With a rough roller coaster in 2020, investors will look forward to stability and better returns in the New Year.
Hopefully, with multiple companies announcing their COVID-19 vaccines, the pandemic may not play as big a role in the financial markets as the year gone by and investors can once again look forward to better returns from the stock markets.
To welcome the New Year, three stock market experts give their top five picks for 2021.
Here are five picks each from Ventura Securities, Religare Broking and SAMCO Securities
Vinit Bolinjkar, Head of Research, Ventura Securities
1. Aarti Drugs Ltd (ADL) -- Not Rated
The Indian API industry has sustained price inflation across products along with strong volume demand. Global pharma companies are securing reliable API sources in India and ADL plays a crucial role in the global pharma supply chain.
Management has announced a capex of Rs 600 crore on 7 projects in the next 18-24 months. These projects will integrate the company's chemical, intermediaries, and API divisions, which could further improve operational efficiencies.
(CMP: Rs 716, MCap: Rs 6,669 crore, FY22 P/E: 20.3X)
2. IDFC First Bank Ltd (IDFCFB) – Price Target: Rs 48
Aggressive write-downs of legacy NPAs and adequate provisioning for the stressed asset has ameliorated the concerns around asset quality of the bank and its loan book is set to grow at a mid-teen rate in the coming years.
Liabilities could grow at a high teen rate driven by faster growth in low-cost CASA deposits, which could further boost earnings.
The twin impact of change in lending mix and lower cost of funds should lead to a healthy gradual NIM expansion by FY23.
(CMP: Rs 35, MCap: Rs 19,655 crore, FY22 P/BV: 1.0X)
3. Dabur India Ltd (DABUR) – Price Target: Rs 600
Focus on immunity-based products and reformatting of ethical's portfolio with product launches like Tulsi, Giloy, Ashwagandha, Ayush Kwath, Churan and Adulsa to aid DABUR's healthcare segment revenue growth.
In the current pandemic situation, we believe that DABUR is well placed to capitalise on rising preference for herbal, natural and immunity booster products.
Besides, the company is also focusing on non-Ayurvedic products in home and personal care segment, where the growth to be driven by a plethora of product launches, like sanitiser, handwash, etc. under Odonil and Dazzel brand.
(CMP: Rs 507, MCap: Rs 89,378 Crore, FY22 P/E: 46.4X)
4. Godrej Consumer Products Ltd (GCPL) – Price Target: Rs 900
GCPL has significantly reduced its debt in H1FY21 which augurs well for the company as it strengthens the balance sheet and reduces finance cost pressure on the income statement.
Scale-up in different product categories along with new product launches to sustain business momentum and market share gains across all geographies, according to us.
(CMP: Rs 713, MCap: Rs 72,883 Crore, FY22 P/E: 38.2X)
5. Gujarat State Petronet Ltd (GSPL) – Price Target: Rs 293
The increasing adoption of natural gas (NG) by industries in place of coal in Gujarat has significantly improved the NG demand in the past 12 months.
Besides, DMIC will cover 62% of Gujarat, which is expected to substantially improve NG usage in the state in the next couple of years GSPL, as a gas transmission player, has a quasi-monopoly in Gujarat, and with the rising demand for industrial gas the company could witness a significant jump in the gas volumes in the coming years.
(CMP: Rs 204, MCap: 11,521 Crore, FY22 P/E: 12.0X)
Ajit Mishra, VP Research, Religare Broking
1. ICICI Bank
ICICI Bank has not only shifted its focus on growing its retail loan portfolio (much safer in difficult times in terms of default as compared to corporates) but also improved its corporate governance image.
Further, the bank has a strong brand name, healthy capital and liquidity position, stable asset quality and a large customer base which bodes well for its growth.
2. Kansai Nerolac Paints
The Indian paint sector is expected to grow in double-digit driven by government initiatives for housing, rising disposable income, increase in rural spending, and reduction in repainting cycle and pickup in auto demand.
This would in turn support organised players to gain market share and Kansai Nerolac is well placed in rural and semi-urban areas to capitalise the opportunity driven by innovative products in both decorative and industrial segments, focus on non-auto segments, increase distribution network and expand in newer areas that are technology-intensive.
Moreover, its recent foray into the adhesives and construction chemicals segment would aid benefits in the coming quarters.
3. Sudarshan Chemicals
It is well placed to capitalise on opportunities in the global as well as Indian pigment sector driven by positive industry growth trends, a wide range of products, cost competitiveness and strong technical capabilities.
In H1FY21, the growth was impacted due to the pandemic. However, the demand has started picking up but the pace is gradual and would normalise by FY21. Further, we remain positive on the company's growth given its strong products, focus on the pigments segment, expansion opportunity and strong financial track record.
Besides, it would see improvement in margins driven by a change in product mix (focus towards high margin products) and stable raw material prices.
4. Bharti Airtel
It has a strong customer base, a consistent rise in 4G subscribers and industry-leading ARPUs. Further, it has become increasingly clear that ARPUs needs to increase from here on for these companies to continue investment into new technology.
A rise in ARPU would aid better profitability for Bharti Airtel. Further, the valuations appear attractive at these levels.
5. Britannia Industries
This is one of the strongest players in the FMCG sector; during Covid times its performance has remained resilient.
Further, for the next 1-2 years company's plan is to drive growth by expanding product portfolio, focus on growing in international markets, rural area and Hindi belt area which is gaining strong momentum, improving operating efficiencies and managing strong distribution and supply channel.
We have an optimistic view on the stock from a long-term perspective.
Nirali Shah, Senior Research Analyst, Samco Securities
2020 has been a memorable year with huge market volatility from lows of 7000 to new all-time highs. 2021 will see a number of stocks doing well out of which investors can keep an eye on HCL Tech, Bajaj Finance, HDFC Life, L&T Limited and Dixon Tech.
1. Bajaj Finance
Bajaj Finance could see a plausible recovery in its assets as it firmly dealt with headwinds and came out stronger with a leaner operating model and positive growth guidance. Being a leader, we expect asset quality and recovery to be better than its peers.
The optimism around the recovery is reflected strongly in the stock performance, crossing its 52-week highs.
2. HCL Technologies Ltd
Available at discount vs its peers, HCL Tech could see a multi-year opportunity as cloud and other next-gen technologies become priorities for organisations globally.
Strong deal pipeline and ramp up of large deals will support growth momentum ahead. With attractive valuations, this stock can give strong returns in 2021.
3. HDFC Life
The leader in private insurance stands to benefit from the COVID-19 created awareness among the public about the need for an insurance policy. It is witnessing a gradual recovery in demand with a sturdy topline APE CAGR of 21% from FY17-20.
Going forward, HDFC Life could emerge stronger because of its diversified product mix and well-established digital presence which will boost margins.
4. Larsen & Toubro
L&T has witnessed a number of orders and as execution picks up revenues could start flowing in for this player.
Despite seeing a strong recovery in financials and order inflows, the stock continued to underperform the market but is expected to recover going into 2021.
5. Dixon Technologies
Dixon Technologies stands to benefit greatly from the PLI scheme announced by the government.
Opportunities such as increasing market share, growth in the domestic market and entrance into new ones along with vertical integration could drive margins higher.
Export markets make the electronics and consumer durable segment attractive which can further accelerate the company's growth momentum.
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