BSE Sensex and NSE Nifty 50 have soared higher in recent days, helped by positive flows from foreign institutional investors, softening inflation, and expectations of less hawkish global central banks. However, after the sharp up-move charted by benchmark indices, analysts are not ruling out a short-term correction on Dalal Street. Amid such a scenario, analysts recommend going stock-specific with your portfolio. HDFC Securities has picked two stocks that they believe could help investors pocket as much as 19% returns in the next two to three quarters.
Bharat Electronics: BUY
Target price: Rs 319-342.5
Bharat Electronics (BEL) share price has skyrocketed 37.47% so far this year and analysts believe the rally is not over yet. The public sector firm is engaged in the business of Defence Electronics empowering the Nation’s Defence Forces and in other chosen areas of Professional Electronics. “BEL has been continuously focusing on sustainable growth plans and has taken various initiatives like focusing on enhancing its R&D capability, enhancing manufacturing capabilities through timely modernisation and expansion of facilities and entering into joint ventures in existing and emerging businesses to enhance growth visibility,” HDFC Securities said.
With the government focusing on research and development, increased indigenisation levels and completion of key projects like Brahmos missile, Aakash air defence systems, LAC Tejas, light combat helicopters and submarines provide enough room to grow the domestic defence ecosystem. “We expect that BEL could play an important role on India’s defence theme, given its indigenization capabilities, healthy order book, promising order inflow pipeline, and strong execution capabilities,” analysts said. Buying has been recommended in Rs 288-294 band and add more on dips to Rs 261.50 band. The base case target price is set at Rs 319.5 per share and bull case at Rs 342.5 per share with a two-quarter time horizon.
Faze Three: BUY
Target price: Rs 437-466
The stock has jumped 34% so far in 2022 to now trade at Rs 389 per share. The company is engaged in the business of manufacturing and export of technical and home textiles products. “The company has laid down a capacity expansion plan with Rs. 80 Cr and targeted asset turnover of ~8 to 10x of new capex. This is in line with the company’s plan to reach up to Rs.1500 Cr annual revenue run rate in next five to six years,” analysts noted. China plus one strategy adopted by many across the globe has boded well for Faze Three. The firm offers Floor coverings (Bathmats / Rugs – Rubber backed), Performance & Outdoor Home Textiles, Cushions, Top of Bed Products, Blankets, Accessories, Bathmats, Accent Rugs, Cushions, and Power loom rugs, among other products.
“FY22 was a remarkable year for the company as it was able to add significant capacities, management bandwidth, new products, customers & substantial value across all stakeholders. Even after sharp rise in prices of raw material, Coal/Fuel costs, shipping costs, etc., the company was able to report its highest ever revenue,” HDFC Securities said. Faze three has zero long term debt in the balance sheet since FY18, however recently the short term debt has risen due to inflated raw material and transportation cost as well as due to ongoing capex. Buying has been advised in the Rs 393-405 range while adding more on dips to Rs 350. Base case target is set at Rs 437 and bull case at Rs 466 with 2-3 quarter time horizon.