ICICI Lombard, Asian Paints Among Samco Securities' Top Diwali Picks
In Samvat 2077 - the Hindu New Year that began on November 14 last year, equity markets witnessed a historical journey as it touched new lifetime highs with the Nifty and Sensex crossing the 18k/60k mark respectively, for the very first time. Markets have seen an ever-increasing base of investors and shows resilience despite macro and short term challenges. Domestic brokerage and research firm Samco Securities has enlisted a few stocks to 'buy' on the occasion of Diwali Muhurat 2021.
Here are the top Diwali stock picks from Samco Securities:
Asian Paints Limited:
Stock Price: Rs 3,162.95
''Asian Paints is the largest paint company in India with industry-beating growth over the last three years. The company has around 60 per cent share of the decorative paints market, which accounts for 80-85 per cent of the Indian paints industry.
In this segment, the company is further cementing its market position and gaining market share. It is also expanding its product portfolio from paints to other categories like Home Décor, Designer Tiles, and so on to diversify its presence across the value chain.
The gross margins of the company have taken a hit in the most recent quarter primarily due to rising crude and chemical prices. However, the company remains confident to take price increase in its products and to maintain its EBITDA margins in the 18-20 per cent range.
With the shift in the sector from unorganized to organized players expected to propel its medium to long-term growth, we remain positive on the paint-maker due to its strong portfolio mix coupled with a robust distribution channel,'' said Samco Securities in a report.
ICICI Lombard General Insurance Company Limited:
Stock Price: Rs 1,527.50
''With a 7.9 per cent market share, ICICI Lombard is the biggest private sector general insurance provider. Because of its dominant position and strong parentage of ICICI Bank, the company has reached benefits. Its constant focus on profitable areas, as well as its cautious investment reserve policy, are significant long-term positives.
The insurer has not only delivered good profit growth of 23.75 per cent CAGR over the last five years but has also maintained a healthy dividend payout of 21.33 per cent. Its gross direct premium income grew at a CAGR of 11.7 per cent for the past 13 years. The moat of the company is comprised of its strong brand, qualified management, and healthy returns, which makes it a keeper in an investor's portfolio,'' said Samco Securities in a report.
Dabur India:
Stock Price: Rs 610.40
''Dabur is the world's largest Ayurvedic and natural healthcare company. It has a strong brand value and has over 400 trusted products, over 1,000 SKUs, and a strong rural reach. In the last year, Dabur reported an impressive 15 per cent YoY growth in domestic FMCG sales led by stellar 32 per cent YoY growth in healthcare. The company has successfully given the average return on equity and capital employed of around 31 per cent and 36 per cent respectively for the last five years.
In the wake of the pandemic, the demand for Ayurvedic Healthcare products witnessed a surge, and Dabur, with its strong lineage and market positioning, strong Research & Development capabilities, and healthy financial metrics, is a clear beneficiary. All these factors coupled with its comparatively lower beta, make Dabur an attractive investment bet,'' said Samco Securities in a report.
HDFC Bank:
Stock Price: Rs 1,581.85
''HDFC Bank is one of the leading banks in India and has maintained its dominant leadership position with healthy operational performance over various cycles. With a capital adequacy ratio of 20 per cent which is well above the regulatory limit and among the lowest GNPAs in the banking industry at 1.35 per cent for the recent quarter, the bank has a well-cushioned and strong balance sheet to capitalize on growth opportunities.
The company has delivered a robust financial performance with an average ROE of 18 per cent over a decade, growth in advances and deposits at an impressive CAGR of 19.55 per cent and 20 per cent respectively for the last five years, and net interest margins which have been consistently above the industry average.
The lifting of the ban on credit card issuance will aid its retail ambition. With strong earnings visibility, improving loan mix, stable asset quality, HDFC bank remains one of the resilient stocks in this sector and an attractive investment opportunity,'' Samco Securities said in a report.
Affle India Limited:
Stock Price: Rs 1,058.10
''Affle is a leading ad-tech company that helps enterprises drive user acquisitions, engagements, and transactions through relevant mobile advertising. It is the only listed stock in this space in India.
The management of the company indicates the operating margin to be sustainable and expects to deliver at least 25-30 per cent revenue CAGR in the next five years.
Affle predominantly focuses on emerging markets where the scope of digital advertising growth is expected to be faster at over 20-25 per cent CAGR.
It is also well-positioned to benefit from the industry tailwinds in India such as higher smartphone penetration, faster adoption, and increasing interest usage. The uniqueness of the business and high multiyear growth potential make Affle a compelling portfolio addition,'' Samco Securities said in a report.
(Stock prices as of November 3, 2021)
