Domestic markets, after seeing a strong rally earlier this week, have been on a downward trend over the past few sessions. In the afternoon, benchmark indices posted modest gains after the governor of the RBI said the central bank has now prioritized inflation over growth. The BSE Sensex rose 300 points to 59,320 and the NSE Nifty rose 80 points to 17,750. RBI kept the key repo rate unchanged at 4 percent, maintaining the status quo and its accommodative stance, but said it would gradually withdraw liquidity over time. The top bank today raised inflation forecasts for FY23 to 5.7 percent from 4.5 percent, while lowering real GDP estimates to 7.2 percent from 7.8 percent earlier, given continued high prices of oil and other commodities.
Here are four large-cap stock recommendations from Angel One Ltd. that will deliver healthy returns in the short term:
HDFC Bank- Target Price Rs 1859
HDFC Bank is India’s largest private sector bank with an asset book of Rs. 11.3 lakh crore in FY21 and a deposit base of Rs. 13.4 million crore. The bank has a very well-diversified portfolio, with wholesale accounting for approximately 54 percent of the asset portfolio, while retail accounts for the remaining 46 percent of the loan portfolio. Q1FY22 numbers were impacted by the second wave of Covid leading to a 15/8bps QoQ increase in GNPA/NNPA to 1.5 percent and 0.5 percent of receivables. Restructured advances at the end of the quarter were 0.8v of advances, compared to 0.6 percent in Q4FY21.
The bank posted NII/PPOP/PAT growth of 8.6 percent/18.0 percent/16.1 percent for the quarter, despite higher provisions due to strong credit growth of 14.4 percent year on year. NIMs for the quarter declined ~10 basis points to 4.1 percent sequentially as a result of interest rate reversals and changes in product mix. Management has indicated a loss of 35-40 days of collections but expects a healthy recovery from slippage in 2QFY22, which should lead to lower credit costs going forward. Given best-in-class asset quality and the expected recovery in growth from Q2FY22, we are positive on the bank given reasonable valuations at 3.0xFY23 adjusted book which is discounted from historical averages. We value the stock at 3.7xFY23 adjusted book and arrive at a target price of Rs. 1859.
HCL Technologies- Target Price Rs 1466
HCL Tech (HCLT) ranks among the top four service companies from India, offering a huge range of services such as ADM, Enterprise solutions, Infrastructure management services, etc. HCLT reported revenue growth of 3.5 percent in constant currency (CC) in Q2FY22 which was lower than street estimates. The disappointment on the revenue front was due to an 8 percent quarter-on-quarter decline in platform and product revenues due to delays in deal signing. However, its services witnessed a robust 5.2 percent QoQ CC growth.
New deal TCV of $2.3 billion was up 38 percent year-over-year and included 4 major deals. Strong deal gains should fuel growth in the services sector, which should offset any shortfall in the product sector due to the delays in signing deals. At CMP, the stock is trading at a P/E multiple of 21.5xFY23 EPS estimate, offering a significant discount over the other major IT companies such as Infosys and TCS and offering tremendous value at current levels given its status. of the market leader in infrastructure management.
PI Industries- Target Price Rs 3440
PI Industries is a leading player in providing custom synthesis and manufacturing solutions (CSM) to global agrochemical players. The CSM business accounted for more than 70 percent of the company’s revenues in FY21 and is expected to be the primary growth engine for the company going forward. The company has increased its share of high-margin CSM business through strong relationships with global agrochemical players. PI is leveraging its chemistry skills and looking to diversify its CSM portfolio into Electronic Chemicals, Pharma API, Fluorochemicals, etc., which will help boost business.
PI Industries has announced that they will acquire the API business of Indswift Labs for a consideration of Rs. 1,500 crowns. Indswift labs had clocked a turnover of Rs. 850 crore in FY21 and provides PI access to the API business, which will provide additional leverage for the company to drive growth. We are buying the stock with a price target of Rs. 3950.
Ashok Leyland – Target price Rs 164
Ashok Leyland Ltd (ALL) is one of the leading players in the Indian CV industry with a 32 percent market share in the MHCV segment. The company also has a strong presence in the fast-growing LCV segment. Demand for MHCV was negatively impacted after peaking due to multiple factors, including changes in Axel standards, a price increase due to the implementation of BS 6 standards, followed by a sharp decline in demand due to the ongoing Covid-19 crisis.
While demand for the LCV segment has grown smartly after the pandemic, demand for the MHCV segment has also started to recover in recent months before the 2nd lockdown. We believe the company is ideally placed to absorb the resurgence of growth in the CV segment and will be the largest beneficiary of the government’s voluntary scrapping policy, so we rate the stock as a BUY.
Disclaimer:Disclaimer: The expert opinions and investment tips contained in this News18.com report are their own and not those of the website or its management. Users are advised to contact certified experts before making any investment decisions.
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