Top 5 Stocks To Buy This Week: From BEL To Hero Motocorp; Latest Target Prices?

Indian benchmark indices continued to rise for the fourth week in a row despite the market's extreme volatility. Nifty fell below 24,200 before rising rapidly to end the week at 24,768, a weekly gain of 0.37%. The BSE Sensex ended the week at 82,133, up 424 points (0.52%). The broking company Sharekhan is bullish on five stocks, despite the continued volatility ahead of the US Federal Reserve policy meeting and domestic macroeconomic data releases this week. Buy recommendations on Triveni Engineering, Bajaj Finance, Hero MotoCorp, Godrej Consumer Products, and Bharat Electronics Ltd (BEL) have been initiated by Sharekhan's research experts. Check the latest target prices below for the mentioned stocks.

Triveni Engineering & Industries

"Triveni Engineering & Industries (TEIL) has approved a composite scheme of arrangement among Triveni Engineering & Industries (TEIL), Sir Shadi Lal Enterprises (SSEL) and Triveni Power Transmission business (PTB). Under the scheme, for every 137 equity shares of SSEL of a face value of Rs. 10 each will receive 100 equity shares of face value of Rs. 1 each of TEIL. Further, the PTB division comprising gears and defence businesses will be demerged and listed as Triveni Power Transmission (TPT). For every 3 equity shares of TEIL of face value Re.1, shareholders will receive one equity share of TPT at a face value of Rs. 2 each. Demerged entity represents 4.75% of the total turnover of TEIL. SSEL's amalgamation would optimise resources and rationalise costs to improve profitability, while PTB demerged would help scale up its core business (including gears and defence) in the coming years. Overall, strategic restructuring is focused towards enhancing shareholders' value in long run," said Sharekhan in a note.

"Strategic restructuring including amalgamation of SSEL in TEIL and demerger of gear and defence business into separate entity will enhance shareholders' value in the long run. We maintain our earnings estimates and will make relevant changes once restructuring happens. Stock has seen a good run-up in last one month and is currently trading at 27x, 22x and 19x its FY2025E/26E/27E earnings. We maintain our Buy recommendation on the stock with revised price target of Rs. 582 (rolling it over to FY2027E earnings)," the research analysts of the broking firm said.

Bajaj Finance

According to the brokerage firm Sharekhan, "Bajaj Finance announced its long-range strategies (LRS-3, FY2025 to FY2029) after seeing exponential growth in LRS-1 (2008-2016) and LRS-2 (2017 to 2024). it is expected to remain a dominant NBFC expanding its share in the total credit to 3.2-3.5% by FY2029 from 2.1% in H1FY2025. The company also aims to widen its customer base to 200 mn by FY2029 and build a leadership position in personal loans, gold loans, MFI and two-wheeler loans. At the same time, opex is likely to decline in the medium term led by deep AI integration, which will also help improve revenues driven by cross sales and better customer engagement. Besides, it will also support to reduce credit costs. Profitability has also remained strong at 20% over the past 10 years. PAT growth is expected to remain strong at 22-23% in the cycle, translating into a 20-22% RoE versus 19.4% in H1FY25. The company is well diversified NBFC and can offset the impact of unsecured loans with other levers. Asset quality and credit cost would normalise in the medium term."

"AUM growth is expected to be robust and operating costs would reduce, while credit costs normalise in the medium term. Return ratios would also be stable. As per LRS-3, the company is expected to build strong base of customers to 200 million by FY2029 which will aid cross sales in the long run. We are confident on strong sustainable earnings growth and longevity of the franchise and retain our Buy rating with an unchanged PT of Rs. 9,500. At CMP, the stock trades at 4.5x/ 3.8x/ 3.2x its FY2025E/ FY2026E/ FY2027E BV," the research analysts of the brokerage firm further added.

Hero MotoCorp

Hero MotoCorp Limited (HMCL) is releasing new models and variations within its current brands in an effort to strategically expand its premium product line. The goal of this action is to build strong brands in the premium market and increase brand recognition. As a result of the company's efforts to enhance its products, average selling prices (ASPs) for Q2FY2025 climbed 3.3% year over year. HMCL keeps its margin projection of 14-16% in spite of higher investments in growing the premium segment. Strong operational success is demonstrated by the underlying EBITDA margin for HMCL's internal combustion (IC) division, which has already achieved 16% in terms of profitability. The company's electric vehicle (EV) segment's cash burn is the main reason why its blended EBITDA margin is still below 16%, according to Sharekhan.

"As the EV business scales up and the company expects to benefit from the Production Linked Incentive (PLI) scheme, losses in this segment are likely to reduce, leading to improved profitability. Although HMCL has already experienced strong sales during the festive season, the company anticipates sustained demand through the upcoming marriage season. This extended demand is expected to drive growth beyond the festive period. HMCL has been strategically focussing on (1) Improving customer experience for a long-lasting experience via digitisation and new formats of dealerships, (2) Increased presence in the scooter segment via an aggressive product launch strategy, (3) achieving a dominant position in the EV space, (4) revenue-driven growth model in place of plain-vanilla volume growth model, and (5) premiumisation across the segments. Besides, the company is looking for a strategic focus on the top 10 export markets," the brokerage stated.

"While demand growth is expected to moderate following the strong festive season, the upcoming marriage season and the expected recovery in rural sales should support retail growth. The expansion of exclusive stores for premium products and upgrades to the dealership network will likely attract new customers. Moreover, the company's aggressive plans to grow its EV business, particularly with attaining scale, are expected to reduce losses in the EV segment as more affordable products are introduced and volumes increase. HMCL's strong distribution network, particularly in rural markets, positions the company well for continued growth. The company's target of maintaining an EBITDA margin of 14-16% reflects its ongoing efforts to improve operating performance. With a strong recovery in the IC business and continued investment in the EV space, HMCL is building a balanced and sustainable future. The premiumisation of its distribution system through Hero 2.0 stores will also support growth. We retain our BUY rating with an unchanged price target (PT) of Rs. 6,057, driven by healthy recovery in EBITDA margin, strong product response, a continuous focus on premiumisation, and expansion into the EV market," the research analysts of Sharekhan further stated.

Godrej Consumer Products

"Godrej Consumer Products (GCPL) pointed to a weak Q3FY2025 in its pre-quarter business update affected by flat sales volumes and a margin dip in the India business. Domestic sales volumes growth would be flat (vs. average 7% volume growth in last six quarters) owing to lower soap sales and HI sales volumes (that contribute ~67% to India business). Rest of India business is set to achieve double-digit volume growth. Management expects weakness to be transitionary and expects a gradual recovery in the quarters ahead with long term investment strategies in place. Standalone EBIDTA margins are expected to be lower versus a normative range of 24-27% due to inflation in the palm oil prices. International business is expected to post a stable performance with mid-single digit volume growth in the Indonesia business and consistent margin improvement in the Africa business due to restructuring of the business. We have reduced our earnings estimates by 4-6% for FY25/26/27 to factor in near-term headwinds," said Sharekhan in a note.

The research analysts of the brokerage firm stated that "We have reduced our earnings estimates by 5%, 6% and 4% for FY2025E, FY2026E and FY2027E to factor in near-term headwinds. The management is confident about the medium-term outlook and maintained its thrust on strategic investment to drive consistent earnings growth in the medium term. Stock has corrected by ~27% from its high, trading at 59x, 46x and 39x its FY2025E, FY2026E and FY2027E earnings. With a limited downside risk and focus on long term growth prospects with strong product portfolio, we maintain a Buy on the stock with revised PT of Rs. 1,355."

Bharat Electronics

In order to strengthen India's defence capabilities, the Defence Acquisition Council (DAC) has approved five capital acquisition bids totalling Rs 21,772 crore. This would result in an additional order pipeline for defence companies over the next two to three years. It would take two to three years from AoN to real order conversion, and it demonstrates the government's dedication to defence expenditure.

"The DAC has greenlit five proposals critical to enhancing India's defence preparedness - 1) AoN for 31 new water jet Fast Attack Crafts (FAC), 120 Fast Interceptor Crafts (FIC) and 6 ALH (M) MR likely to boost maritime surveillance capabilities. 2) Overhaul for tanks and BMPs to enhance life of armored fleet of Indian Army. 3) Focus on overhaul of Su-30MK-I likely to boost squadron strength of IAF. AoN to actual order conversion would take 2-3 years and it solidifies the government's commitment towards defence spending. BEL is expected to be the biggest beneficiary due to its involvement in the EWS package for the Su-30MKI aircraft and its participation in various other proposals, including shipbuilding and the overhaul of electronic components and fire control systems for tanks and BMPs," said Sharekhan in a note.

"The company's future order pipeline is also promising as orders worth Rs. 65,000 crore (including QRSAM) are to be awarded in the next two years. We believe that BEL would play a significant role in successfully implementing the government's Make in India and AtmaNirbhar Bharat initiatives, as it is a key defence and aerospace player. After the strong performance in this quarter, we maintain our PT of Rs. 380 to 44x of FY2027 EPS," the research analysts of Sharkhan commented.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.