ITC, VIP Ind: Stocks brokerages are betting on for a cracker Samvat 2079- QHN

Equity markets across the globe underwent a roller-coaster ride in the Samvat 2078. Liquidity reversal, policy tightening, the Russia-Ukraine geopolitical crisis, and rising inflation induced volatility in the markets since last diwali. As we enter Samvat 2079, analysts believe that the domestic market’s outperformance against global peers will sustain as fundamentals and profitability of Indian corporate improves.

“A good monsoon, cool-off in commodity inflation, and healthy job labour market, suggests a steady macro-environment inspite of high inflation. We believe housing or realty, consumer space, commercial vehicles, home improvement, and travel or tourism to emerge as top themes in Samvat 2079,” said Neeraj Chadawar, head quantitative equity research, Axis Securities.

Meanwhile, here is a list of top brokerage houses and their bets for Samvat 2079:

SBI Securities

HDFC Bank | CMP: Rs 1,443 | Target price: Rs 1,709 | Potential upside: 18%

Analysts expect that the synergy with HDFC will strengthen the bank’s network and create cross-selling of products as well as use of existing networks of both HDFC and HDFC Bank. The brokerage firm believes that the stock trades at an attractive P/BV multiple of 2.6-3x of FY23E/FY24E book value.

ITC | CMP: Rs 340 | TP: Rs 405 | Potential upside: 19%

Analysts expect the cigarette-to-FMCG conglomerate to deliver mid-teen earnings CAGR during FY22-24E period. With a 22 per cent upside potential, the brokerage firm has shared a target price of Rs 405 per share on the stock for one-year time horizon. Analysts expect all the four segments – cigarette, hotels, FMCG and agri-businesses to deliver profitable growth down the road.

Bank of Baroda | CMP: Rs 140 | TP: Rs 155 | Potential upside: 10%

The bank is adequately capitalised with 15.5 per cent CAR and well prepared to take advantage of likely 15 per cent credit growth in industry, without any equity dilution, said analysts. Going forward, analysts believe that the higher proportion of floating rate will translate into higher yield on advances. Asset quality, too, they believe is likely to improve on the back of lower slippages and steady recoveries.

United Spirits | CMP: Rs 835 | TP: Rs 987 | Potential upside: 18%

The recent cool-off in commodity prices and increase in domestic consumption is likely to augur well for United Spirits from Q3FY23 onwards. That apart, the company is confident of double-digit growth in the medium-to-long term horizon. The focus towards premiumisation and international brands will drive margin expansion too.

Sumitomo Chemicals | CMP: Rs 514 | TP: Rs 596 | Potential upside: 16%

As of March 2022, the company has a debt-free balance sheet with cash and investment of Rs 436 crore. In FY22, the company has reported 16 per cent and 23 per cent YoY growth in net sales and profit to Rs 3,065 crore and Rs 424 crore.

Whirlpool of India | CMP: Rs 1,600 | TP: Rs 1,895 | Potential upside: 18%

Analysts expect the volume growth for Whirlpool products to remain healthy during FY22-FY24 period led by launch of new products. Moreover, the recent drop in raw material prices and freight rate will help to recoup margin losses of FY22. The company is likely to report PAT CAGR of 41.4 per cent to Rs 573 crore in FY22-24.

IDBI Capital

Kolte-Patil Developers | CMP: Rs 358 | TP: Rs 460 | Potential upside: 28%

While the stock trades at 10x FY24E consensus EPS, which is slightly above its average of 9.3x, the brokerage firm foresees upside potential of 34 per cent in a year, with a target price of Rs 344 apiece. Despite rising property prices and rising interest rate cycle, analysts expect the realty player to benefit from upbeat housing demand coupled with declining debt levels.

Mahindra CIE Automotive | CMP: Rs 312 | TP: Rs 381 | Potential upside: 22%

The company is likely to be a major beneficiary of cyclical upturn in the Indian auto sector along with its strategy of penetrating into new customers and product technologies. The brokerage firm has a positive view on the growth prospects of the company as they plan to expand their operations through organic and inorganic routes.

Tata Power | CMP: Rs 220 | TP: Rs 260 | Potential upside: 18%

The huge untapped renewable resource market in India offers great potential for the company to invest further into the green energy segment. That apart, the company aims to triple its revenue from FY22 levels and reach PAT growth of 4x.

Avenue Supermarts | CMP: Rs 4,139 | TP: 5,148 | Potential upside: 24%

Analysts expect better revenue mix from modern large size stores going forward. They also forecast revenue to grow 35 per cent 2 year CAGR (FY22-24E) and APAT to grow 44 per cent 2 year CAGR (FY22-24E). The brokerage firm believes that D-mart is their high conviction ‘buy’ idea in the retail sector.

Blue Dart Express | CMP: Rs 8,489 | TP: Rs 11,500 | Potential upside: 35%

Since the company operates with its own fleet of six Boeing 757-200 freighter aircrafts, flotilla of 22,336 vehicles as well as 2173 facilities and hubs across over 35,000 locations, analysts believe that such a network enables the company to reach the remotest parts of India.

City Union Bank | CMP: Rs 193 | TP: Rs 230 | Potential upside: 19%

The management’s guidance to positive credit growth from FY23 back to pre-covid levels is a positive trigger. Higher upgrades/recoveries against fresh slippages will result in decline in GNPA and improve asset quality.

Axis Securities

IDFC First Bank | CMP: Rs 56 | TP: Rs 70 | Potential upside: 25%

The brokerage firm believes that the bank is focused on building a strong deposit base with a high proportion of CASA after V Vaidyanathan took charge as managing director. With a strong and granular deposit base, superior return ratios are expected over FY23-25E.

Sundaram Finance | CMP: Rs 2,298 | TP: Rs 2,490 | Potential upside: 7%

Despite the ups and downs in the CV cycle, the management’s prudence in lending has led to otherwise consistent performance in the past, resulting in strong return ratios. Analysts believe that the company’s well-diversified secured loan mix with strong underwriting practices will support the broad-based recovery.

Ashok Leyland | CMP: Rs 149 | TP: Rs 175 | Potential upside: 17%

The company remains well-positioned to benefit from the cyclical recovery, especially in buses and higher tonnage trucks where it has a higher market share. Analysts believe that the commodity cost pressures will subside, which will drive margin improvement in the upcoming quarters.

Indian Hotels Company | CMP: Rs 323 | TP: Rs 375 | Potential upside: 16%

Analysts expect significant improvement in the company’s realizations and occupancies, which in turn, would be further augmented by the strong operating leverage it enjoys among the industry peers.

NOCIL | CMP: Rs 256 | TP: Rs 300 | Potential upside: 17%

NOCIL stands to be the key beneficiary of the China alternative theme in the niche rubber chemical space in India. The company is witnessing strong demand tailwinds and reducing pressure from raw materials. Furthermore, the operational leverage will boost its margin profile in the coming quarters.

ICICI Direct

Laurus Labs | CMP: Rs 510 | TP: Rs 675 | Potential upside: 32%

Since the company has rigorously been working in custom synthesis (CRAMs) business in the past few years, analysts believe that it is well-positioned to meet global demand of NCE drug substance and drug products.

Axis Bank | CMP: Rs 816 | TP: Rs 970 | Potential upside: 18%

With strong capitalisation levels at ~17.8 per cent, analysts believe that Axis Bank is poised to pedal higher business growth, going ahead. Robust business growth, improving operational efficiency and synergy benefits from the Citi acquisition would reflect positively on the earnings trajectory and price performance.

Apollo Tyres | CMP: Rs 280 | TP: Rs 335 | Potential upside: 19%

As crude is down over 20 per cent from June 2022 levels and currently hovers around $90-95 per barrel, this bodes well for all tyre manufacturers, Apollo Tyres emerging as a key beneficiary.

Lemon Tree Hotels | CMP: Rs 85 | TP: Rs 110 | Upside potential: 29%

With the opening of international borders to foreign tourists, analysts expect the hotel business in key cities like Mumbai and Delhi to also improve significantly. Lemon Tree is likely to be the key beneficiary of the same.

Havells India | CMP: Rs 1,257 | TP: Rs 1,650 | Upside potential: 31%

The softening of raw material prices and launch of premium products will result in a strong EBITDA margin recovery for the company from H2FY23 onwards. As result, PAT will register a strong CAGR of 20 per cent over FY22-24E.

Prabhudas Lilladher

Apollo Hospitals Enterprises | CMP: Rs 4,363 | TP: Rs 5,000 | Upside potential: 14.6%

Apollo Hospitals remains our top pick given the company is best play amongst Omni-channels with 7,864 operational beds; scale up B2C diagnostic segment with target of Rs 1,000 crore revenues in next 3 years; digital health space foray to help APHS cross sell its services to a larger population.

Avenue Supermart | CMP: Rs 4,138 | TP: Rs 5,121 |Upside potential: 24%

Consolidated industry with only 2/3 players having huge entry barriers; significant scope to grow in existing catchments with potential of 1,500 stores; focus on everyday low prices; growing success of DMart ready with expectation to turn EBITDA positive by FY25; 42% PAT CAGR likely over FY22-25; margin accretion from rise in the share of general merchandise and apparel segment make us bullish.

Bharti Airtel | CMP: Rs 783 | TP: Rs 1,032 | Upside potential: 32%

Focus on premiumisation and customer focused strategies led to highest Adjusted Gross Revenue (AGR) in Q1FY23 for Bharti over one/two-year growth at 25.1%/30.3% vs Jio’s 20.6%/18.7%. We expect Bharti’s EBIDTA to increase at 21.8% CAGR over FY22-25.

Ashok Leyland | CMP: Rs 150 | TP: Rs 200 | Upside potential: 33.3%

Recovery in the CV industry to continue going ahead led by economic recovery benefitting demand from segments like Infra, Mining and E-com. We believe AL will continue to regain its lost share on the back model launches and revival in the bus segment.

Jubilant Ingrevia| CMP: Rs 544 | TP: Rs 860 | Upside potential: 58%

Jubilant Ingrevia is well placed to capitalize on long term growth opportunities given 60 new products pipeline, strong traction in CDMO, import substitution, China+1 policy and commensurate capex outlay of Rs 2,050 crore over FY22-25.

VIP Industries | CMP: Rs 685 | TP: Rs 1,020 | Upside potential: 49%

We believe rising in-house production capacity is expected to structurally elevate GM profile as manufacturing profit will now accrue within the company in addition to trading profit, and freight cost & currency volatility will decline amid reduced dependency on China. Moreover, the target to increase export revenue share to 15% coupled with an aim to scale handbags business by 5x over next 3 years will act as key growth levers.

JM Financial

ICICI Bank | CMP: Rs 897 | TP: Rs 1,100 | Upside potential: 23%

We see ICICI Bank delivering strong compounding returns with valuations set to re-rate higher. We believe ICICI Bank firmly remains on a path to deliver 2.0 per cent/17.0 per cent avg RoA/avg RoE over FY23-24E with stable asset quality and industry leading growth.

ITC | CMP: Rs 340 | TP: Rs 382 | Upside potential: 12.3%

The stock has gained momentum in recent months but still offers a near to 4 per cent dividend yield at CMP and good amount of sizeable cash on books, and we believe 2nd Half earnings could support further valuations re-rating.

Maruti Suzuki | CMP: Rs 8,801 | TP: Rs 10,350 | Upside potential: 17.6%

Recent correction in commodity costs and favourable impact of currency movement will start reflecting from 2QFY23 margins. We estimate revenue / EPS CAGR of 18 per cent / 82 per cent over FY22-24E.

CAMS | CMP: Rs 2,595 | TP: Rs 3,300 | Upside potential: 27%

We believe CAMS would continue to maintain its leadership position in RTA industry and would continue to grow both AUM based revenue as well as non-AUM based revenues (value-added services such as analytics, customer relationship management, branch support, technology support & physical processing of transactions).

Schaeffler India | CMP: Rs 3,189.5 | TP: Rs 4,045 | Upside potential: 27%

We expect a robust performance by the company going forward, driven by normalisation of economic activity, improvement in content per vehicle, strong growth in the wind power and railways businesses, and launch of new products in the aftermarket segment. We expect new business wins in the automotive segment and rising share of exports to drive outperformance.

Cholamandalam Investment and Finance Company | CMP: Rs 747 | TP: Rs 950 | Upside potential: 27%

We forecast earnings CAGR of 19 per cent over FY22-24E driven by healthy AUM growth trends, better margins, product portfolio expansions, and improvement in asset quality. We estimate CIFC to generate PAT CAGR of 19 per cent over FY22-24E and ROA/ ROE of 2.7 per cent/ 20 per cent in FY24E.