Domestic indices have been outperforming global peers by a wide margin this year and if one were to go by Axis Securities, this outperformance may continue in the medium-to-long term, even as domestic stocks may turn volatile and range-bound in the near term, the brokerage said in a note.
It is a ‘Buy on Dips’ market, for now, the brokerage said.
"We recommend investors maintain good liquidity (10 per cent) to use such dips in a phased manner to build a position in quality companies (where the earnings visibility is very high) and with an investment horizon of 12-18 months," Axis Securities said in its report.
Axis Securities has recommended six stocks that it expects to deliver up to 25 per cent return over the next 12 months. They are:
Target: Rs 1,000
Current Market Price: Rs 867.65
Axis Securities said the bank has been outperforming its peers and has been firing on all cylinders.
"ICICI Bank has ticked most boxes on growth, margins, and asset quality," it said.
Higher loan growth, improving operating profits, and a strong provision buffer coupled with a strong deposit franchise will help the bank achieve a return on assets/ return on average assets expansion over FY23-25E, the brokerage said. On the valuation front, the brokerage said the bank continues to be on a comfortable footing.
Target: Rs 262
Current Market Price: Rs 223.30
Axis Securities said higher international coal prices, expansion of the large open cast mines and focus on closing the non-profitable manpower intensive high-cost underground coal mines, will drive Coal India's profitability.
"The company has a capex plan of Rs 17,000 crore for FY23, primarily on evacuation infrastructure. Despite the proposed Capex and high dividend payout, liquidity will remain robust over the medium term, backed by a robust capital structure and healthy cash accrual," it added.
Target: Rs 1,200
Current Market Price: Rs 1,028.30
Axis Securities said Tech Mahindra has a superior services mix and multiple long-term contracts that are well-spread across the verticals, reducing its dependency on any one vertical.
"Furthermore, we foresee healthy tractions in Communications and Enterprise verticals which will greatly accelerate the company’s revenue growth moving forward," it said.
Target: Rs 10,270
Current Market Price: Rs 8,687.45
The domestic brokerage felt that Maruti has a stronghold in the entry-Level segment and with the recent launches --in the compact (All-New Brezza) & mid SUV (Grand Vitara) segment, the auto major seems to be moving towards regaining lost market share by FY25E.
"We expect a rise in demand from new launches along with upgradation of existing product portfolio, softening commodity inflation and improving ECU shortages to support recovery in the margins," Axis Securities said in its report.
Axis Securities said the company would gain further market share, driven by an expected shift towards petrol, CNG and hybrid vehicles.
"Looking at the existing order book, we expect the company’s volumes to witness strong growth from the second half of FY23 onwards. We expect a recovery of both market share and margins in FY23 and FY24, led by a favourable product lifecycle, operating leverage, and product mix as well as price action/cost-cutting," it added.
State Bank of India
Target: Rs 665
Current Market Price: Rs 532.70
Axis Securities said SBI remains its best play in the PSU banking pack. This is because of its healthy PCR, robust capitalisation, strong liability franchise, and improved asset quality outlook.
The brokerage said normalization in credit costs and improved growth outlook should lead to double-digit ROEs of 14.5 per cent for the bank over FY23-24E.
"The bank’s asset quality performance has been consistently ahead of expectations including eventually stressed asset accruals which resulted in credit cost normalisation," the brokerage firm added.
Target: Rs 8,250
Current Market Price: Rs 7,475
Axis Securities said the company’s digital initiatives and business transformation are key positives to look forward to and are currently progressing well with sequential improvement visible across metrics.
With the digital transformation journey likely to be completed by FY23, we believe it should contribute meaningfully to overall growth, the brokerage said.
Axis Securities believes the marginal compression in NIMs will be offset by improved fee income, improving Opex ratios, and stable credit costs, thereby enabling the company to deliver superior return ratios.
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