Stocks To Buy: Sharing its top picks, domestic brokerage and research firm Angel One has recommended five stocks that investors can look to buy or accumulate these quality stocks with the time horizon of one year.
Five Stocks To Buy
Ashok Leyland
Accumulate Ashok Layland: CMP: Rs 143| Target: Rs 164
Demand for MHCV was adversely impacted post peeking out due to multiple factors including changes in axel norms, an increase in prices due to the implementation of BS 6 norms followed by the sharp drop in demand due to the ongoing Covid-19 crisis. CV segment has held up well in the current year despite challenges and improvement in business sentiments along with spending on infrastructure are likely to drive demand in the medium term. The bus segment is also likely to bounce back going ahead owing to improvement in activities for the end-users. FY21 MHCV industry production volumes have been at the lowest levels seen in 12 years and we believe that the company is ideally placed to capture the growth revival in the CV segment.
The brokerage house said: “We believe that ALL will be the biggest beneficiary of the Government’s voluntary scrappage policy and hence rate the stock a BUY.”
Federal Bank
Buy Federal Bank: CMP: Rs 98| Target: Rs 120
Federal bank is one of India’s largest old-generation private sector banks. At the end of Q4 FY2022 the bank had advances of Rs. 1.45 lakh cr. and deposits of Rs. 1.81 lakh cr. The bank predominantly has a secured lending book which helped limit asset quality issues during the Covid 19 pandemic. Federal Bank has posted a good set of numbers for Q4FY22 as NII/ advances increased by 7.4 per cent/9.9 per cent YoY. Provisioning for the quarter was down by 10 per cent YoY as a result of which PAT was up by 13.1 per cent YoY. GNPA and NNPA ratio improved to 2.80 per cent and 0.96 per cent while restructuring remained stable sequentially at 2.6 per cent of advances. Overall asset quality for the quarter improved in Q4FY22 which was in line with our expectations.
Angel One says, “We expect asset quality to improve further in FY2023 given normalization of the economy. We expect the Federal bank to post an NII/PPOP/PAT CAGR of 24.9 per cent/29.1 per cent/42.7 per cent between FY2022-24 and remain positive on the bank.”
HDFC Bank
Buy HDFC Bank: CMP: Rs 1,392| Target: Rs 1,610
HDFC Bank is India’s largest private sector bank with a loan book of Rs. 13.68 lakh crore in Q4FY2022 and deposit base of Rs. 15.6 lakh crore. The Bank has a very well spread-out book with wholesale constituting 57 per cent of the asset book while retail accounted for the remaining 44 per cent of the loan book. Q4FY2022 numbers were below expectations due to change in portfolo mix towards corporate which resulted in contraction in NIM by 10bps QoQ to 4.0 per cent. Moreover higher opex dragged down PPOP growth. The bank posted NII/PPOP growth of 10.2 per cent/5.3 per cent for the quarter on the back of loan growth of 20.8 per cent YoY. While operating numbers were below expectations the bank posted an improvement in asset quality as GNPA/ NNPA reduced by 9/5bps QoQ to 1.17 per cent and 0.32 per cent of advances. Restructured advances at the end of the quarter stood at 1.14 per cent of advances.
“Given best-in-class asset quality, expected rebound in retail credit growth we are positive on the bank given reasonable valuations at 2.3xFY24 adjusted book which is at a discount to historical averages,” it said.
Sobha Limited
Accumulate Sobha Limited: CMP: Rs 662|Target: Rs 750
The company operates in Residential & Commercial real-estate along with Contractual business. Companies 64 per cent of residential pre-sales come from the Bangalore market which is one of the IT hubs in India, we expect new hiring by the IT industry will increase residential demand in the South India market. Ready to move inventory and under construction inventory levels have moved down to their lowest levels. Customers are now having a preference towards branded players like Sobha Developers. The company expected new projects/phase spread over 13.53mn sqft across 7 citites. The majority of launches will be coming from existing land banks. The company has a land bank of approx. 200mn Sqft of salable area.
Marico
Buy Marico: CMP: Rs 500| Target: Rs 600
Marico is one of the major FMCG companies present in the hair oil, edible oil, foods & personal care segment. Major brands include Parachute, Saffola, Nihar, Hair & Care, Set Wet, Livon & Beardo Marico’s products have strong brand recall coupled with an extensive distribution reach of more than 5mn outlets and direct reach of 1 million outlets.
“We expect Marico to report a healthy bottom-line CAGR of 11 per cent over FY2022-24E due to better volume growth on the back of strong brand, wide distribution network,” the brokerage note said.
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