Stocks to buy: Heritage Foods, Bank of India among top fundamental picks by HDFC Securities

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Heritage Foods, Bank of India and Sharda Motor Industries. The brokerage believes investors can buy these stocks at current market price and add on dips for a time horizon two to three quarters. Also Read: Day trading guide for stock market today: Six stocks to buy or sell on Thursday — 11th January Heritage Foods has a strong balance sheet with low debt, improving margins and operating cash flows.

While the EBITDA margins are marginally lower to its closest peers, analysts believe that the inflationary pressure on milk procurement seems to have bottomed out. This coupled with an increasing share of the margin accretive value-added products, should drive margin expansion, going forward. “Management has a long term target of ₹6,000 crore in revenue.

Also, it believes that it can sustain EBITDA margin levels of 7-8% in the long run. At a current P/E of 20x FY25E EPS, Heritage Foods’s attractive valuation relative to its peers makes it a strong candidate for re-rating," HDFC Securities said. It believes the base case fair value of the stock is ₹333 (22.5x FY25E EPS) and the bull case fair value is ₹355 (24.0x FY25E EPS).

Investors can buy the stock in ₹294-301 band (20.0x FY25E EPS) and add more on dips in ₹255-263 (17.5x FY25E EPS) band, the brokerage firm added. (Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Bank of India is expected to grow its loan book at 13% CAGR while net interest income (NII) and net profit expected to grow at 14% and 36% CAGR respectively over FY23-26E. ROAA is estimated to improve to 1% in FY26E from the current 0.5% in FY23.