Federal Bank, APL Apollo among top 4 stocks which could give over 20% return in Samvat 2079: Vishal Wagh

“We need to be cautious on the higher side. Though global markets are still strong, 17,800 on Muhurat looks a little difficult,” says Vishal Wagh, Research Head of Bonanza Portfolio.

In an interview with ETMarkets, Wagh said: “The RBI is trying to control the fall of the rupee but the bounce in USDINR is indicating further weakness possible till 84” Edited excerpts:

What a week for Indian markets ahead of Diwali. Benchmark indices rose more than 2%. What led to the price action?
This price action is led by the bounce in the global markets, a small cool-off by the dollar index and strong results from banking majors.

We are heading for a truncated week. Where do you see nifty heading in the coming week? Do you see 17,800 on Muhurat Trading Day?
The last hour of the weekend has indicated limited upside. So, we need to be cautious on the higher side. Though global markets are still strong, 17800 on Muhurat looks a little difficult.

In terms of sectors, banks, PSU stocks rose more than 3%. What led to the price action?
PSU banking is doing well. All the PSU banks have stronger balance sheets compared to what it was a couple of years back.

The event number from the banking sector is very strong. So, this is only fueling the rally.

What is your take on the rupee? Do you see further weakness in the coming week?
The RBI is trying to control the fall of the rupee but the bounce in USDINR is indicating further weakness possible till 84.

One trading advice you would want to give to traders on Muhurat Trading for Samvat 2079.
Be with the trend till the time it won't bend. Try to keep noise away from trading and focus on the trend till the time is persist. Once it reverses you need to change the direction of the trade.

What are your picks for Samvat 2079?
We like Federal Bank, APL Apollo Tubes, Praj Industries, and Campus Activewear for the next 1 year:

Federal Bank: Buy| Target Rs 160| LTP Rs 132| Upside 21%
The asset quality is likely to stay stable with gradual improvement in the profitability and thus expect it to deliver Return on Asset (RoA)/RoE or return on equity of 1.3%/14.4% by FY24E.

At the current market price, the stock trades at 1.3x its FY23E ABV (Adjusted Book Value) and 1.1x its FY24E ABV. The brokerage firm value the stock at a target multiple of 1.4x FY24E ABV.

APL Apollo Tubes: Buy| Target Rs 1392| LTP Rs 1074| Upside 29%
APL Apollo is well placed to grab this massive growth opportunity given pan-India presence, spare capacity (utilization rate of 78%), capacity expansion and new innovative product launches.

The stock is currently trading at 44.0x FY23E EPS and 32.2x FY24E EPS, respectively.

Praj Industries: Buy| Target Rs 545| LTP Rs 425| Upside 28%
PRAJ, developer of Ethanol plants in India (65% market share), will be a beneficiary of the government’s ethanol blending target of 20% (EBP20) which was reduced to 2025 from 2030 earlier.

The stock is currently trading at 37.1x FY23E EPS and 26.3x FY24E EPS, respectively. “We are valuing Praj Industries at 33.0x FY24E EPS of Rs.16.50,” said the note.

Campus Activewear: Buy| LTP Rs 589| Target Rs 729| Upside 23%
Campus grows faster than industry and will expand its distribution network and deepen its footprints with a specific focus on the western and southern regions of India.

The company has maintained its healthy operating cash flows, asset turnover ratio of more than 4x, consistency in EBITDA margins over the years, and best-in-class return profile making it a capital-efficient business model.

Campus has reported extremely well on the growth drivers and have a far superior outlook, currently, the campus is trading at P/E of 45x one year forward FY24E. "We assign P/E multiple of 56x to Campus on FY25E EPS," said the note.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)