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This article is more than 1 month old.

Ashok Leyland, Varun Beverages, ICICI Bank, SBI, Airtel among Axis Securities' top picks; check others

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Axis Securities remains constructive on the market and believes that the dips should be used to build positions. The domestic brokerage believes PSU banks, Energy, and Metal Index provide valuation comfort at the current levels, while valuations for the IT, Pharma, and Auto sector are expensive. The brokerage has a December 2021 Nifty target of 17,400. Here are its top picks:

Ashok Leyland, Varun Beverages, ICICI Bank, SBI, Airtel among Axis Securities' top picks; check others
ICICI Bank | Target Price (TP): Rs 810
| Higher loan growth, improving operating profits, and a strong provision buffer coupled with a strong deposit franchise will help ROAE/ROAA expansion over FY22-23E. Valuation wise, we believe the bank has further scope for expansions visà-vis its peers, Axis Securities said.
sbi, sbi results, sbi share price State Bank of India | TP: Rs 510 | SBI continues to be the best play among PSU banks on the gradual recovery in the Indian economy given its healthy PCR, robust capitalization, a strong liability franchise, and an improved asset quality outlook. We believe credit costs normalization and improved operational performance will lead to double-digit ROEs of 13-15 percent by FY22-23E.
Lupin | TP: Rs 1,400 | Lupin has taken several steps to improve overall EBITDA margins. Launch of value-added products including biosimilars could improve gross margins, alternate vendor strategies to bring down the overall procurement costs, bring down manpower costs to rationalize expenses for launch of a new product, rationalization of R&D costs to have more focus on complex products and lower cost in Solosec promotions could improve EBITDA margins by 590 basis points over the period FY20FY23E.
Tech Mahindra Tech Mahindra |  TP: Rs 1,350 | The brokerage believes Tech Mahindra has a resilient business structure and better revenue growth visibility from a long-term perspective but it is trading at discount as compared to its Indian peers.
Airtel Bharti Airtel | TP: Rs 700 | Airtel sees headroom to gain market share with opportunities in Cloud communication by offering voice, video, chat through API, Cybersecurity integrated with connectivity for SME and IOT which was launched recently. We value and recommend a Buy with SOTP based valuation at Rs 700/share aided by better margins, stronger subscriber growth, and higher 4G conversions.
HCL Technologies HCL Technologies | TP: Rs 1,150 | We believe the COVID-19 outbreak will create huge opportunities across geographies and services for HCL Tech to post strong organic growth over different verticals.  We believe HCL Tech has a resilient business structure from a long-term perspective, Axis Securities said.
Federal Bank Federal Bank | TP: Rs 100 | Key positives are increasing retail focus, strong fee income, adequate capitalization, and prudent provisioning.  Given strong underwriting standards, changing loan mix, and strong retail deposit franchise, we expect the bank’s valuation to improve from current levels if asset quality trends are maintained and ROA improvement keeps on track.
Equitas Small Finance Bank | TP: Rs 76 | The brokerage firm believes the bank is eligible for re-rating given the improving profitability, asset quality, and return ratios. The bank has recently approved the scheme of amalgamation with the promoter, which would ensure compliance with regulatory requirements. This, coupled with its application for a universal banking license, further supports our re-rating rationale, it said.
Ashok Leyland Ashok Leyland | TP: Rs 150 | Ashok Leyland is focusing on reducing its dependence on the cyclical truck business by increasing the revenue share of Exports, Defence, Power Solutions, LCV, and after sales spare parts business. It remains well-positioned to benefit from a strong recovery in the CV cycle on the back of new product launches and a well-diversified product portfolio.
Varun Beverages | TP: Rs 900 | We marginally tweaked our estimates and expect VBL to register Revenues/Earnings CAGR of 17 percent/53 percent respectively over CY20-23E on account of a low base in CY20. This growth will be driven by 1) Further in-roads in under-serviced South and West territories, 2) Distribution-led market share gains, 3) Debt reduction, and 4) Positive cash flow generation, Axis Securities said.
Representational image: cement, cement industry, industry Orient Cement | TP: Rs 180 | We believe the company is well-positioned to grow its revenue and profitability moving forward. The growth will be supported by a revival of cement demand in its key markets in both trade and nontrade segments, cost optimization measures as well as increasing premium cement sales aided by capacity expansions.
Amber Enterprises | TP: Rs 3,330 | Despite prevailing short-term uncertainties led by lockdown-led restrictions, we believe the long-term growth outlook of the company remains intact. We expect Amber to register a Revenue CAGR of 37 percent over FY21-23E.
Minda Corporation | TP: Rs 155 | We expect Minda Corp’s profitability to improve over FY21-23E in the backdrop of a wide product basket, robust market share, new product addition, and operating leverage. We expect an excellent growth in the company’s profitability by FY23E owing to the attributes such as improved content-per-vehicle as well as higher indigenous content. Return ratios, too, would improve by FY23 led by improving profit margins and asset turnover crossing 2x.
Steel Strip Wheels | TP: Rs 1,669 | We expect SSWL to outperform the industry growth given its sticky relations with OEMs across all the auto segments viz., 2/3W, PV, CV, and Tractors. We have penciled in Revenue/EBIDTA/PAT CAGR of 34 percent/43 percent/139 percent over FY20-23E respectively vis-à-vis 7 percent/9 percent/(1) percent CAGR for FY13-20. The higher growth estimates are supported by operating leverage kicking in through better capacity utilisation owing to the domestic auto-recovery and improving exports.
Asian Paints Mold-Tek Packaging | TP: Rs 585 | We expect Mold-Tek Packaging to register Revenue/EBITDA/PAT CAGR of 18 percent/23 percent/30 percent respectively over FY20-23E. For FY22, the management remains hopeful of scaling back to a positive volume growth trajectory despite Q1FY22 being impacted by the lockdown. At CMP, the stock trades at 17x PE FY23E which is at a discount to its 5-year average valuation of 31x PE. We assign a target PE multiple of 20x FY23E EPS and arrive at a target price of Rs 585/share.
Camlin Fine Sciences | TP: Rs 215 | We expect the company to register Revenue/EBITDA/PAT CAGR of 21/29/34 percent respectively over FY21-23E. We recommend a BUY on the stock and value the company at 18x FY23E EPS of Rs 12/share to arrive at a target price of Rs.215/share, implying at an upside potential of 24 percent from CMP.