Shanta Securities picks seven stocks for long-term investment

Infographic: TBS

Shanta Securities Limited – one of the country's top brokerage firms – has strategically selected seven fundamentally sound stocks, providing forecasts of their business and stock performance based on their record and projected trajectories.

The broker last week revealed the names of the stocks in its report titled Bangladesh Finds Its Lighthouse Amid Reform Hopes: 2025 – A Year of Structural Reforms and Consolidation.

The stocks are British American Tobacco (BAT) Bangladesh, BRAC Bank, Grameenphone, IBN Sina Pharmaceuticals, IT Consultants (ITC), Marico, and Square Pharmaceuticals.

Shanta Securities also identified five stocks for trading in the secondary market, highlighting their potential for future business opportunities that could yield significant returns for investors.

These are Bangladesh Shipping Corporation, MJL Bangladesh, Renata, Robi, and Runner Automobiles.

SM Galibur Rahman, head of Research and Strategic Planning at Shanta Securities, told The Business Standard, "As part of our commitment to providing research-based services to our investors and clients, we have identified stocks that we believe are well-positioned for long-term investment.

"We selected these stocks based on our rigorous research methodology, which includes analysing their corporate governance practices, historical performance, and business outlook," he added.

Rahman further emphasised that their suggestions and forecasts are intended to help investors make informed long-term investment decisions. However, it is important to note that analysis-based projections do not always align with actual outcomes.

The seven stocks

Between 2014 and 2023, BAT Bangladesh achieved a compound annual growth rate (CAGR) of 13.9% in revenue and 13.8% in net profit. Additionally, its recent agreement to manufacture cigarettes for Philip Morris Bangladesh Limited, the producer of Marlboro, is expected to significantly boost its topline.

The company has consistently invested around Tk900 crore in capital expenditures, positioning itself to enhance margins through improved manufacturing efficiency and reduced production costs while meeting both local and international demand.

Currently, BAT Bangladesh trades at Tk360 per share, reflecting a price-earnings ratio of 11.02, compared to the market average of 17.7. 

This suggests the stock is trading at an attractive valuation relative to its historical averages, presenting a potential buying opportunity for investors, according to Shanta Securities.

Shanta Securities said BRAC Bank's board comprises distinguished professionals and academic leaders who ensure robust asset management. BRAC, the renowned international NGO, holds a 46.2% ownership stake in the bank. Notably, 60% of the board members are independent directors, a unique feature in the industry.

The brokerage firm projects the loan book to grow further to Tk91,300 crore by 2028, representing a five-year expected CAGR of 11.5%. 

Despite an industry-wide rise in non-performing loans (NPLs), BRAC Bank has consistently maintained its NPL ratio below 4% since 2016, reflecting its commitment to good governance. As of 30 September 2024, the NPL ratio stood at an impressive 2.8%.

Shanta Securities sets the target price of Grameenphone shares to Tk380, which currently trade at Tk323. The brokerage firm expects investors to achieve a return of 17.6% from Grameenphone shares.

IBN Sina Pharma is set to launch a second factory specialising in oral solid dosages, sterile products, and oncology medicines. This expansion is expected to significantly boost in-house manufacturing capacity, enabling the company to meet growing demand and adapt to evolving market trends, according to the broker.

The commercial production of the API unit will commence once the necessary licences are obtained from the drug administration. Meanwhile, work on the polymer unit is progressing steadily. As these projects become operational, Shanta Securities anticipates a consistent improvement in the company's margin ratios.

ITC is the first private third-party Payment Service Operator company in Bangladesh licenced by the Bangladesh Bank. It is the owner of the largest payment platform in Bangladesh, known as Q-Cash. At present, 36 banks are using different electronic payment services of the Q-Cash network.

ITC's revenue growth is linked with the country's digital journey as Q-cash is an electronic payment system. With increased usage of online banking systems and card transactions, the company's earnings will increase, said the securities firm.

Capitalising on this favourable business environment, investors could potentially earn a 54.1% return from ITC shares, which are currently considered undervalued, according to Shanta Securities.

Directors of Square Pharma have increased their stake in the company by purchasing 91 lakh shares at prevailing market prices from the secondary market. This move reflects the directors' confidence in the company's strong fundamentals and future growth potential, according to Shanta Securities.

Additionally, the parent company is progressively transferring its products to Square Lifesciences Limited, which benefits from a favourable 3% tax rate. 

Similarly, Square Kenya Limited, a tax-exempt entity, is gaining momentum in the Kenyan market. The scaling up of operations in these tax-advantaged entities is expected to significantly boost overall profitability, the brokerage firm noted.

These strategic advantages position Square Pharma to deliver improved returns for investors, Shanta Securities added.

Marico has a strong track record of delivering solid returns to its investors, a trend that is likely to continue with its increased production capacity, according to Shanta Securities.

However, the firm cautioned that anti-India sentiment could temporarily disrupt the company's growth momentum.

Despite this risk, Shanta Securities projects a potential return of 31.4% on Marico shares this year for investors.