HUL to HDFC Bank and ITC: These 10 NSE 200 stocks may zoom 20-40% in a year

Here are 10 stocks, covered by at least 10 brokerages, which are most likely to zoom based on their price target over the next year

Brokerages remain upbeat on the Indian equity market despite the recent rise in geopolitical tensions globally and a slowdown in consumer demand in the country.
 

They expect the broad-based Nifty 50 to rally by another 11 per cent from its current level over the next year.
 

According to Bloomberg estimates, the Nifty 50 is expected to reach 24,597.40 by the end of April next year compared to its Tuesday's close of 22,147.90.
 

By comparison, the index is up 22.6 per cent since the end of April 2023 and had rallied 5.63 per cent between April 2022 and April 2023. A rally in the index is likely to be driven by a continued rise in corporate earnings.

 

The Nifty 50’s underlying earnings per share (EPS) is expected to rise by 14.3 per cent over the next year to Rs 1,070.7 from Rs 936.5 currently. By comparison, the index’s EPS is up 14.2 per cent in the past 12 months, according to data from the National Stock Exchange (NSE).
 

The Nifty EPS tracks the combined net profit of India’s top 50 listed companies that are part of the index. This means, unlike in the past, brokerages expect a moderation in the index valuation ratio over the next one year.
 

The Nifty 50 trailing price-to-earnings (P/E) multiple is expected to decline to 23x by April next year compared to its current P/E multiple of 23.6x.
 

By comparison, the index P/E multiple increased by 13.3 per cent over the past year from 20.87x at the end of April 2023. The brokerages see an even bigger upside in the top-performing stocks.
 

Top-performing stocks across sectors are expected to rise by 20- 40 per cent over the next year. This is driven by earnings growth and a continued bullishness on Dalal Street.
 

Here are 10 stocks from the NSE 200 index that brokerages are most bullish about based on their price target over the next year. Our analysis includes only those stocks that are covered by at least 10 brokerages.
 

We have also excluded loss-making companies such as One97 Communi­cations (Paytm), even though it has a steep price target.
 

The forward price estimates suggest that brokerages are most bullish on banking, financial services and insurance (BFSI) companies, followed by fast-moving consumer goods (FMCG) and consumer goods firms. Interestingly, companies from these sectors have been laggards in recent months. Their share prices have either declined in the past year or have risen much lower than the rally in benchmark indices.
 

However, for the sake of diversity, we have included companies from other sectors, as well in our list.

Some of the stocks with steep price targets excluded from our top 10 list include Bandhan Bank, Kansai Nerolac, HDFC Life Insurance, IndusInd Bank and SBI Life Insurance.

Vedant Fashions

The company posted an 18.1 per cent same-store sales growth in FY23. However, this has slowed down over 9MFY24, given weak demand trends. A recovery in sales growth is expected over the next couple of quarters
 

Even as competitive intensity in the wedding wear segment is increasing at a rapid rate, ICICI Securities highlights that Vedant’s competitive positioning continues to be strong in terms of price, quality, differentiation and data edge
 

Manyavar has a robust business model with an operating profit margin of 40 per cent, post-tax return on invested capital of 60 per cent and is currently going through a rough patch, says IIFL Research, which has a buy rating on Vedant Fashions
 

The stock is down 38 per cent from its December peak and is now trading at the lower end of the consumer discretionary pack even though 4-year same-store sales performance is broadly in line with peers

 

Dalmia Bharat

Cement maker Dalmia Bharat has also been a laggard in the last year owing to concerns over weak pricing in the company’s key Southern and Eastern markets
 

According to HDFC Securities, cement prices have corrected by 4 per cent sequentially in Q4FY24 as against expectations of a +0-1 per cent increase at the start of the quarter
 

However, prices in these key markets now seem to have bottomed out, which coupled with Dalmia Bharat’s strong presence in the East and South regions, along with continuous capacity addition, will help to bolster its position in these markets
 

The cement major is expected to register healthy business growth on the back of a 20 per cent clinker capacity addition by FY26 across its operations

Dabur India

Demand trends are expected to be sluggish in the near term though price cuts have helped boost rural growth in staples. The company expects a pick-up in consumption due to a positive rabi crop harvest and a normal monsoon forecast
 

Gross margins are expected to see an expansion on the back of lower raw material prices and cost-saving initiatives
 

Dabur mitigated the impact of inflationary pressures through disciplined cost control, operational efficiencies and judicious price increases, says Centrum Research
 

BP Equities has a buy rating on the stock given that the business has a huge terminal value, attractive valuation, high return on capital employed and Dabur’s increased focus on new product innovation and launches

 

HDFC Bank

HDFC Bank has been a laggard in the last year and its stock (down 10.6 per cent since the end of April 2023) has underperformed benchmark indices like the Sensex (up 19.5 per cent) by a big margin
 

The stock's under-performance is due to muted earnings growth reported by the bank post its merger with Housing Development Finance Corporation in July last year
 

The bank's net profit was up 6.1 per cent year-on-year (Y-o-Y) in Q2FY24 - the first quarter post-merger and earnings growth declined further to 2.6 per cent Y-o-Y in Q3FY24
 

Similarly, the Y-o-Y growth in banks' gross interest income slowed down to 21.8 per cent in Q3FY24 from 26.3 per cent in Q2FY24
 

Brokerages have, however, now turned bullish on the stock due to faster growth in incremental deposits, improvement in credit-to-deposit ratio, and relatively low valuation

 

Coforge

In terms of orders, Coforge has been reporting a total contract value of $300 million-plus for eight consecutive quarters now and brokerages expect it to continue this trend in the March quarter
 

Operating profit margin is expected to improve in the March quarter due to complete reversal of furloughs and deal ramp-ups
 

Analysts say the IT services company has adequate margin levers such as peaking-out of sales, general and administration expenses, moderating attrition, higher offshoring and utilisation
 

The recent share price correction of 24 per cent from its 52-week high provides a good investment opportunity and entry point from a medium to long-term perspective, says Sharekhan Research
 

With strong growth and margin expansion expected in the medium term, Coforge will continue to be a strong earnings compounder, says PhillipCapital Research

 

Bajaj Finance

The retail non-bank lender Bajaj Finance has also turned a laggard in the second half of FY24 after outperforming the broader market in the first half of 2023-24
 

The company’s share price is up 10.9 per cent since the end of April 2023 compared to a 19.5 per cent rise in the BSE Sensex in the period
 

The stock’s poor show on the bourses is attributed to investors' concern about a steady decline in net interest margin from the ongoing higher interest rate cycle amidst strong credit growth
 

Bajaj Finance's net profit growth slowed down to 21.1 per cent Y-o-Y in Q3FY24 from 25.6 per cent Y-o-Y growth in Q1FY24 and 62 per cent Y-o-Y growth in FY23
 

In comparison, its gross interest income was up 32.4 per cent Y-o-Y in Q3FY24, compared to 33.1 per cent Y-o-Y growth in Q1FY24 and 28.2 per cent Y-o-Y growth in FY23
 

Brokerages now expect Bajaj Finance to report faster growth in earnings growth driven by higher loan book growth and moderation in its borrowing costs

 

Axis Bank

Axis Bank has been one of the top-performing banks on the bourses last year
 

The bank's stock price is up 22.6 per cent since the end of April 2023, higher than about 20 per cent rally in the leading benchmark indices in the period
 

The bank’s good show on the bourses is attributed to relatively faster credit growth along with market share gains in advances and deposits
 

Investors also expect Axis Bank to gain from its acquisition of Citibank's high-margin retail business in India in March last year
 

Brokerages expect the bank’s growth momentum to continue. Religare Broking estimates the bank to grow 500-600 basis points higher than the industry growth
 

As a result, Axis Bank’s net profit is expected to grow at a CAGR of 21 per cent during the FY23-FY26 period

Hindustan Unilever

Volume growth is expected to have bottomed out and there could be a gradual recovery going ahead. While near-term revenue is likely to be muted given sluggish demand trends, gross margins should see some support on lower raw material costs
 

With normal monsoons expected this year, upcoming general elections, which will lead to a spurt in spending and freebies, may revive consumer demand from Q2FY25 onwards, says Nuvama Research
 

Given the scope for improvement in beauty and personal care and scaling up in the food and refreshment categories, the Street will keep an eye out for execution in these segments under the new CEO
 

The valuation at 45 times FY26 earnings per share estimates is reasonable given its last five-year average P/E of 65 times on one-year forward earnings, says Motilal Oswal Research

 

ITC

ITC’s cigarette business is expected to witness some recovery in volume growth and improvement in product mix backed by innovations in the regular filter and king-size segment. What should further aid growth (and market share gains) is a stable tax environment
 

Contribution of the non-cigarette business has increased to 27 per cent from 17 per cent in FY13. The diversification was led by the FMCG business which grew by almost 5 times over the same period with operating profit margin consistently improving to low double-digits
 

During 9MFY24, FMCG business posted a resilient performance in a challenging environment with industry-leading growth in both revenue and segment profit, which rose 8 per cent and 36 per cent Y-o-Y respectively, highlights Antique Stock Broking
 

Other businesses such as hotels are also on a strong wicket on the back of robust demand and increased capacity

Star Health & Allied Insurance

The stock of health insurer Star Health and Allied Insurance has been a laggard on the bourses in the last year
 

The company’s share price is down 5.5 per cent since the end of April 2023 versus a nearly 20 per cent rise in the leading indices
 

Analysts attribute the stock’s underperformance to concerns about a slowdown in premium income in the March quarter of FY24 given the high base of Mar’23 and a general moderation in premium income in the health segment
 

The insurer's net profit was up 36 per cent Y-o-Y in the first nine months of FY24 while its operating income was up 14.3 per cent Y-o-Y in the period