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Last Updated : Aug 14, 2020 05:50 PM IST | Source: Moneycontrol.com

Analysts pick 11 stocks to achieve financial freedom; do you own any?

India's stock market remains one of the most promising emerging markets of the world with tremendous growth potential as several structural reforms initiated by the Narendra Modi-led government assures that tomorrow belongs to India.

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In his "Tryst with Destiny" speech, India's first Prime Minister Jawaharlal Nehru had said that attaining freedom was just a step, an opening of opportunity, to the greater triumphs and achievements that awaited us.

As we enter the 74th year of independence, India's growth story remains intact. Emerging from setbacks and fighting obstacles, we have earned the reputation of one of the emerging superpowers of the world.


We have not only been able to maintain our socio-cultural diversity and democratic values unimpaired, but we have also made remarkable progress in many fields, including space technology, IT and pharma.

India's stock market remains one of the most promising emerging markets of the world with tremendous growth potential as several structural reforms initiated by the Narendra Modi-led government assures that tomorrow belongs to India.

The idea of a stronger India cannot take the shape of reality unless it is financially strong. While the country is gradually inching towards becoming an economic superpower, it is time for us too to make efforts for attaining financial freedom.

Investing in stock markets is one of the best ways to be financially strong. Based on the views of several analysts, we bring you 11 stocks that can give you healthy returns in the long-term. Take a look:

Analyst: Rusmik Oza, Executive Vice President and Head of Fundamental Research at Kotak Securities

Bharti Airtel | Buy | LTP: Rs 535.35 | One-year target price: Rs 710 | Upside: 33%

The telecom sector is now a 2-3 player market with a good scope of ARPUs going up in the future.

Management has guided for ARPUs to move to Rs 200 per month in the short term and Rs 300 per month in the medium-term (From current Rs 152 per month). Online streaming and demand for data are going to only rise from here in the future.

Bharti has already provided for about Rs 47,000 crore towards ARG dues.

"The company should generate consolidated EBITDA of more than Rs 1 lakh crore in the next two years. It trades cheap at less than 7 times on FY22E EV/EBITDA," said the analyst.

Axis Bank | Buy | LTP: Rs 448.10 | One-year target price: Rs 600 | Upside: 34%

After a slow loan growth of 6.6 percent in FY21, it should accelerate to nearly 13 percent in the next two years (i.e. FY22 & FY23), said the analyst.

Net NPLs are at 4 year low of 1.2 percent. Although post moratorium NPLs will rise, the bank has been providing for potential COVID-related NPLs.

"While the near-term outlook is hazy for all banks, we believe a healthy asset mix, superior customer profile, liability strength and capital comfort will allow Axis Bank to ride this challenging period," said the analyst.

ICICI Bank | Buy | LTP: Rs 368.05 | One-year target price: Rs 470 | Upside: 28%

The analyst believes that ICICI Bank has come into this crisis with much slower growth and less emphasis on market share.

Net NPLs are at a six-year low of nearly 1.3 times with provision coverage ratio improving to nearly 79 percent.

Share of retail loans has steadily increased over the years and account for nearly 64 percent of overall loans as at the end of Q1FY21.

"The bank trades at 1.8 times FY22E book value. For our price target of Rs 470, we value the bank at nearly 2 times book value and 15 times June 2022E EPS for lower RoEs in the medium-term," said the analyst.

At the price target of Rs 470, the valuation of subsidiaries works to Rs 115 per share. This makes the standalone bank valuations very cheap on a P/BV basis.

ITC | Buy | LTP: Rs 201.45 | One-year target price: Rs 260 | Upside: 29%

The cigarette business is getting back to normal. Volume levels in June has dismissed concerns of behavioural changes in tobacco consumption due to extended lockdowns.

Strong traction in the food and hygiene portfolio should help improve growth in FMCG.

The hotel business is likely to have a slow recovery. FMCG business clocked more than Rs 1,000 crore in annualized EBITDA in Q1FY21.

"The stock continues to offer a good combination of (1) inexpensive valuations, (2) healthy dividend yield, (3) promise of solid long-term growth in FMCG and (4) emerging agri-business," said the analyst.

SBI Life Insurance Company | Buy | LTP: Rs 861.50 | One-year target price: Rs 1,050 | Upside: 22%

The annualised premium equivalent (APE) of the life insurance industry has grown at a CAGR of 14 percent in the last five years.

If we take FY21 as the base, then the industry is likely to again report healthy double-digit CAGR for the next few years.

For SBI Life, the analyst expects the value of new business (VNB) margins to expand to 19.5 percent in FY21E from 18.7 percent in FY20.

He expects VNB margins to inch up to over 21 percent over the medium-term due to a steady increase in the share of protection business.

VNB margin expansion will support operating RoEV (return on embedded value) at 16-17 percent in FY21-23E.

"We have a one year target of Rs 1,050. At the target price it will trade at 2.8 times embedded value (EV) on June 2022E," said the analyst.

Analyst: Vinod Nair, Head of Research at Geojit Financial Services

HDFC Bank | Buy | LTP: Rs 1,059.05 | One-year target price: Rs 1,403 | Upside: 32%

HDFC Bank today is a household name in India and the largest in terms of market share in the private banking space.

The bank, in the recent quarterly results, posted better top and bottom-line performance.

Net interest income rose 18 percent year-on-year (YoY), backed by strong growth in loans and advances. While profits grew 20 percent despite a spike in provisions.

Strong governance and equally strong asset quality have always been the hallmark of HDFC Bank setting it apart from its peers.

Uncertainty with respect to CEO appointment is over and the bank is expected to build-up further on its growth momentum from current levels.

"We value the stock at 3.5 times FY22E BVPS (equivalent to the 3-year average forward P/BV multiple) with a revised target price of Rs 1,403," said the analyst.

Reliance Industries | Buy | LTP: Rs 2,122.05 | One-year target price: Rs 2,464 | Upside: 16%

Focus on cost optimisation and integration to compensate the weak demand under O2C businesses, expansion of 4G network and upgrade to 5G technology, the launch of JioMart, the ramp-up of Ajio, and the start of oil production from R cluster in H2FY21 will boost the company’s performance in medium-term, said the analyst.

Colgate-Palmolive (India) | Buy | LTP: Rs 1,434.35 | One-year target price: Rs 1,770 | Upside: 23%

Revenues for the Q1FY21 quarter fell by 3.9 percent year-on-year (YoY) due to shrinkage of sales in discretionary categories like toothbrush and body wash whereas the sales volume in the toothpaste segment remained relatively stable.

The company was able to increase its EBITDA margins by 190 bps YoY due to its cost savings in Advertisements and Promotions. Further, the company also increased its PAT by 17.2 percent YoY due to lower taxes and tax reversals from prior periods.

Colgate remains debt-free and has strong cash flows to meet operational challenges going forward. With the launch of 'Colgate Ved Shakti' the analyst believes, the company will gain market share going forward as it will also cater to customers preferring natural toothpaste.

UPL | Buy | LTP: Rs 489.15 | One-year target price: Rs 601 | Upside: 23%

The analyst expects UPL’s net profit to grow at a CAGR of 26 percent over FY20-FY22E on the back of cost optimisation measures and an increase in volumes of value-added crop protection products.

The entry into new geographies as well as synergy from the Arysta Acquisition will further propel UPL’s earnings into the medium to long-term.

"We expect a reduction in its debt-equity ratio from 1.3 to 1.0 over the next two years. We recommend a buy rating on the stock with price target of Rs 601 based on 12 times FY22E adjusted EPS," said the analyst.

Analyst: Siddharth Sedani, Vice President- Equity Advisory, Anand Rathi Shares and Stock Brokers

Escorts | Buy | LTP: Rs 1,120.85 | One-year target price: Rs 1,326 | Upside: 18%

Despite the current challenges, we have seen a faster revival in the Escorts tractor business this quarter.

Going ahead, the analyst believes its tractor business would grow in line with the industry, driven by strong rural demand across regions.

Demand will continue to grow in FY22. Escorts expect the second half (H2) of FY21 to grow 12 percent YoY, leading to a 5 percent overall revenue growth.

"Assuming a favorable monsoon and a good rabi crop this year, we expect demand to continue and thus expect volume growth of 5 percent in FY21 and 12 percent in FY22, leading to a 9 percent revenue CAGR over FY20-22," said the analyst.

HDFC Life Insurance Company | Buy | LTP: 599.75 | One-year target price: Rs 685 | Upside: 14%

Owing to expectations of continued volatility in equity markets as well as a rise in demand for protection products, the company is set to raise Rs 600 crore which would provide 15 percent additional cushion.

The management noted that business has gained momentum on a month‐on‐month basis and is seeing higher traction, particularly in the individual protection business.

In terms of ULIP products, management expects demand to remains soft throughout the year. In addition, management stated that the company has been witnessing improving renewal premium collection trends.

However, it remains cautious about the sustainability of these trends given the uncertain environment.

The company remains focused on driving growth through its diverse channels of distribution – bancassurance, agency, direct, brokers, and others.

The company’s digital assets have seen strong adoption across all its distribution channels during the quarter.

Further, the company intends to tap new geographies and customer segments, enhance product offerings and bolster technology to improve overall operational efficiency and customer service.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

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.
First Published on Aug 14, 2020 02:03 pm