As the coronavirus pandemic continues to inflict pain on the market and the economy, there is much uncertainty as to when COVID-19 will come under control.
At this juncture, it seems that the pain will linger and there are tougher days ahead for the businesses and the economy.
Experts point out that the COVID-19 pandemic came in stages across the world and its fading away also will happen in phases over the next few quarters.
With no relief in sight, investors must look for stocks that have the potential to endure the pain.
"Investors should look for quality with reasonable growth in businesses. Lower debt and higher cash generation companies will be better placed," said Vikas Jain, Senior Research Analyst at Reliance Securities.
From a long-term perspective, brokerages suggest these 12 stocks that can give you healthy returns. Take a look:
Analyst: Vikas Jain, Senior Research Analyst at Reliance Securities
Bharti Airtel | Buy | LTP: Rs 493 | Target price: 700 | Upside: 42%
The company is a beneficiary of being an emerging duopoly with large subscriber base and regular price hikes, higher data consumption with respect to work from home (WFH), digital payments and OTT
platforms.
Lesser capex requirements in the near future is also a key positive for the stock.
"It has scaled an all-time high breaking its 10-year range with strong volumes and recent correction provides a good opportunity for the target of Rs 700 levels over the next 2 years," said the analyst.
HDFC Bank | Buy | LTP: Rs 970.05 | Target price: 1,200 | Upside: 24%
One of the best stocks to own in the financial sector - HDFC Bank - is well-positioned to deliver strong business momentum with advances growth of 20 percent, consistent margin of 4 percent and impeccable asset quality to aid return ratios.
"Unlocking of its subsidiaries listing will also add value, going forward. The stock trades at 2.4 times FY21E adjusted book value, recent correction in price is providing comfort as trades at 30 percent discount to its
10-year average," said the analyst.
HDFC | Buy | LTP: Rs 1,827.95 | Target price: 2,200 | Upside: 20%
The growth prospectus for HDFC remains strong on the back of strong parentage, large balance sheet to raise and deploy money regularly and increased housing demand.
"Increasing credit by the banks subsidiary provides an opportunity for further penetration of client base and stable margins to deliver consistent growth in earnings and valuations," said the analyst.
The stock has strong support near to 1,400 levels near to its 34-month averages.
Maruti Suzuki | Buy | LTP: Rs 5,055 | Target price: Rs 7,400 | Upside: 46%
Maruti is one of the best stocks in the domestic passenger vehicle segment.
Strong parentage and recent Toyota tie-up should help Maruti surpass near-term challenges and emerge stronger.
"Debt-free balance sheet with a shorter working capital cycle, higher ROE, and 50 percent market share for the last decade are the key positives to own the stock for long term after a 50 percent correction from its all-time high," said the analyst.
Tech Mahindra | Buy | LTP: Rs 531.50 | Target price: Rs 650 | Upside: 22%
The global impact of COVID-19 is likely to result in a material deterioration of the demand environment for IT companies but the analyst believes it is a good opportunity to add as once the pandemic fades a lot of new deals and orders may flow from across the world.
Operating margins are likely to benefit from rupee depreciation, lower fixed costs as IT companies are gearing to WFH over the next years which will improve margins.
The stock is one of the laggards in the current bounce but the analyst expects it to outperform from the current levels and said it remains one of the top picks in the IT sector.
Analyst: Jyoti Roy, DVP Equity Strategist, Angel Broking
Hindustan Unilever | Buy | LTP: Rs 2,234 | Target price: Rs 3,080 | Upside: 38%
The analyst expects Hindustan Unilever to report a healthy bottom-line CAGR of about 12 percent over FY2019-22E due to healthy volume growth on the back of a strong brand and wide distribution network.
Bata India | Buy | LTP: Rs 1,335 | Target price: Rs 1,561 | Upside: 17%
The analyst expects Bata India to report net revenue CAGR of about 11 percent to nearly Rs 3,974 crore over FY2019-22E mainly due to increasing brand consciousness among Indian consumers, new product launches, a higher number of store additions in tier II/ III cities and focus on high growth women’s segment.
Further, on the bottom-line front, the analyst expects CAGR of nearly 20 percent to Rs 562 crore over the same period on the back of margin improvement due to increasing premium product sales.
Larsen & Toubro Infotech | Buy | LTP: Rs 1,460 | Target price: Rs 1,803 | Upside: 23%
The company has a very strong exposure to the BFSI and manufacturing verticals which accounts for nearly 45 percent and 17.5 percent of the company’s revenues and are amongst the least impacted vertical due to
the shutdown on account of COVID-19.
The company doesn't have a very large exposure to service-oriented verticals like travel and tourism which are amongst the worst impacted due to the COVID–19 outbreak.
"We expect the company to outperformance the sector. Rupee depreciation to help the company's topline and bottom-line positively. After the recent correction the stock is available at reasonable valuations," said the analyst.
Alkem Laboratories | Buy | LTP: Rs 2,661.95 | Target price: Rs 3,300 | Upside: 24%
As much as 67 percent of revenue comes from domestic generic and API business.
"Anti-infectives and Cronic businesses continue to provide revenue growth for Alkem. It is expected to outperform the Indian pharmaceutical market (IPM) by 1.5 times growth rate for the next two years. We expect Alkem to grow its top line by 13-15 percent in the upcoming years," said the analyst.
Brokerage: Anand Rathi Shares & Stock Brokers
Divi's Laboratories | Buy | LTP: Rs 2,369.75 | Target price: Rs 2,510 | Upside: 6%
Divi's Laboratories has negligible borrowings and aims to maintain a similar level of debt in the next 3-5 years.
In terms of growth, the company has outpaced the industry growth over the years and has registered a CAGR of 14 percent over the past five years in a market scenario which is not very favourable for the sector. In addition to growth, the company has maintained healthy margins of nearly 40 percent.
"Considering the company's impressive performance over the years and the government’s focus on Indian API manufacturers which are likely to be a big positive for the company in the near term, we believe that the company is well-positioned to take advantage of this opportunity," said the brokerage.
Dr. Reddy’s Laboratories | Buy | LTP: Rs 3,882 | Target price: 4,382 | Upside: 13%
Apart from a strong product profile, the company benefits from a diverse geographic presence.
Further, in line with its strategy to boost India business, recently, the company inked deal with Wockhardt to acquire select divisions of its branded generics business in India and a few other international
territories of Nepal, Sri Lanka, Bhutan and Maldives for Rs 1,850 crore.
The deal comprises a business portfolio of 62 brands in multiple therapies and is expected to close by Q1FY21.
"The company should continue to witnesses strong growth in India, emerging markets, Europe and PSAI business driven by volume growth, new launches and improving realizations," said the brokerage.
ICICI Bank | Buy | LTP: Rs 367.65 | Target price: Rs 617 | Upside: 68%
With improving asset quality and better growth trends, the brokerage believes ICICI Bank is favourably positioned to deliver superior profitability and return ratios.
"We have factored in the latest information into our model and revised our estimates. We continue to remain positive on the company over medium to longer-term perspective," said the brokerage.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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