Diwali 2023 stock picks: Five Star, Fusion, SRF among top ideas of Nirmal Bang for Samvat 2080

Domestic brokerage firm Nirmal Bang Securities has selected 10 stocks for the upcoming Samvat 2080. The brokerage firm has picked mostly recent debutants of Dalal Street, which made its debut in Samvat 2079. Its picks have mostly been from industrials, financials, chemicals and capital goods sectors. Have a look at the picks by Nirmal Bang:

Archean Chemical Industries | Target Price: Rs 767
Archean Specialty Chemicals Ltd (ACIL) is a leading specialty marine chemical manufacturer in India. It caters to three major product categories such as bromine, industrial salts and sulphate of potash. ACIL is one of India's largest exporters of both bromine and industrial salts with one of the lowest cost of production across the globe.

During H1FY24, global headwinds in the chemical industry led to downward pricing pressure on bromine. However, demand remained strong, and many customers had liquidated a large part of their inventory. Thus, one can expect a good quarter with demand revival in the medium-term. Our earnings forecast has been revised considering the expected weak performance for FY24E due to challenges faced by the overall industry. We have assigned a target price of Rs 767 per share.

Elecon Engineering | Target Price: Rs 1,050
Elecon Engineering Ltd is a manufacturer of industrial gears and material handling equipment (MHE). It is a play on industrial capex across various sectors, especially in cement, steel, power, sugar and other sectors. Elecon is the leader in industrial gears with a market share of 35 per cent in India.

After a decade of juggling issues related to liquidity and legacy EPC projects, the MHE segment is finally turning around after the company revised its strategy. All new orders are either product-based or aligned towards after-market sales. Elecon offers strong growth visibility with an improving balance sheet. We assign a target price of Rs 1,050 per share.

Five Star Business Finance | Target Price: Rs 1,100
Five Star Business Finance Ltd provides secured business loans to unbanked micro-entrepreneurs & self-employed individuals excluded by most Banks/NBFCs with ATS of Rs 2.4 Lakh and total AUM of Rs. 6,900 crore. All its loans are secured by borrowers’ property, predominantly self-occupied residential property.

Serving mainly in tier 3-6 small towns, invoking legal action entails high cost, as a result, the only other listed company (SFB) present in this segment is shifting its focus away from less than Rs 5 Lakh ticket size. Five-Star’s strong return metrics and high earnings growth of 30% CAGR over FY23-25E shall be driven by strong AUM CAGR of 35 per cent; stable NIM and cost/income; and subdued credit cost in the 0.6-0.8 per cent range. We recommend ‘buy’ with a target of Rs 1,100.

Fusion Micro Finance | Target Price: Rs 820
Fusion is India’s second largest NBFC-MFI with AUM of Rs 9,712 crore and borrower base of 36 lakh, implying average outstanding per borrower of Rs 25,800 crore. Fusion’s peak GNPA since covid stood at 5.7 per cent vs 16 per cent for industry, reflecting its quality underwriting and proactive risk management.

Good corporate governance having auditors from big 4 since inception; Warbug and Creation stakes at 39 per cent and 24 per cent, respectively; Fusion has been delivering industry leading metrics, identical to CreditAccess which is considered as the best in class MFI. On a conservative basis and due to limited listing history, we value Fusion at a 30 per cent discount to CreditAccess at 2.1 times Sep 2025 book-value and arrive at a target of Rs 820.

Sai Silk (Kalamandir) | Target Price: Rs 323
Commenced operations in 2005 , Sai Silk , with presence majorly in Southern states including Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu. Through its four store formats, Kalamandir, VaraMahalakshmi Silks, Mandir and KLM Fashion Mall, offers various products including premium ethnic fashion, ethnic fashion for middle income and value-fashion and other fashion products suitable for weddings, parties, daily wear.

With presence in South India, Sai Silk intends to deepen its penetration in those areas , by opening 30 additional stores over two years for which the company will utilize Rs. 125.08 crore of IPO net proceeds and also propose to open 5 additional stores in franchise model. FY21 was impacted due to Covid, while FY23 , revenue surpassed FY21, indicating strong recovery on both revenue and margin front driven by growth in stores. We recommend a 'buy' on the stock with a target price of Rs 323.

Sanghi Movers | Target Price: Rs 864
Sanghvi Movers is the largest crane rental company in India and Asia; and the sixth-largest in the world. At present, the company has a fleet of 400 medium to large sized heavy duty telescopic and crawler cranes ranging from 40 to 1000 MT. SML also has a fleet of more than 95 High Bed Trailers and 64 multi-axle lines which are being used for the movement of its crane and crane parts from one location to another. Company’s fleet is primarily catered for the construction of various industrial plants.

Utilization reaching optimal level; room for yield to improve: In FY19, capacity utilization went down to 59 per cent, but has now gradually bounced back to 84 per cent in Q1FY24. Considering the industry tailwind, revival of capex cycle, high earning growth visibility, strong balance sheet and strong cash flow generation. We value the share at a target price of Rs 864.

SRF | Target Price: Rs 2,637
Incorporated in 1970, SRF Ltd is headquartered at Gurugram, Delhi. SRF engages in the business of industrial and specialty intermediates. It has gradually transformed its business from a pure play technical textiles player where it presently deals with various segments such as fluorochemicals, specialty chemicals, packaging films, coated and laminated fabrics.

We are positive on SRF’s operating efficiencies with lowest working capital cycle amongst its peers at 45 days in FY23. Also, it has the ability to expand its presence in the market in addition to its wide range of distribution networks that result in reasonable wallet share gains. While our earnings forecast for FY24 has contracted based on Q2FY24 results, we are positive on the stock at current valuation. We have done SOTP valuation to value SRF’s business and arrived at a target price of Rs 2,637 per share.

Venus Pipes & Tubes | Target Price: Rs 1,830
Venus is the only pure-play listed player focused on the high value SS (Stainless Steel) pipe industry. SS pipes are used in critical, high pressure & temperature applications like pressure vessels, heat exchangers, condensers & others. Industry exposure: capital goods 50 per cent, chemicals 33 per cent, other industries 17 per cent.

Venus offers strong growth visibility driven by capacity expansion of 3 times from 12,000 tons to 38,000 tons by FY25E plus operating leverage thereon; backward integration into manufacture of hollow pipes; sales through stockists which is 30 per cent mix today is expected to dip below 20 per cent in favor of direct sales' entry in larger diameter pipes. We assign a target price of Rs 1,830.

Vishnu Chemical | Target Price: Rs 421
Incorporated in 1989, Vishnu Chemicals Ltd is one of the leading players in the manufacturing and sales of chromium chemicals and barium compounds across the world. It serves more than 100 customers across more than 12 user application industries and 50+ countries globally. The company’s backward integration in the chromium vertical bodes well to sustain its gross margins.

Vishnu Chemicals aims to achieve a D/E ratio of 0.6 times within a year and the upcoming capex is expected to be funded through internal accruals. We expect it to deliver strong and steady performance with revenue and PAT growth at 15 per cent and 24 per cent over FY23-25E. We value the share at 12 times to FY25E EPS to arrive at a target of Rs 421 per share.

Vishnu Prakash R Punglia | Target Price: Rs 262
Vishnu Prakash R Punglia Ltd is a Rajasthan based EPC company focused player on water supply projects along with railways and
roads. Order book and revenue have grown at a CAGR of 50 per cent over FY21-23 while PAT has grown at over 100 per cent. Order book stands at Rs 4,390 crore.

Its niche focus on water supply projects, low revenue base and demonstrated track record of high growth with margin expansion makes the company attractive compared to listed peers. We recommend ‘buy’ with a target of Rs 262 based on 15 times Sep 2025E EPS.

 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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