Chola Securities' Diwali Picks: Multibagger Railway Stock Still Has Steam Left

RVNL’s share price has been on a tremendous bull run this year, and analysts at Chola Securities see the stock going further up. The brokerage firm in its Diwali picks note, said that the the railway infra space has been buzzing and flooded with orders, on renewed Government's focus/spending.

Talking to Benzinga India about the picks, Chola Securities’ head of equity research, Dharmesh Kant, said “We have seen one part of one leg of the run-up in the stock and this was more to do with the valuation catch-up kind of a thing. If you look RVNL it’s a multifold play.”

He adds that the company has a robust order book which bodes well for future growth. “If you look at the order book, they are sitting on a pretty strong order book of 65,000 crores. So it’s already 3x book-to-bill ratio.” Kant adds that the RVNL share price could run up to ₹210-₹220 in the next one year.

The other picks from the brokerage this Diwali are Reliance, Poonawalla Fincorp and HAL. Talking about Reliance, the brokerage firm is confident that most of its business verticals will keep up their performance in the coming year.

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Talking about one of Reliance’s biggest segments Jio, Kant said that it continues to gain market share and has shown robust subscriber additions. He adds that it also has the opportunity to raise its annual revenue per user in the coming quarters. He expects the Jio business to grow at a compound annual growth rate of 20%.

For retail and oil and gas he expects a CAGR of 12%. But as per Kant, the Oil-to-Chemicals segment is to see a bit of a slowdown going forward. He sees Reliance’s share price going up to ₹3,100 in the next year.

The defence segment has also seen a similar upward trajectory as the Railway stocks, but the brokerage firm thinks that HAL might have some more steam left. One of the reasons for picking HAL was its valuation. “It’s cheap compared to other players in the defence segment. If you compare it with any other meaningful player, be it Bharat Electronics, or Data Patterns, they all are trading at valuation multiples which are far higher than that of HAL. HAL is still available at 19 times PE multiple with an ROE of 26 27%. So it’s more of a bargain buy in the defence space.”

Talking about Poonawalla Fincorp, Kant said that the company for the last six quarters has been consistently maintaining an average AUM growth run rate of more than 13%-14% while improving asset quality as well. He adds that the company has been ramping up safety measures while going aggressive on growth and that is one of the reasons that the brokerage firm chose it as one of its Diwali picks.

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Posted In: Analyst ColorEquitiesPrice TargetExclusivesMarketsAnalyst RatingsTrading IdeasInterviewHALPoonawalla FincorpRail Vikas NigamReliance