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Brokerages say these 13 largecaps are likely to give 11-32% return; do you own any?

HPCL, Wipro, Marico, Avenue Supermarts and Dr Reddy's Laboratories among 13 largecaps which could give 11-32% return.

January 19, 2021 / 11:39 AM IST
Sensex
Market witnessed profit booking for second straight day in a row which pulled the Nifty below 14300, while Sensex lost 470 points. Here are the 13 largecaps that brokerages are betting on:
Marico | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 470 | Upside: percent. Company's resilient product portfolio has delivered an impressive performance across categories, with the domestic business registering double-digit volume growth as consumer sentiment improves across the country. Growth in Parachute is highly encouraging. The Foods and Edible Oils portfolio is likely to continue its growth momentum with a higher consumer focus on health, hygiene, and immunity boosting products. Riding this tailwind, it is launching new products in these categories, the success of which will be critical for medium-term growth (though it has seen limited success so far). Outlook on its international business is getting better. While material costs may see a mild inflation, the company is well placed to offset it through price increases and cost optimization.
Marico | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 411.05 | Target: Rs 470 | Upside: 14 percent. Company's resilient product portfolio has delivered an impressive performance across categories, with the domestic business registering double-digit volume growth as consumer sentiment improves across the country. Growth in Parachute is highly encouraging. The Foods and Edible Oils portfolio is likely to continue its growth momentum with a higher consumer focus on health, hygiene, and immunity boosting products. Riding this tailwind, it is launching new products in these categories, the success of which will be critical for medium-term growth (though it has seen limited success so far). Outlook on its international business is getting better. While material costs may see a mild inflation, the company is well placed to offset it through price increases and cost optimization.
HDFC Life Insurance | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs | Target: Rs 820 | Upside: percent. We expect gross written premium (GWP) to grow at a CAGR of 10.1% in FY20-23E to Rs 43703 crore. PAT is expected to grow at 9% CAGR over the same period to Rs 1671 crore. VNB margins are expected to be in the region of ~ 25% by FY23E. HDFC Life currently trades at ~ 4.3x FY23E embedded value (EV), which is at a premium compared to its peers. Given the superior business franchise and continued focus on profitability, valuations are expected to remain at a premium.
HDFC Life Insurance | Brokerage: ICICIdirect | Rating: Buy | LTP: Rs 693.95 | Target: Rs 820 | Upside: 18 percent. We expect gross written premium (GWP) to grow at a CAGR of 10.1% in FY20-23E to Rs 43703 crore. PAT is expected to grow at 9% CAGR over the same period to Rs 1671 crore. VNB margins are expected to be in the region of ~ 25% by FY23E. HDFC Life currently trades at ~ 4.3x FY23E embedded value (EV), which is at a premium compared to its peers. Given the superior business franchise and continued focus on profitability, valuations are expected to remain at a premium.
Source: Reuters
Hindustan Unilever | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 2,332.60 | Target: Rs 2,790| Upside: 19 percent. Rural demand outpacing urban demand, improving growth prospects for health food drinks and an expected recovery in discretionary categories remain key growth drivers in the near term. We expect HUL revenues and PAT to grow at a CAGR of 13% and 21% over FY2020-23 (including the acquired business of GSK Consumers). This along with a strong cash generation ability and strong dividend payout makes it better pick in the large cap FMCG space.
Bandhan Bank | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs | Target: Rs 450 | Upside: percent. Bandhan reported strong business trends, aided by the festive season and improved economic activity, particularly in rural India. It continues to demonstrate strong deposit performance, led by retail deposits, with the CASA mix improving to 43% and retail deposits mix to 81%. Furthermore, the bank holds COVID-related / excess standard provisions of Rs 17.4b to manage higher delinquencies over FY21. We expect LGDs to remain lower (v/s those of peers) given Bandhan’s strong market share and higher unique customer base.
Bandhan Bank | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 356 | Target: Rs 450 | Upside: 26 percent. Bandhan reported strong business trends, aided by the festive season and improved economic activity, particularly in rural India. It continues to demonstrate strong deposit performance, led by retail deposits, with the CASA mix improving to 43% and retail deposits mix to 81%. Furthermore, the bank holds COVID-related / excess standard provisions of Rs 17.4b to manage higher delinquencies over FY21. We expect LGDs to remain lower (v/s those of peers) given Bandhan’s strong market share and higher unique customer base.
Tata Consultancy Services | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 3,590 | Upside: percent. We upgraded our earnings estimates for FY2021E/FY2022E/FY2023E, given that both revenue and operating margin exceeded estimates, continued strong deal wins and resilience in IT spending of clients. We continue to prefer TCS on account of a strong business model, stable management, solid execution and strong free cash flows (FCF) generation. As TCS is well-positioned to capitalise on ensuing opportunities created by COVID-19, we expect TCS’ USD revenue and earnings would clock an 11%/15% CAGR over FY2021-23E.
Tata Consultancy Services | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 3,221.75 | Target: Rs 3,590 | Upside: 11 percent. We upgraded our earnings estimates for FY2021E/FY2022E/FY2023E, given that both revenue and operating margin exceeded estimates, continued strong deal wins and resilience in IT spending of clients. We continue to prefer TCS on account of a strong business model, stable management, solid execution and strong free cash flows (FCF) generation. As TCS is well-positioned to capitalise on ensuing opportunities created by COVID-19, we expect TCS’ USD revenue and earnings would clock an 11%/15% CAGR over FY2021-23E.
Avenue Supermarts | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 3,296 | Upside: percent. As post covid recovery catches up, D’Mart seems gaining confidence on expansion of D’Mart ready with 1) launch in Ahmedabad, Bangalore and Hyderabad 2) allocation of store space for operations and 3) extending D’Mart ready to general merchandise (Home furnishings, small electrical and Kitchen aids) and fruits and veggies. Worst seems over although near term outlook remains mixed due to disruption due to night curfew and weekend closure in certain cities, supply issues in non FMCG goods and mix impact as apparel, laundry, footwear and travel segments remain impacted.
Avenue Supermarts | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 2,744.90 | Target: Rs 3,296 | Upside: 20 percent. As post covid recovery catches up, D’Mart seems gaining confidence on expansion of D’Mart ready with 1) launch in Ahmedabad, Bangalore and Hyderabad 2) allocation of store space for operations and 3) extending D’Mart ready to general merchandise (Home furnishings, small electrical and Kitchen aids) and fruits and veggies. Worst seems over although near term outlook remains mixed due to disruption due to night curfew and weekend closure in certain cities, supply issues in non FMCG goods and mix impact as apparel, laundry, footwear and travel segments remain impacted.
Maruti Suzuki | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 9,000 | Upside: percent. The company is witnessing strong recovery in domestic demand with sales volumes sustaining growth in the post-festive season. Sales enquiry is strong even after the festive season, underpinning our view of genuine demand in the PV segment. We expect strong recovery from FY2022, driven by normalisation of economic activity. Margins are expected to improve, driven by operating leverage and cost-control measures.
Maruti Suzuki | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 7,830.65 | Target: Rs 9,000 | Upside: 15 percent. The company is witnessing strong recovery in domestic demand with sales volumes sustaining growth in the post-festive season. Sales enquiry is strong even after the festive season, underpinning our view of genuine demand in the PV segment. We expect strong recovery from FY2022, driven by normalisation of economic activity. Margins are expected to improve, driven by operating leverage and cost-control measures.
Dr Reddy’s Laboratories | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 6,500 | Upside: percent. Expected improvement in the US backed by a sturdy new product pipeline, growth in base business and expected improvement therein, relatively easing pricing pressures would result in a double-digit growth in US sales. On the back of a likely improvement in acquired portfolio, COVID related opportunities and expected pick up in acute therapies would drive the India business’ growth. Further, DRL has successfully completed phase-II trials for Sputnik-V (COVID-19 vaccine) and achieved its primary end point of safety. This augurs well and points towards a likely successful phase-III trial. Upon approval, it can offer substantial growth opportunities and lead to further earnings upgrades.
Dr Reddy’s Laboratories | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 5,052.10 | Target: Rs 6,500 | Upside: 28 percent. Expected improvement in the US backed by a sturdy new product pipeline, growth in base business and expected improvement therein, relatively easing pricing pressures would result in a double-digit growth in US sales. On the back of a likely improvement in acquired portfolio, COVID related opportunities and expected pick up in acute therapies would drive the India business’ growth. Further, DRL has successfully completed phase-II trials for Sputnik-V (COVID-19 vaccine) and achieved its primary end point of safety. This augurs well and points towards a likely successful phase-III trial. Upon approval, it can offer substantial growth opportunities and lead to further earnings upgrades.
Wipro | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 510 | Upside: percent. Broking firm revised earnings estimates for FY2021E/FY2022E/FY2023E factoring in better-than-expected Q3FY2021 results and strong deal wins. It believe that a leaner organisation structure would enable the company to take better decisions on a go-to market strategy and optimise costs. Wipro would focus on mining large accounts, wining large transformational deals, hiring top talents for key roles, leveraging partnerships and strategic mergers & acquisitions (M&A) to drive faster growth.
Wipro | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 431.55 | Target: Rs 510 | Upside: 18 percent. Broking firm revised earnings estimates for FY2021E/FY2022E/FY2023E factoring in better-than-expected Q3FY2021 results and strong deal wins. It believe that a leaner organisation structure would enable the company to take better decisions on a go-to market strategy and optimise costs. Wipro would focus on mining large accounts, wining large transformational deals, hiring top talents for key roles, leveraging partnerships and strategic mergers & acquisitions (M&A) to drive faster growth.
Infosys | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs | Target: Rs 1,611 | Upside: percent. Management stated that budget planning for CY21 by clients is progressing normally with positive growth estimates. Deal pipeline remains healthy with broad-based improvement. Infosys stays our top pick in the sector as it benefits from near term margin defense and long term growth acceleration from DX/cloud/AI megatrends. We are assigning 27X multiple (11% discount to TCS multiple) to Infy as we believe higher multiple is justified due to following factors 1) Strong revenue acceleration 2) Best in class metrics along with broad based recovery 3) Excellent supply chain mechanism 4) Strong dividend payouts 5) All time high deal wins.
Infosys | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 1,312.05 | Target: Rs 1,611 | Upside: 22 percent. Management stated that budget planning for CY21 by clients is progressing normally with positive growth estimates. Deal pipeline remains healthy with broad-based improvement. Infosys stays our top pick in the sector as it benefits from near term margin defense and long term growth acceleration from DX/cloud/AI megatrends. We are assigning 27X multiple (11% discount to TCS multiple) to Infy as we believe higher multiple is justified due to following factors 1) Strong revenue acceleration 2) Best in class metrics along with broad based recovery 3) Excellent supply chain mechanism 4) Strong dividend payouts 5) All time high deal wins.
HDFC Bank | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 1,810 | Upside: percent. We believe the bank’s consistency is buoyed by its robust underwriting capability and risk measurement standards, which provide support for valuations. We find management’s indications for stable NIMs, and a structurally improving cost-income ratio encouraging, while the high provisioning buffer should provide support to asset quality and profitability. We have fine-tuned our estimates and the target multiple for the bank considering the improving earnings visibility.
HDFC Bank | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 1,483.10 | Target: Rs 1,810 | Upside: 22 percent. We believe the bank’s consistency is buoyed by its robust underwriting capability and risk measurement standards, which provide support for valuations. We find management’s indications for stable NIMs, and a structurally improving cost-income ratio encouraging, while the high provisioning buffer should provide support to asset quality and profitability. We have fine-tuned our estimates and the target multiple for the bank considering the improving earnings visibility.
HPCL | Brokerage: Sharekhan | Rating: Buy | LTP: Rs | Target: Rs 275 | Upside: percent. We expect healthy dividend yield of 7% on account of strong earnings growth and completion of capex cycle (refinery expansion at Mumbai, Vizag, and new refinery in Rajasthan) to improve FCF generation from FY2023. HPCL’s attractive valuation across valuation parameters and potential re-rating of the marketing business (in case of successful completion of privatisation of BPCL) makes us constructive on HPCL. We see risk reward favourable, given earnings visibility, attractive valuation and healthy dividend yield.
HPCL | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 231.25 | Target: Rs 275 | Upside: 19 percent. We expect healthy dividend yield of 7% on account of strong earnings growth and completion of capex cycle (refinery expansion at Mumbai, Vizag, and new refinery in Rajasthan) to improve FCF generation from FY2023. HPCL’s attractive valuation across valuation parameters and potential re-rating of the marketing business (in case of successful completion of privatisation of BPCL) makes us constructive on HPCL. We see risk reward favourable, given earnings visibility, attractive valuation and healthy dividend yield.
HCL Technologies Ltd
HCL Technologies | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 981.50 | Target: Rs 1,300 | Upside: 32 percent. Broad-based sequential growth, coupled with healthy deal wins and a robust pipeline, indicates an improved outlook. We estimate strong performance in the Products business driven by HCLT’s capabilities to rightly align and sell these products. Given its deep capabilities in the IMS space and strategic partnerships, investments in Cloud, and Digital capabilities, we expect HCLT to emerge stronger on the back of an expected increase in enterprise demand for these services. The stock is currently trading at a modest ~15x FY23E earnings, which offers a margin of safety.
Rakesh Patil
first published: Jan 19, 2021 11:13 am

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