Samvat 2080: Prabhudas Lilladher Lists 6 Large Cap Stocks And 7 Mid & Small Cap Stocks To Buy This Diwali

Prabhudas Lilladher Report

Ahead of this Diwali, we recommend six large cap stocks and seven mid and small cap stocks which includes a leading private bank, an automobile major, a wood panel manufacturer that investors can look to Buy and get returns of up to 35%.

ICICI Bank Ltd. (Current market price: Rs 933| target price: Rs 1,280/ Market cap: Rs 6,516.0 billion)

ICICI Bank continues to deliver strong earnings driven by a beat on all parameters. Core pre-provision operating profit performance has been superior to peers as it witnessed a healthy compound annual growth rate of 22.5% over FY19-23 driven by margin increase without diluting credit standards.

Balance sheet is stronger than ever as-

1. share of BB & below pool has been declining (from 1.5% to 0.7% YoY)

2. buffer provisions at 1.2% is best-in-class and

3. CAR/CET-1 is strong at 17.6%/16.8%.

Likely core return on asset/return on equity for FY25/26E is 2.0%/17.0% (versus 1.7%/15.3% for HDFC Bank Ltd.). ICICI Bank is currently valued at 2.2 times/1.9 times on FY25/26E core adjusted book value.

Maintaining multiple at 3.0 times, our SOTP based target price is Rs 1280. Reiterate ‘Buy’.

Maruti Suzuki India Ltd. (Current market price: Rs 10,285/ target price: Rs 12,485 / Market cap: Rs 3,106.1 billion)

Maruti Suzuki is well poised for revenue CAGR of ~13% over FY23-FY26E led by stable industry demand, healthy order book, new launches, higher average selling prices, and improving supply chain which provides good visibility of demand for near to medium term.

Recent model launches by MSIL have positively impacted average selling prices, profit margins, and the proportion of high-end models. Maruti Suzuki's plans to continue to introduce higher priced models in the SUV space and expand the smart hybrid technology to other models.

Maruti Suzuki holds a strong position in the CNG segment (market share of ~70% in FY23), which is poised for high growth as India focuses on clean energy. Maruti Suzuki is expected to launch its first EV in FY25.

Maruti Suzuki should also benefit from improving margins (~350 bps over FY23-26E) led by a shift towards higher-priced SUVs, stable input costs, price increases and higher capacity utilisation.

We estimate ~25% EPS CAGR over FY23-26E. The stock is currently trading at 21.7 times FY25E. We have a ‘Buy’ rating on the stock.

Greenpanel Industries Ltd. (Current market price: Rs 337/ target price: Rs 464 / Market cap: Rs 41.3 billion)

We have 'Buy' on Greenpanel Industries with target price of Rs 464 based on 21 times Sep-25 EPS. The company is well-positioned for growth and value creation given its-

1. leading position in domestic MDF segment,

2. strong growth prospects in domestic MDF demand,

3. planned capacity increase of 35% over FY23-26 and

4. extensive distribution network.

Although with higher raw material prices, margins will be impact in FY24, however, we expect better growth and margins for FY25 onwards. We estimate FY23-26E revenue/Ebitda/profit after tax CAGR of 8.8%/6.4%/7.2%, with MDF volume CAGR of 11.7%.

Greenpanel Industries’ MDF volume growth guidance of +3-4% with MDF Ebitda margin of 22-23% for FY24, even after 4.7% decline in MDF volume in H1 FY24 (considering improvement in volume in H2 FY24).

MDF dom. realisations are expected to be stable in near future. Plywood is expected to deliver flat volume growth in FY24 despite severe fall in volume (-29.2%) in H1 FY24.

We believe Greenpanel's performance should further improve through focus on increasing utilisation of expanded capacity, asset turns and better free cash flow generation.

Navneet Education Ltd. (Current market price: Rs 152 / target price: Rs 205 / Market Cap: Rs 34.3 billion)

We believe National Curriculum Framework implementation is likely to emerge as a key re-rating lever for Navneet as it would make second hand books market redundant and result-in significant volume delta.

Substantial yield advantage is also expected, as repricing at higher level becomes easier post curriculum revamp. Turnaround in Indiannica business (expected to be profitable in FY24E), back ended recovery in gross margin amid softening paper prices, narrowing losses in Ed-Tech and impending benefits from NEP is expected to result in sales/PAT CAGR of 12%/35% over FY23-FY25E.

Navneet trades at attractive valuations of 13.2 times/11.6 times our FY25E/FY26E EPS and we recommend a 'Buy' with SOTP based target price of Rs 205.

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