Here Are The Top Stock Picks For January 2024 By KRChoksey

KRChoksey Research Report

Investment period: six months. Research idea: Fundamental

HDFC Bank - Consistent performance with sustainable ROA of 2.0%

(CMP Rs: 1,691, Target: Rs 2,060, Potential upside: 21.8%)

We expect HDFC Bank Ltd.'s current valuation to re-rate on the back of-

1. a strong balance sheet,

2. improved opportunities for business growth with healthy CET,

3. improving margin outlook in the long term; and

4. an adequate cushioning in terms of provisions with stable asset quality.

We value the bank's standalone business at 2.8 times FY25E price/adjusted book value to Rs 1,857 and the subsidiaries at Rs 203, taking the total value to Rs 2,060 per share, implying an upside of 21.8% from the current price.

Accordingly, we maintain a 'Buy' rating on the shares of HDFC Bank.

Happiest Minds - A strong focus on organic growth and cost control measures will aid revenue and margin

(CMP Rs: 901, Target: Rs 1,062, Potential upside: 17.9%)

We estimate Happiest Minds Technologies Ltd.'s revenue to grow at 22.6% compound annual growth rate over FY23-25E and profit after tax to grow at 16.5% CAGR over FY23-25E. Currently, the stock is trading at price-to-equity multiples of 57.0 times/39.7 times based on our FY24E/FY25E earnings per share estimates, respectively.

We assign a P/E multiple of 45 times on FY25E EPS of Rs 22.7 to arrive at a target price of Rs 1,062 and maintain the recommendation of ‘Buy’ and imply an upside potential of 17.9% over current market price.

Varun Beverages - Capex and entry into new geographies to boost growth

(CMP: Rs 1,262, Target: Rs 1,505, Potential upside: 19.3%)

We expect net revenue/ Ebitda/adjusted profit after tax to grow at a CAGR of 17.3%/ 20.2%/ 26.2% over CY22-CY25E.

We assign a P/E multiple of 65.0 times to CY25E earnings per share of Rs 23.2 to arrive at a target price of Rs 1,505 per share, with an 19.3% upside from current levels. Accordingly, we maintain a 'Buy' rating in the shares of Varun Beverages Ltd.

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