Top Stock Picks for July: DevenChoksey’s Expert Recommendations

Overview of Indian Stock Market Performance

On July 10, the Indian stock market benchmarks, Sensex and Nifty 50, both experienced over a 1% decline in intraday trading due to sector-wide profit booking. Market experts view this correction as a healthy adjustment given the concerns over the market’s high valuations. With markets at record highs, there are fewer fresh triggers to sustain gains, shifting the focus to the upcoming Budget and Q1 earnings of Indian companies. Additionally, inflation data from the US and India and speculations around interest rates are expected to keep the market active.

Investment Strategy in a Volatile Market

At this stage, experts recommend investing in quality stocks that offer reasonable valuations and robust growth prospects. Wealth management firm DevenChoksey has identified six top stock picks for July, emphasizing their potential for growth and strong fundamentals.

DevenChoksey’s Top Picks for July

1. Tata Consultancy Services (TCS)

Previous Close: ₹3,985.50 | Target Price: ₹4,194 | Upside Potential: 5%

TCS is focusing on artificial intelligence, new energy solutions, supply chain enhancements, and talent acquisition. The company has recently secured significant deals, including a $150 million contract with BSNL for setting up data centers across four regions in India. Additionally, TCS and AWS have entered into a multi-year strategic agreement to accelerate cloud transformation and offer GenAI solutions.

DevenChoksey expects TCS to experience a net revenue growth and adjusted PAT (profit after tax) growth at a CAGR (compound annual growth rate) of 9% and 12%, respectively, from FY24 to FY26. The firm assigns a P/E (price-to-earnings) multiple of 26.6 times on FY26 EPS (earnings per share) of ₹158.2, arriving at a target price of ₹4,194 per share.

2. Bajaj Finance

Previous Close: ₹7,068.05 | Target Price: ₹8,000 | Upside Potential: 13%

Bajaj Finance’s growth strategy is supported by product diversification and an omnipresence strategy. Over the past 17 years, the company has achieved a 36% CAGR in AUM (assets under management) and a 50% CAGR in PAT, driven by successful geographic expansion.

DevenChoksey assigns a P/ABV (price to adjusted book value) multiple of 4.5 times on FY26 adjusted book value of ₹1,778, leading to a target price of ₹8,000 per share.

3. Balaji Amines

Previous Close: ₹2,348.90 | Target Price: ₹2,643 | Upside Potential: 13%

Capacity expansion and sequential price recovery are expected to drive Balaji Amines’ growth. The company has recently launched N-Butyl Amines manufacturing at Unit 4, increasing annual production capacity to 15,000 metric tons.

The stock is trading at PE multiples of 25.2 times and 19.6 times based on FY25E and FY26E EPS, respectively. DevenChoksey anticipates revenue growth at a CAGR of 21.7% and PAT growth at 39.5% CAGR over FY24-26. They apply a PE multiple of 21.5 times to FY26E EPS, arriving at a target price of ₹2,643.

4. DCX Systems

Previous Close: ₹420.30 | Target Price: ₹519 | Upside Potential: 23.5%

DCX Systems, a leading manufacturer of electronic sub-systems and cable harnesses for aerospace and defense sectors, has developed obstacle detection equipment for railways. With preparations for mass production pending government tenders, DCX has invested approximately ₹210 crore in NIART for manufacturing capabilities.

DevenChoksey expects DCX’s revenue and PAT to grow at a CAGR of 29.6% and 45.5%, respectively, from FY24 to FY26. The firm maintains a multiple of 36 times P/E on FY26E EPS of ₹14.4, leading to a target price of ₹519 per share.

5. SBI Life Insurance Company

Previous Close: ₹1,524.75 | Target Price: ₹1,705 | Upside Potential: 12%

SBI Life Insurance is well-positioned to capitalize on industry opportunities due to its strong market positioning and diverse product mix. Although VNB (value of new business) margins have declined, the company’s efforts to improve protection and sub-par growth are expected to stabilize margins.

DevenChoksey applies a 2.2 times P/EV (price to embedded value) on FY26E EVPS (embedded value per share) of ₹776.2 and a VNB multiple of 12.4 times, arriving at a weighted average target price of ₹1,705 per share.

6. Shree Cement

Previous Close: ₹27,776.30 | Target Price: ₹30,662 | Upside Potential: 10%

Shree Cement has expanded into the ready-mix concrete business and is investing ₹100 crore in capex to enhance its premium product portfolio. The company is also pushing for green power adoption, planning to add 188 MW of green power generation capacity by FY25E.

DevenChoksey expects Shree Cement’s net revenue and adjusted PAT to grow at a CAGR of 11.8% and 14.2%, respectively, over FY24-FY26. The firm assigns an EV/EBITDA multiple of 17.5 times on FY26E EBITDA, arriving at a target price of ₹30,662 per share.

In Conclusion, The recommendations by DevenChoksey highlight the importance of selecting quality stocks with robust growth potential and reasonable valuations. These top picks for July, including TCS, Bajaj Finance, Balaji Amines, DCX Systems, SBI Life Insurance, and Shree Cement, offer promising investment opportunities for discerning investors. However, it is always advisable to consult with certified financial experts before making any investment decisions.

Disclaimer: The views and recommendations are those of individual analysts, experts, and brokerage firms, not FinBrook. Investors are advised to consult certified experts before making any investment decisions.