From SBI to IHCL: 23 stocks brokerages are betting for 2023

The Indian markets outperformed most of the global markets in 2022, despite several headwinds like high inflation, rising interest rates, geopolitical uncertainties, and the onslaught of foreign outflows.

So far in calendar year (CY22), frontline indices Nifty50 and the S&P BSE Sensex have climbed around 4 per cent each, as against 10-20 per cent fall in most of the global indices. Broader markets, meanwhile, were mixed as Nifty MidCap 100 index outperformed Nifty SmallCap 100 index, during the same period, shows ACE Equity data.

Going into 2023, analysts believe that the valuations of Indian equities may be closer to long-term averages as inflation moderates and rate hike cycle takes a slower pace.

“As we enter 2023, inflation is showing signs of moderation and we may likely be closer to the end of the rate hike cycle than the beginning. Nifty earnings are expected to grow at 15 per cent CAGR over the next two years – higher than any other major economy. Hence, the absolute and relative strength of India is likely to continue keeping it a preferred investment destination. Banks, Autos, and Manufacturing are the top themes for 2023,” said Alok Agarwal, portfolio manager, Alchemy Capital Management.

Here is a list of top bets across leading brokerages for 2023.

Religare Broking

Maruti Suzuki | CMP: 8,415 | Target: 9,650 | Upside potential: 14.67%

The brokerage firm believes that the automaker would be the biggest beneficiary from demand in the passenger vehicle industry given its leadership position, strong presence in the entry level segment, and wide distribution network. Technically, the stock has reclaimed record high after spending five years in the corrective phase.

Voltas | CMP: 797 | Target: 1,050 | Upside potential: 31.74%

Analysts believe that the company will continue to benefit from positive industry trends, given its leadership position, strong product portfolio, and pan-India distribution presence. Going ahead, the joint venture with Arcelik, the sourcing of raw materials locally, capacity addition for AC and refrigerators, and investment in making compressors would drive revenue and improve margins.

Exide Industries | CMP: 178 | Target: 230| Upside potential: 2.92%

The brokerage firm believes that the strong demand from the replacement market and recovery in the automotive and industrial segment would aid in gaining market share. The company’s plans to foray into manufacturing of lithium-ion batteries, which will cater to growing demand for EVs.

V-Guard Industries | CMP: 265 | Target: 330 | Upside potential: 24.52%

The brokerage firm is positive on the growth prospects of the company given the strong demand from housing and real-estate sector, focus on high margin products, expanding manufacturing facilities and synergies with acquiring company Sunflame Ent. Going forward, the company plans to expand distribution reach to non-south markets in the next 2-3 years, by increasing revenue share up to 50 per cent from 42 per cent in FY22.

Birlasoft | CMP: 293 | Target: 370| Upside potential: 26.27%

Analysts at Religare Broking are positive on Birlasoft for long term growth on the back of improving demand, robust order inflow, and strong relationship with partners and clients. Besides, demand from verticals such as manufacturing, BFSI, among many others, coupled with expansion in Europe is likely to aid strong growth.

Motilal Oswal

Infosys | CMP: 1,510 | Target: NA

Analysts believe that the IT major will continue to see traction in the large deal pipeline, despite an adverse demand environment. The company, they said, is a long-term beneficiary of acceleration of IT spends, given its capabilities around cloud and digital transformation.

SBI | CMP: 601 | Target: NA

Since the state-run lender is one of the few large-cap stocks available at reasonable valuations, analysts foresee high growth visibility, driven by strong retail loans and pick-up in the corporate segment. Asset quality, too, remains strong, while the restructured book remains under control at 0.9 per cent.

ITC | CMP: 332 | Target: NA

The brokerage firm believes that a stable tax environment for cigarettes in recent years has allowed ITC to calibrate price increases and they expect this trend to continue, which would drive earnings visibility over the medium term. Healthy sales momentum in the FMCG business, recovery from the hotels business, and better capital allocation are also expected to drive business growth.

L&T | CMP: 2,113 | Target: NA

The company has a dominant position and market share in most of its operating verticals and is beneficiary of record high order book, improving health of Hyderabad Metro project, and revival in private capex, said analysts. They believe that strong projects pipeline in verticals like transportation (railways, metro and roads), factories, and buildings augurs well for L&T.

Axis Bank | CMP: 922 | Target: NA

The private sector lender has been witnessing strong growth in the retail and mid-corporate segment, which along with MSME, would remain the key growth drivers. Since it expects cost-to-assets ratio to moderate at ~2 per cent by the end of FY25, analysts expect the lender to deliver FY24E RoA/RoE in the range of 1.8-18.1 per cent.

Maruti Suzuki| CMP: 8,415| Target: NA

The brokerage firm believes that the automaker is on a strong footing for recovery in market share and margin with launches gaining traction and semiconductor shortages easing. Analysts assert that the company can gain further market share, led by an expected shift towards petrol and hybrid vehicles, resulting in ~14 per cent volume CAGR over FY22-25E.

Apollo Hospitals | CMP: 4,585 | Target: NA

The brokerage firm is bullish on the hospitals chain as a favorable case-mix and increasing occupancy would drive better prospects for healthcare services. Moreover, strong franchise in pharmacy space, healthy store additions, and ongoing investments is expected to enhance franchise under Apollo 24x7. Therefore, analysts expect 15 per cent revenue CAGR over FY22-24 driven by growth in pharmacy, healthcare, and AHLL businesses.

Indian Hotels Company | CMP: 314| Target: NA

The brokerage firm expects strong demand momentum witnessed in FY22 to continue in FY23-25E, led by further improvement in ARR and occupancy rate due to favorable demand-supply dynamics, higher income from management contracts, and value unlocking by launching re-imagined and new brands.

Westlife | CMP: 777 | Target: NA

The brokerage firm believes that the prospects of healthy growth are bright, led by opportunity in the QSR space and Westlife’s own efforts over the next few years. This growth will be facilitated by an additional 250-300 stores from its current 337 over the next five years.

HDFC Securities

ACC | CMP: 2,456 | Target: NA

The brokerage firm believes that Adani’s buyout of ACC can be a catalyst for cost-saving opportunities, better procurement, logistics and brownfield expansions — which could drive earnings growth faster than peers. Moreover, since ACC gets valuation in terms of EV/T, lower than similar sized peers, this gap could be easily bridged gradually. However, volatile input costs of coal, pet coke, and crude oil could hamper the operating dynamics of the company.

Bharat Forge | CMP: 874| Target: NA

Since the company is the leading player in the forgings industry, analysts believe that the China+1, and EU+1 would benefit the company. The government’s initiative to enhance local manufacturing through PLI schemes and Atma Nirbharta would boost prospects for the company. That apart, the company’s order book to develop components for electric CV in the light truck segment would be a game-changer.

Chennai Petroleum Corporation | CMP: 204 | Target: NA

The brokerage firm believes that the refining fundamentals of the company remain strong. In H1FY23, CPCL’s Average Gross Refining Margin (GRM) stood at $14.58 per barrel (bbl) versus $5.75 per bbl in H1FY22, whereas GRM was at $4.44 per bbl in Q2FY23, as against $5.83 per bbl in Q2FY22. However, the brokerage firms warn that fall in GRMs, volatile gas prices, and regulatory changes could hamper the future trend.

Indian Oil Corporation| CMP: 74 | Target: NA

The state-run oil refining and marketing business is set to commission various projects over the next two years, thereby, boosting growth. As per its earlier guidance, the ongoing projects are expected to be completed as follows: Panipat refinery (25 mmtpa) by Sep’24, Gujarat refinery (18mmtpa) by Aug’23, and Baruni refinery (9 mmtpa) by April’23. Moreover, the company is expected to add 1,000 outlets and upgrade existing outlets in fuel retailing.

Larsen & Toubro | CMP: 2,113 | Target: NA

L&T is targeting to reduce debt by Rs 5000 crore over the next 2-3 years, led by receipt of interest free loan of Rs 3000 crore from Telangana government and monetisation of ToD rights of Rs 2,000-2,500 crore. Moreover, the company expects the bid to award ratio to further improve in H2FY23 over 55 per cent, which would drive order inflows.

PNC Infratech | CMP: 283 | Target: NA

The company is expecting around Rs 100-120 crore of capex during FY23 and anticipates receiving new orders during FY23 in the range of Rs 8,000-10,000 crore out of NHAI bid pipeline of ~Rs 50,000 crores. This, thereby, would provide strong momentum in revenue visibility over the years. Besides, the government’s plan to expand the national highway network by 25,000 kilometers in the current fiscal year will be supported by a massive increase in budget.

Power Finance Corporation| CMP: 137 | Target: NA

Analysts believe that the power sector outlook for the long term seems bright. The large liquidity support, several proposed reforms, and government’s aggressive capex plan will keep the sector on a strong growth track. Moreover, since the past few quarters, the company has been able to deliver strong growth momentum along with considerable improvement in the asset quality. Therefore, the brokerage firm feels that the worst in terms of asset quality deterioration has been done in the power financing space.

SBI | CMP: 601 | Target: NA

Analysts believe that the state-run lender is better placed to curtail asset quality worries than many other large banks because of the quality of its loan book. The incremental lending has been done to better rated corporates, while retail book is skewed towards salaried class especially government employees. This shows the resilient quality of the current loan book of SBI.

Zensar Technology | CMP: 216| Target: NA

Zensar witnessed increase in multi-service line deal wins in the second quarter of this fiscal year (Q2FY23), led by advanced engineering services growing 7.4 per cent QoQ, and data engineering services growing 16.8 per cent QoQ, led by multiple wins in cloud migration, cloud modernisation and enterprise transformation.