Benchmark equity indices BSE Sensex and NSE Nifty are set to deliver a double-digit return in the financial year 2022 despite lingering concerns over geopolitical tensions, rising inflation, elevated crude oil prices, monetary tightening by central banks, and supply-side issues. Going ahead, analysts believe that returns will depend upon the earnings potential of corporates.
Cyclical sectors such as financials and autos powered an over 1 per cent march on the benchmark indices on Wednesday as investors cheered de-escalation talks between Russia and Ukraine. Investor sentiment was boosted following negotiations between Russian and Ukrainian officials in Turkey, at which Russia’s deputy defense minister claimed Moscow had decided to “drastically” cut back its military activity near Ukraine’s capital. Yash Gupta- Equity Research Analyst, Angel One Ltd., suggests five large-cap stocks for a one-year time frame:
HDFC Bank |Target Price: Rs 1859 | Upside- 26.24 per cent
HDFC Bank is India’s largest private sector bank with a loan book of Rs 12 lakh crore in H2FY2022 and a deposit base of Rs 14 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. Q3FY2022 numbers were in line with expectations as GNPA/ NNPA reduced by 9/3bps QoQ to 1.26 per cent and 0.37 per cent of advances. Restructured advances at the end of the quarter stood at 1.37 per cent of advances. The bank posted NII/PPOP/PAT growth of 13.0 per cent/10.5 per cent/18.1 per cent for the quarter on the back of strong loan growth of 17.5% YoY. NIMs for the quarter were stable sequentially at 4.1 per cent.
The management has maintained that there will be a maximum impact of 10-20bps on asset quality from the restructured pool. Given best in class asset quality and expected rebound in growth from FY2023 we are positive that the bank has given reasonable valuations at 2.8xFY23 adjusted book which is at a discount to historical averages. We have a buy call on HDFC Bank with a target price of Rs 1859
Infosys |Target Price: Rs 2205 |Upside: 15.59 per cent
Infosys has also been reporting strong deal wins, which in Q3FY22 was $2.53 bn with the deal pipeline being at the highest levels in a long time. The management has sounded positive and suggested that the demand environment has been extremely strong, and they also increased FY22 Dollar revenue growth guidance from 16.5-17.5 per cent CC to 19.5-20 per cent YoY.
Given that the demand environment for the overall industry is resilient and expected to sustain going ahead, Infosys is expected to be among the top performers in the large-cap space. We have a buy call on Infosys with a target price of Rs 2205.
Divi’s Laboratories |Target Price: Rs 5200 |Upside: 14.14 per cent
Divi’s Laboratories reported a very good set of numbers for Q3FY2022, Molnupiravir sales help the company to achieve sales growth. We believe that divis will be the preferred player for the china+1 theme for API and CRAMS. In the long term, we expect double-digit sales growth and improvement in margins on the back of backward integration and debottlenecking. We expect Divis to be among the top performers in the pharmaceutical sector. We have a buy with a target price of Rs 5200.
ICICI Bank |Target Price: Rs 900 |Upside: 23.28 per cent
ICICI Bank is India’s second private sector bank with a loan book of Rs 7.6 lakh crore in H2FY2022 and a deposit base of Rs 9.8 lakh crore. The Bank has a very well spread-out book with retail accounting for 68.3 per cent of the loan books followed by corporate and SME at 22.9 per cent and 4 per cent of the loan book. Q2FY2022 numbers were better than expected as GNPA/ NNPA reduced by 33/17bps QoQ to 4.82 per cent and 1.0 per cent of advances. Restructured advances at the end of the quarter stood at 1.3 per cent of advances. The bank posted NII/PPOP/PAT growth of 24.8 per cent/20.0 per cent/29.6 per cent for the quarter on the back of strong loan growth of 17.2 per cent YoY. NIMs for the quarter declined also improved to 4.1 per cent.
ICICI Bank has posted a turnaround in operations over the past few years and the asset quality issues are now behind the bank. At current levels, adjusted for subsidiary valuations the bank is trading at P/ABV of 2.4xFY23 Adj. a book which we believe offers value given improvement in RoE from 12 per cent in FY20 to 16 per cent in FY23E which would be in line with the best in the industry.
Oberoi Realty |Target Price: Rs 1250| Upside: 33.83 per cent
Oberoi Realty is a real estate company, focusing on the MMR region. The company has business vertices of residential and commercial real estate. The company has reported a strong set of numbers in Q2FY22, we expect residential real-estate growth momentum to continue for the next couple of quarters as in Q3FY22 company has launched Elysian Tower B in Goregaon along with this upcoming launch of Thane. Diversified Revenue Mix – Company owns Oberoi Mall (0.5 msf), Commerz (1.1 msf), and the west hotel (269 room keys). We expect occupancy levels to improve in CY2022. Robust launch pipeline – The company expects to launch Thane residential project in Q4FY22 along with this Borivali project.
Consolidation in Real-estate – We have seen good consolidation across India towards top-10 players. Top-10 players now hold an 11.2 per cent market share as compared to 5.4 per cent in 2017. We believe that top-10 players will continue to gain market share.
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