May Investment Spotlight: Nirmal Bang Recommends Epigral Stocks and Suryoday SFB – A Deep Dive into Their Financial Potential

• The Indian stock market saw a 1.24% rise in April, driven by strong local fund buying.
• Initial Q4FY24 quarterly results are mixed, with FMCG, IT, and cement showing weaker numbers, while banks and chemical companies remain stable.
• Market volatility is expected in the near term due to the upcoming General Election outcome in June.

Amid mixed Q4FY24 results and upcoming General Election, the Indian stock market is expected to remain range-bound, with Nifty predicted to trade between 22,000-23,000 for the May Series.

Stock Market Performance and Predictions

The Indian stock market saw a rise in April, driven by strong local fund buying. However, the initial Q4FY24 results are mixed, with FMCG, IT, and cement showing weaker numbers, while banks and chemical companies remain stable. The market is also looking at the General Election outcome expected in June’s first week, which may cause volatility in the near term. Despite these factors, Nirmal Bang expects the market to remain in a range, with Nifty predicted to trade between 22,000-23,000 for the May Series.

Stock Picks for May

Amid this backdrop, the brokerage has come out with 2 fundamental picks for May. The first is Epigral, with a ‘buy’ call on the stock and a target of ₹1,690, implying a 31 percent potential upside. The second is Suryoday Small Finance Bank, with a ‘buy’ rating and a target price of ₹280, indicating a potential upside of 37.5 percent. Both stocks have shown significant growth in the last year and are expected to continue this trend.

Epigral’s Performance and Outlook

Epigral’s revenue grew at 33.3% CAGR and PAT grew by 15% CAGR between FY20-24 despite challenges in the industry due to geopolitical situations and a weak macro environment. The company’s new project commissioning and a strategic shift towards specialty products are expected to improve overall margins going forward. The management aims to achieve ROCE in the range of 24-25% and is focusing on strengthening its position in the specialty segment.

Suryoday Small Finance Bank’s Performance and Outlook

Suryoday Small Finance Bank also bore the brunt of high defaults owing to Covid. However, post the comprehensive restructuring exercise done by Suryoday with respect to its asset quality over FY20-23, the brokerage expects the bank to shift its focus on growth. It sees advances growing at 31% CAGR over FY24-26E driven by faster growth in secured books at 35% CAGR led by affordable housing, CV and small business; while microloans shall grow at 29% CAGR.

Conclusion

Despite mixed Q4FY24 results and the upcoming General Election, the Indian stock market is expected to remain range-bound. The brokerage’s top picks for May, Epigral and Suryoday Small Finance Bank, show promising growth potential. Investors are advised to keep an eye on these stocks and the market’s performance in the coming weeks.