BSE Sensex and Nifty 50 ended the financial year 2020-21 on a strong note, with all the sectors delivering positive returns. Among sectors, metals and IT registered the strongest gains while FMCG grew the slowest during the year. Stocks from the auto and realty sector also delivered solid returns during the fiscal. “While FY21 was very strong aided by cheap valuations and a low base but March was a mixed bag,” said Naveen Kulkarni, Chief Investment Officer, Axis Securities. In the new financial year 2021-22, the focus will remain on earnings growth and sustenance of demand momentum.
Axis Securities has maintained its December Nifty 50 index target of 17,200. The brokerage firm said that earnings growth for the entire decade from 2010-2020 was quite sluggish with an earnings CAGR of 7 per cent (doubling in 10 years). In the broader market, mid and smallcaps have outperformed the large caps by a significant margin in FY21. Domestic brokerage firm believes that this trend is likely to sustain in FY22 as well as earnings growth is expected to be very strong for the broader market.
Top stock picks:
ICICI Bank: The brokerage firm has given a target price of Rs 720, a rally of 24 per cent from the current levels. Higher loan growth, improving operating profits, strong provision buffer coupled with strong deposit franchise will help ROAE/ROAA expansion over FY22-23E for the bank.
State Bank of India: It will take SBI stock to jump 31 per cent from the previous close to hit the target price of Rs 477 pegged by Axis Securities. Among PSU banks, SBI remains the best play on the gradual recovery in the Indian economy, with a healthy PCR, robust capitalization, a strong liability franchise and an improved asset quality
Federal Bank: The brokerage firm sees a 23 per cent rally in Federal Bank stock price, with price target of Rs 93 apiece. Axis Securities believes that key positives are increasing retail focus, strong fee income, adequate capitalisation (Tier-1 at 13%), and prudent provisioning.
Equitas Small Finance Bank: Domestic brokerage firm believes that Equitas Small Finance Bank is eligible for re-rating given its improving profitability, asset quality and return ratios. It has given a target price of Rs 72, a gain of 20 per cent from the previous close.
Varun Beverages: With business growth restoring, aided by unlocking as witnessed in Q4CY20, Axis Securities expects the current momentum to continue. The stock has a target price of Rs 1,230, implying a rally of 23 per cent from the level of Rs1,003 apiece.
Relaxo Footwear: Relaxo Footwear has maintained healthy operating cashflows, asset turns and EBITDA margins over the years making it a capital-efficient business, said the brokerage. It has a price target of Rs 1,013 apiece, gain of 15 per cent.
Camlin Fine Sciences: The brokerage firm sees an upside of 18 per cent in Camlin Fine Sciences stock, with a target price of Rs 165. CFS is one of the world’s leading and integrated manufacturers of the most preferred traditional antioxidants and vanillin and manufactures various other shelf-life solutions, aroma ingredients and performance chemicals.
Amber Enterprises: Healthy build-up for the upcoming season, government policy measures and support through the PLI scheme makes us believers in this structural long term story. It has a target price of Rs 3,658, a gain of 10 per cent.
Minda Corporation: Minda Corp would be a beneficiary of migration to BS6 as the company’s product viz., wire harness (25-30% market share) would witness a sea change in share of business both in terms of value and volume. It will need a jump of 20 per cent from the previous close to hit the target of Rs 121 apiece.
Steel Strip Wheels: The increasing contribution of high margin Al-alloy wheel rims in overall revenues to aid margin expansion. Steel Strip Wheels had reported around 7 per cent of revenues from Al-alloy wheels in FY20 and expects to take it to 25 per cent plus over a couple of years. The brokerage firm sees a 25 per cent rally in the stock with a target price of Rs 877 apiece.
Lupin: A 20 per cent upside would be needed to take it to levels of Rs 1,225 predicted by Axis Securities. The domestic formulations market in India has recorded 9.5% CAGR in 2014-19 to reach US$ 22 bn is expected to grow at 8%-11% CAGR to US$ 31-35 bn by 2040.
Tech Mahindra: Axis Securities believes that Tech Mahindra has a resilient business structure from a long term perspective. It has recommended to ‘buy’ and has assigned 14x P/E multiple to its FY23E earnings of Rs 81, which gives a target price of Rs 1,116 per share.
Bharti Airtel: Bharti Airtel reported solid numbers in Q2FY21 beating consensus estimates both on financial and operating parameters. A jump of 31 per cent will be required to touch the target price of Rs 676.
HCL Technologies: The brokerage firm has given a target price of Rs 1,088 apiece, a jump of 11 per cent. The recent deal trend continues to be healthy for HCL tech and is reflective of traction in Retail & CPG, Manufacturing and BFSI verticals.
ACC Ltd: Stock is currently trading at 8.3x CY22E and 7.14x CY23E EV/EBITDA. Axis Securities has recommended to ‘buy’ with a target price of Rs 2,100 a share valuing the company at 10x of its CY22E EV/EBITDA.
(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)
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