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Samvat 2077 has been historic for more than one reason, the benchmark indices logged path-breaking gains and rallied to never before levels. The BSE benchmark index, the Sensex, surged past the 60,000-mark, while the NSE Nifty pierced the 18,000-mark on the back of a strong liquidity driven rally, with rising participation by retail investors. Hopes of strong corporate earnings, economic recovery and government led-reforms were some of the major triggers that aided the bullish sentiment.
There were walls of worries which the markets climbed on its way up, like the second-wave of Covid-19 and the threat of a possible third-wave, high commodity prices mainly oil, slowdown in foreign fund inflows in the backdrop of US stimulus withdrawal and possible change in interest rate cycle back home given the inflation concerns.
Going forward, Samvat 2078, analysts say, will all be about the right stock selection at a time when corporate earnings may come under pressure due to rising input costs, and foreign flows may face headwinds due to a change in policy stance of major central banks, especially the US Fed.
Here are some of the stocks that leading brokerages have recommended for Samvat 2078.
ICICI Direct Research
Bank of Baroda | Reco Price: Rs 90 – Rs 100
The brokerage firm believes that credit growth will pick with unlocking and speedy economic recovery. Transfer of NPAs to bad bank would lower broad NPA numbers and aid recovery. Margins are expected to remain stable despite reduced lending rates due to benign funding costs, lesser reversals due to moderation in stress formation from here on. A shift in tax regime should also aid profitability.
Gateway Distriparksc (GDL) | Reco Price: Rs 255 – Rs 275
GDL has been actively reducing its gross debt position, which reached a high of around Rs 740 crore in FY19 to Rs 480 crore in FY21. A strong balance sheet along with strategically located infrastructure will help GDL to capitalise on future growth opportunities and improve its return ratios.
Mahindra Lifespace | Reco Price: Rs 255 – Rs 280
The company has outlined five year plans wherein it aims to achieve a sales value of Rs 2,500 crore by FY25. We like the company for its strong parentage, the management’s focus on expanding its overall scale of operation and a comfortable balance sheet. The change in management and execution has started to show signs of transformation, which drives our conviction.
JM Financial
Jindal Steel & Power | Reco Price: Rs 423.75 | Target: Rs 515 – Rs 550
JM Financial believee that long products demand should be more resilient as construction activity is likely to improve faster. Divestment of non-core businesses, de-leveraging of balance sheet and growth capex will drive earnings trajectory going forward.
Max Financial Services (MFS) | Reco Price: Rs 958.35 | Target: Rs 1,120 – Rs 1,150
MFS currently holds majority stake in Max Life, the latter has been delivering strong performance on new business, its market share has increased by 63 bps to 11 per cent. Max can continue to out-perform peers with Axis Bank tie-up aiding continued market share gains and resultant operating leverage support margins.
Gail India | Reco Price: Rs 148.25 | Target: Rs 175 – Rs 180
Higher crude price has increased earnings visibility for Gail’s gas trading due to rise in competitiveness of its US LNG portfolios v/s crude linked LNG contract; it also improves profitability of its downstream Petchem and LPG businesses. The gas trading and downstream business constitutes 40-50 per cent of Gail’s overall EBITDA. Management re-iterated expectation of 6-8 per cent CAGR in gas transmission volume while expects gas trading margins to continue to be robust.
Motilal Oswal (2-3 month picks based on derivative data observation)
SBI | Reco Price: Rs 503 – Rs 490 | Target: Rs 600 | Stop Loss: Rs 450
Rollover has been intact at 93 per cent from the last 2 months which indicates longs are upright in the stock with more than 10 per cent price increase in the October series. One can look for Bull Call Spread opportunity here by buying 510 Call and selling 540 Call of the November series at a net premium cost of around 10 points.
Bata India | Reco Price: Rs 2,022 – Rs 1,980 | Target: Rs 2,450 | Stop Loss: Rs 1,800
Short covering is seen with increase in price by almost 18 per cent in the October series and increase in implied volatility indicating bulls to be in action.
Tech Mahindra | Reco Price: Rs 1,517 – Rs 1,480 | Target: Rs 1,850 | Stop Loss: Rs 1,350
Open Interest shedding by almost 9 per cent with increase in price which suggests shorts are covering their position and rollover of 97 per cent in the previous series indicating positive sentiment and strong hands at the counter.
Religare Broking
Berger Paints – Buy | Reco Price: Rs 738 | Target: Rs 900
Berger is one of the largest players with 18-19 per cent market share in the organized sector. The positive view on the stock is based on the strong brand recall value, consistent growth in the decorative segment, revival in the industrial segment and market share gains. Also, price increase will help mitigate risk of rising raw material prices.
JK Lakshmi Cement – Buy | Reco Price: Rs 610 | Target: Rs 758
The company is one of the strong players in India, except for South. It’s strategy for the next 2-3 years will be to maximize sales by increasing utilization levels and expanding capacity, improve realizations by focusing on value-added products, enhancing margins by cost optimization measure and reducing debt.
Whirlpool of India – Buy | Reco Price: Rs 2,291 | Target: Rs 2,998
Religare likes Whirlpool given the positive industry growth prospects coupled with its strong parentage, the constant focus on innovation, wide product portfolio and expanding distribution reach. We expect revenue to grow at a CAGR of 16.5 per cent over FY21-24E.
Kotak Securities
ACC – Add | Reco Price: Rs 2,208 | Target: Rs 2,550
ACC is well-placed ahead of its capacity extension in attractive Central India and new WHRS (Waste Heat Recovery Systems) capacity commissioning in CY22E. The company’s Q3CY21 operating profit was ahead of our estimate led by higher-than-expected prices more than offsetting weak volumes. ACC has impressively kept costs under control despite commodity cost headwinds in 9MCY21.
BPCL – Buy | Reco Price: Rs 432 | Target: Rs 550
BPCL’s auto fuels volume growth was ahead of domestic consumption in Q1FY22. We are bullish owing to expected recovery in refining margins, robust marketing margins and potential value unlocking from privatization. We expect EPS to increase by 18.3 per cent in FY23E to Rs 39.90.
Hindustan Unilever – Add | Reco Price: Rs 2,456 | Target: Rs 2,950
The company witnessed market share and penetration gains in 75%+ of the portfolio in Q2FY22. The company is confident of consistent double digit EPS growth partly aided by modest margin expansion. HUL has reiterated its strategy of growing the core, premiumization and market development. On valuing the stock on discounted cash flow (DCF) basis, we arrive at a fair value of Rs 2,950.
Reliance Industries – Add | Reco Price: Rs 2,602 | Target: Rs 2,800
Reliance remains on track to produce first gas from the MJ field by Q3FY23. Guidance remained unchanged on achieving cumulative peak production of around 3 crore scm/d in CY23 from the three KG D6 projects. The key triggers for the stock are – recovery in refining, launch of JioPhone Next, plausible hike in telecom tariffs and anticipated strong growth in retail business.
SMC
ICICI Bank | Reco Price: Rs 747.20 | Target: Rs 874
Business performance of the bank such as domestic loan growth, overall corporate advances, retail loan growth, CASA ratio are continuously improving. The bank is focusing on growing the core operating profit in a risk calibrated manner instead of loan growth. The stock will see a price target of Rs 874 in 8-10 months’ time-frame on current P/BVx of 3.24x and FY23 BVPS (Book Value Per Share) of Rs 269.67.
Prestige Estates | Reco Price: Rs 441.15 | Target: Rs 529
Prestige clocked the highest quarterly sales and collections backed by healthy response to its newly launched project. Prestige Great Acres was sold out within one day of launch. Thus, it is expected that the stock will see a price target of Rs 529 in 8-10 months’ time-frame on current P/BVx of 2.65x and FY23 BVPS of Rs 199.67.
Welspun India | Reco Price: Rs 152.10 | Target: Rs 193
The company remains committed in its long-term aspiration of delivering sustainable and profitable volume led growth, building on strong brand equity and accelerated focus on emerging businesses and implement of government’s PLI scheme for the textile sector. The stock is expected to see a price target of Rs 193 in 8-10 months’ time-frame on current P/BVx of 4.7x and FY23 BVPS of Rs 41.17.
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