The Indian market is teeming with positivity, thanks to improving macro, better Q2 earnings and encouraging reports on the vaccine front, and most market experts believe the positive momentum will continue in new Samvat 2077.
Analysts and brokerage firms are bullish on market prospects as events such as the US election is over and positive reports on the vaccine front are giving hopes that soon COVID-19 will be under control.
Improving macroeconomic indicators are also signalling bulls will have enough fodder for jumping higher.
Global brokerage house Goldman Sachs has upgraded India to 'overweight' and raised Nifty's 2021-end target to 14,100.
Goldman Sachs is of the view that the market has moved higher as investors gained confidence in improving economic momentum.
Global brokerage firm Nomura is of the view that Nifty may hit the level of 13,640 by December 2021.
Brokerages suggest the following 10 large-cap ideas that can give up to 30 percent in Samvat 2077. Take a look:
Brokerage: HDFC Securities
Cadila Healthcare | Buy | LTP: Rs 429.40 | Target price: Rs 508 | Upside: 18%
As per the brokerage firm, the company's domestic and wellness businesses should grow in the high single digits and low-mid teens, respectively.
The stabilisation in the price erosion in the US generics business coupled with a strong pipeline would drive growth in the US business.
It has reduced net debt by Rs 2700 crore to Rs 4030 crore through fundraising of Rs 1000 crore (at the Zydus Wellness level) and a better working capital cycle in H1FY21.
"We estimate revenue CAGR of 8 percent over FY20-22E led by strong growth from wellness business, US market and domestic formulations. We project 150bps margin expansion led by gross margin expansion and operational efficiencies over FY20-22E," said the brokerage.
Healthy revenues, better operating performance and lower interest expenses could drive 16 percent PAT CAGR over the same period.
United Spirits | Buy | LTP: Rs 553.25 | Target price: Rs 645 | Upside: 17%
United Spirits has been severely impacted by the pandemic due to government restrictions.
United Spirits, being the market leader, is expected to recover faster than peers on the back of a recovery in trade business, increase in at-home consumption, festive season sales, resumption in duty-free sales and benign commodity inflation.
"We recommend a buy on the stock at the current market price and add on declines to Rs 510-491 for a target of Rs 645 valuing the company at 52 times FY22 EPS," said the company.
Brokerage: Nirmal Bang’s Institutional Equities Research
HCL Technologies | Buy | LTP: Rs 830.50 | Target price: Rs 1,053 | Upside: 27%
The brokerage believes HCL Technologies will be an outsized beneficiary of the digital infrastructure build-out that has been catalyzed by the pandemic and which will likely be a 3-5 year opportunity.
HCL Tech has the highest leverage to this opportunity among Indian players with what we estimate to be a 30 percent revenue exposure.
HCL Tech will also benefit from a pick-up in Digital transformation spends on both services (Mode-2) and products (Mode-3). This will likely help the company deliver growth outperformance in an industry that will likely see growth acceleration of 300-400bps after delivering 6-8 percent organic growth over FY15-FY20.
The brokerage values HCL Tech at a target P/E of 18.8 times September 2022E EPS, which is at a 25 percent discount to the target P/E multiple of TCS.
Hindustan Unilever (HUL) | Buy | LTP: Rs 2,188 | Target price: Rs 2,555 | Upside: 17%
The brokerage firm believes that HUL offers the best earnings growth visibility in the large-cap Indian consumer space, justifying premium valuation even though return ratios have dropped due to the impact of the merger.
Sun Pharmaceutical Industries | Buy | LTP: Rs 514 | Target price: Rs 618 | Upside: 20%
The brokerage believes the US business for Sun Pharma (excluding Taro Pharmaceuticals and Dusa Pharmaceuticals) should start growing as 92 ANDAs (abbreviated new drug applications) and 6 NDAs, which are pending approval, gradually start reflecting in incremental revenues.
Price erosion in base business is unlikely to be painful as the same is now commoditised with a median competitive intensity of eight players across its marketed ANDA portfolio.
In addition to complex ANDAs, Sun Pharma is also aggressively developing value-added generic drugs that are targeting the following segments: 1) Patients suffering from dysphagia. 2) Dosing convenience. 3) Improved health care administration.
The domestic business should deliver a low double-digit growth and outpace the Indian pharmaceutical market driven by its large exposure to the chronic segment. the brokerage said.
UltraTech Cement | Buy | LTP: Rs 4,890.25 | Target price: Rs 5,640 | Upside: 15%
Over the last 2 years, UltraTech has acquired Binani Cement (renamed as UltraTech Nathdwara) as well as Century Textile’s Cement division.
For Q2FY21, Century’s EBITDA/mt was in excess of Rs 700 and capacity utilization at 68 percent. Ultratech Nathdwara’s capacity utilisation stood at 60 percent and EBITDA/mt at more than Rs 1,500.
"We are building in 5 percent/7 percent/16 percent CAGR in revenue/EBITDA/PAT for the company over FY20- FY23E," said the brokerage.
Analyst: Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers
Dr.Reddy's Laboratories | Buy | LTP: Rs 4,875.60 | Target price: Rs 6,012 | Upside: 23%
Dr. Reddy’s offers an array of the portfolio of products and services, including APIs, custom pharmaceutical services, generics, biosimilars and differentiated formulations.
As of now, 101 generic filings are pending for approval with the USFDA comprising 99 abbreviated new drug applications (ANDAs) and 2 NDAs.
Also, the company expects 28 filings to have first to file status.
In a major development, the company settled litigation with Celgene, relating to patents for REVLIMID Capsules. Celgene has agreed to provide Dr.Reddy’s with a license to sell volume-limited amounts in the US post-March 2022 and without volume limitation beginning on Jan 31, 2026, subject to regulatory approval.
The latest settlement provides significant revenue opportunities to the company in the $7.6 billion REVLIMID market with few players.
The company remains on track to launch over 25 new products including some niche and limited competition products in its North America Generics business in FY21.
"While the company should benefit from the gradual price stabilization in US business, we expect growth across markets driven by an increase in volume and continued new launches," said the analyst.
Also, recent market developments signal the potential for the expansion of its API business. The analyst is optimistic given the company’s strong balance sheet and management's focus on building a healthy product pipeline, improving efficiency, controlling costs and streamlining operations.
Hero MotoCorp | Buy | LTP: Rs 3,105 | Target price: Rs 3,653 | Upside: 18%
The two-wheeler industry is witnessing high demand due to the lack of public transport availability & social distancing norms in place due to COVID-19.
The company is currently operating at nearly 100 percent production capacity with almost all customer touchpoints open.
With the peak festival season coming up in the months of October and November, the company’s management is positive about achieving high sales numbers with the help of positive consumer sentiments.
"With the improvement in demand and improving macro-economic data especially from rural areas, we believe the auto 2-wheeler industry is set to bounce back faster and Hero Moto being a market leader in its segment should also benefit in medium-term," said the analyst.
Bharti Airtel | Buy | LTP: Rs 479.90 | Target price: Rs 625 | Upside: 30%
The analyst believes Bharti Airtel is poised for decent ARPU growth for India Mobile business though there might be some short term impact on 4G subscriber additions.
Revenue prospects look promising with improving performance in the Africa business. Further, with revenue market share gain and decent network capacity compared to peers, the company is well placed for long term growth in the telecom space.
The company remains focused on expanding networks, extending coverage particularly in rural areas, along with continued investments in data centers, home broadband and other lines of business.
The company is also refarming almost all of its spectrum, hence all 3G spectrum is moving to 4G.
The management expects moderation of CAPEX in FY21 compared to FY20. Recently, the company inked a deal with a global investment firm, The Carlyle Group, under which the latter will invest US$235 million in Nxtra Data Limited, a wholly-owned subsidiary of Bharti Airtel engaged in the data center business.
The company looks to benefit from this investment given Carlyle’s prior experience in data centre ownership through investments in Coresite in the US and Itconic in Spain.
HDFC Life Insurance Company | Buy | LTP: Rs 635.55 | Target price: Rs 685 | Upside: 8%
Life insurance has emerged as an important avenue for both protection as well as long-term savings products.
The management stated that the company has been experiencing growth in renewal with normalization being witnessed in premium collection rates.
The company reported a 34.8 percent year-over-year increase in gross premium to Rs 10,182.5 crore in Q2FY21, driven by strong growth in new business premium as well as renewal premium.
As of September 30, 2020, the Assets Under Management (AUM) stood at Rs 150.6 crore, increasing 15 percent YoY.
The company’s market share in terms of Individual Weighted received premium (WRP) grew by 235bps to 17.5 percent.
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