With valuations not exactly inexpensive, what stocks should investors buy when going shopping on Dalal Street?
Emkay Global believes that the Auto sector remains a key beneficiary of the post-Covid economic recovery and low-interest rates.
So far this month, BSE Sensex and the broader 50-stock NSE Nifty have jumped over 11% each. Although there has been some correction, analysts do not expect it to be a small one with the near-term uptrend still intact. Earnings have kept investors confident of their positions and commentary from India Inc has been positive, further aiding confidence. However, with valuations not exactly inexpensive, what stocks should investors buy when going shopping on Dalal Street? Domestic brokerage firm Yes Securities has chalked out a list of shares that they feel offer attractive valuations.
Yes Securities said they are positive on ABB Power Products, helped by increasing electrification of transport and Industry, EV charging creating new demands patterns, and digitalization across the value chain resulting in demand for their products and services. “The company is well placed with its advanced services and innovative O&M strategies,” they added. ABB Power has been improving over the last couple of months with higher-order execution across some key segments and industries, which have ramped up production, post easing of lockdown. “Stock is currently trading at an attractive valuation of 21x FY23E P/E and 21x FY23E EV/EBITDA,” the brokerage firm said.
Current price: Rs 692
The company has a diversified geographical presence, a de-risked business model with presence in both automotive and Non‐Automotive, and presence in multiple segments from 2‐W to HCV in the Automotive segment. Further, Yes Securities expects the stock to benefit from the vehicle scrappage policy and the PLI scheme. ROEs are expected to stay at 18%+ post the next fiscal year. The stock currently trades at 22x FY23E P/E and 13x FY23E EV/EBITDA.
The company makes industrial machinery running from diesel and natural gas engines to power generation, construction and mining equipment. “Cummins is well placed to pocket the opportunities arising from the government’s initiative to make India a $5 trillion economy by FY25,” Yes Securities said. The company is also expected to benefit from the huge outlay towards the infrastructure sector in the Union Budget. Currently, the stock trades at 21x of FY23E.
Steel Strips is a major player in the steel and alloy wheel rims segment with market share of 50% in passenger cars, 45% in tractors, and 50% in commercial vehicles. In the three months the stock price has surged 38%. Going forward the company is expected to benefit from the anti-dumping duty on Chinese Wheels in the EU and USA, along with the PLI scheme and Vehicle Scrappage policy. “At the CMP, the stock is trading at an attractive valuation of 6x FY23E P/E and 4.5X FY23E EV/EBITDA,” Yes Securities said.