Here Are The Top Stock Picks For August 2024 By Axis Securities

Axis Securities Report

Here are our top picks for August 2024:

HDFC Bank – Embracing the upturn (Potential upside 21%)

HDFC Bank Ltd. remains confident of growth picking up in the coming quarters. The bank’s focus on deposit-led credit growth would imply a slowdown in credit growth momentum. However, HDFC Bank’s pursuit of eyeing profitable growth bodes well from a return on asset improvement perspective over the medium term.

Consistent deposit growth and net interest margin improvement remain key re-rating levers for the bank. We maintain our Buy recommendation on the stock with a target price of Rs 1,950/share.

Key risks:

• Slowdown in overall credit momentum owing to the bank’s inability to ensure deposit mobilization,

• Slower substitution of higher-cost debt with lower-cost deposits.

TVS Motor – “New product launches to drive growth” (Potential upside: 15%)

Being well-placed among listed players, we expect the TVS Motor Company Ltd.’s revenue/Ebitda/profit after tax to grow at ~17%/21%/25% compound annual growth rate over FY24-26E. We like TVS because of its engineering and research and development capabilities, strong domestic retail network, export recovery, and increasing sales volumes from premium offerings in developed countries (we estimate Norton's business to be able to generate revenue by FY26- 27).

Based on this strong fundamental outlook, we expect the company to deliver a strong return on equity, ranging between 27%-30% over the next few years.

Key risks:

• Higher Interest rate,

• Macro Economic risks, and

• Higher fuel prices.

Dalmia Bharat - Demand tailwinds and strong market position to drive growth (Potential upside 15%)

During Q1 FY25, Dalmia Bharat Ltd.'s operating cost for cement production decreased by 4% QoQ and 7% YoY to Rs 3,989 per tonne, positively impacting its Ebitda margin. Blended realisation remained stable on a QoQ basis, with a favorable product mix and rationalization of discounts mitigating any further decline in prices. Cement demand is anticipated to stay strong, driven by infrastructure development. The industry is expected to grow at 1.2 times the GDP growth, which is projected to be 6.5%-7% over the next several years.

Given the company's superior positioning in key markets in the East and South, exposure to the West region, the government's focus on infrastructure and affordable housing, increasing real estate demand, new capacity ramp-up, and ongoing cost optimization measures, Dalmia Bharat is expected to deliver stable performance. The company is projected to grow its volume/revenue/Ebitda/adjusted profit after tax at a CAGR of 9%/8%/11%/21% over FY24-FY26E.

The stock is currently trading at 13 times and 11 times FY25E/FY26E EV/Ebitda and EV/tonne of $88 and $85.

Valuation remains attractive. We maintain our Buy rating on the stock with a target price of Rs 2,120/share, implying an upside of 15% from the CMP.

Key risks:

• Lower demand and contraction in cement prices impacting realization;

• Further rise in input prices hampering margin.

Westlife Foodworld – Structural story (Potential upside 10%)

We maintain our positive outlook on Westlife Foodworld despite near-term challenges. Our confidence in the company’s bright future prospects is supported by its strong execution track record of revenue/Ebitda growth of 17%/51% over FY16-20, which was driven by new product launches and cost rationalization programs (100-200 bps cost reduction every year).

We expect the company to deliver healthy revenue/Ebitda growth of 12%/13% CAGR over FY23-26E (Post Ind. AS). This will be led by:

1. Foraying and scaling up fast-growing categories such as McDelivery, McCafe, McBreakfast, and Fried chicken.

2. Leveraging McDelivery and other convenience platforms to capitalize on the rapidly growing delivery channel, and

3. The management’s ambitions to penetrate into fastgrowing smaller towns/cities, raising store guidance prospects to 45- 50stores/year from 25-30 stores earlier and converting normal stores to techsavvy EOTF (Experience of the Future) stores for better customer experience.

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