Domestic markets, after having soared sharply earlier in the week, have been in a downward trend for the previous few sessions. At noon, the benchmark indices were holding modest gains after RBI Governor said that the central bank has now prioritised inflation over growth. The BSE Sensex rose 300 points to 59,320 and the NSE Nifty was up 80 points near 17,750. RBI kept the key repo rate unchanged at 4 per cent, maintaining the status quo and its accommodative stance, but said that it would gradually withdraw liquidity over some time. The apex bank today raised inflation projections for FY23 to 5.7 per cent from 4.5 per cent, while downgrading real GDP estimates to 7.2 per cent vs 7.8 per cent earlier, given the persistent elevated prices of oil and other commodities.
Here are four large-cap stock recommendations by Angel One Ltd., which will give healthy returns in the short term:
HDFC Bank- Target Price Rs 1859
Rationale
HDFC Bank is India’s largest private sector bank with an asset book of Rs. 11.3 lakh crore in FY21 and a deposit base of Rs. 13.4 lakh crore. The Bank has a very well spread out book with wholesale constituting ~54 per cent of the asset book while retail accounted for the remaining 46 per cent of the loan book. Q1FY22 numbers were impacted due to the second Covid wave which has led to an increase in GNPA/ NNPA by 15/8bps QoQ to 1.5 per cent and 0.5 per cent of advances. Restructured advances at the end of the quarter stood at 0.8v of advances as compared to 0.6 per cent in Q4FY21.
The bank posted NII/PPOP/PAT growth of 8.6 per cent/18.0 per cent/16.1 per cent for the quarter despite higher provisioning on the back of strong loan growth of 14.4 per cent YoY. NIMs for the quarter declined by~10bps sequentially to 4.1 per cent due to interest reversals and changes in product mix. The management has indicated that 35-40 days of collections had been lost but expects healthy recoveries from slippages in 2QFY22 which should lead to lower credit costs going forward. Given best in class asset quality and expected rebound in growth from Q2FY22 we are positive on the bank given reasonable valuations at 3.0xFY23 adjusted book which is at a discount to historical averages. We value the stock at3.7xFY23 adjusted book and arrive at a target price of Rs. 1859.
HCL Technologies- Target Price Rs 1466
Rationale
HCL Tech (HCLT) is amongst the top four services companies based out of India and provides a vast gamut of services like ADM, Enterprise solutions, Infrastructure management services, etc. HCLT reported revenue growth of 3.5 per cent in constant currency (CC) in Q2FY22 which was below street estimates. The disappointment on the revenue front was on account of a decline of 8 per cent QoQ in platform & product revenues due to delay in deal signings. However, Its services witnessed robust growth of 5.2 per cent QoQ CC.
New deal TCV at USD 2.3bn was up by 38 per cent YoY and included 4 large deals. Strong deal wins should help drive growth in the services business which should make up for any shortfall in the product business due to the delays in deal signing. At CMP the stock is trading at a P/E multiple of 21.5xFY23 EPS estimate which is at a significant discount to the other large-cap IT companies like Infosys and TCS and offers tremendous value at current levels given market leader status in Infrastructure management.
PI Industries- Target Price Rs 3440
Rationale
PI Industries is a leading player in providing Custom synthesis and manufacturing solutions (CSM) to global agrochemical players. The CSM business accounted for over 70 per cent of the company’s revenues in FY21 and is expected to be the key growth driver for the company in the future. The company has been increasing its share of high-margin CSM business driven by strong relationships with global agrochemical players. PI is leveraging its chemistry skill sets and is looking to diversify its CSM portfolio to electronic chemicals, Pharma API, fluorochemicals, etc. which will help drive business.
PI Industries has announced that they will be acquiring the API business of Indswift labs for a consideration of Rs. 1,500 crores. Indswift labs had clocked revenues of Rs. 850 crore in FY21 and provides PI with an entry into the API business which will help provide the company with an additional lever to drive growth. We rahe the stock a BUY with a price target of Rs. 3950.
Ashok Leyland- Target Price Rs 164
Rationale
Ashok Leyland Ltd (ALL) is one of the leading players in the Indian CV industry with a 32 per cent market share in the MHCV segment. The company also has a strong presence in the fast-growing LCV segment. Demand for MHCV was adversely impacted post peaking out due to multiple factors including changes in axel norms, an increase in prices due to implementation of BS 6 norms followed by a sharp drop in demand due to the ongoing Covid-19 crisis.
While demand for the LCV segment has been growing smartly post the pandemic, demand for the MHCV segment has also started to recover over the past few months before the 2nd lockdown. We believe that the company is ideally placed to capture the growth revival in the CV segment and will be the biggest beneficiary of the Government’s voluntary scrappage policy and hence rate the stock a BUY.
Read all the Latest Business News and Breaking News here
Comments
0 comment