS).