ICICI Bank, Maruti Suzuki, ITC among top 5 picks of Axis Securities with up to 30% upside potential

Indian markets witnessed a stellar rally in the first half of the calendar year 2024. Axis Securities believes that macroeconomic developments will continue to drive the market direction moving forward and the critical near-term monitorables will be the direction of oil, the Dollar Index, US Bond yields, the FOMC meeting in September 23, and further progress of the monsoon.

"In the last couple of months, strong recovery was seen in the broader market after the bottom seen in March 23, thanks to improved sentiments at the macro level. From here onwards, the market is likely to see a style and sector rotation. With the strong catch-up of midcaps and small caps in the last couple of months, we believe that the margin of safety at current levels has reduced as compared to that available in large-caps," it said.

"Keeping this in view, the broader market may see some time correction in the near term while flows likely shift to large-caps. However, the long-term story of the broader market continues to remain attractive. In this context, the theme ‘Growth at a Reasonable Price’ looks attractive at the current juncture," Axis Securities added.

It has picked up five large-cap stocks for September 2023, namely- ICICI Bank, Maruti Suzuki India, State Bank of India, Varun Beverages, and ITC- in its monthly report. Here's what Axis Securities said about these stocks:

ICICI Bank | Buy | Target Price: Rs 1,250 | Current Price: Rs 957.6 | Upside: 30.5 %

Axis Securities believes that the bank has been outperforming its peers and has been firing on all cylinders. ICICIB has ticked most boxes on growth, margins, and asset quality.

It continues to like ICICI Bank for its strong retail-focused liability franchise, buoyant growth prospects, stable asset quality healthy provision cover, adequate capitalization, and potential to deliver robust return ratios.

Maruti Suzuki | Buy | Target Price: Rs 11,000 | Current Price: Rs 10,201 | Upside: 8 %

"Maruti’s has completely refreshed its portfolio with the recent addition of Invicto to Jimny and Fronx launched earlier in the fourth quarter of FY23. The higher share of premium MPV/SUVs in the sales mix will drive the Revenue/EBITDA/PAT growth in FY23-26E," Axis Securities said.

"Strong order book, higher share of premium SUVs, CNG vehicles in the sales mix to improve ASP in FY24/25; further improved chip supplies and stable commodity prices to drive Revenue/EBITDA/PAT CAGR of 14/16/16 per cent from FY23-26," it added.

SBI | Buy | Target Price: Rs 715 | Current Price: Rs 570.45 | Upside: 25%

"Among PSU banks, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy PCR, robust capitalization, strong liability franchise, and improved asset quality outlook," Axis Securities said.

It believes normalization in the credit costs and the ability to deliver healthy growth should enable the bank to deliver RoA/RoE of 1/15-17 per cent over FY24 -25.

Varun Beverages | Buy | Target Price: Rs 1,000 | Current Price: Rs 925.35 | Upside: 8%

According to Axis Securities, Varun Beverages is expected to continue its strong growth momentum on account of the normalcy of operation and market share gains of newly acquired territories post-COVID-19 disruptions, the management’s continued focus on the efficient go-to-market execution in acquired and underpenetrated territories, expansion in its distribution reach to 3.5 million outlets in calendar year 2023 from 3 million currently, focus on expanding high-margin Sting energy drink across outlets coupled with increased focus on expansion of value-added dairy, sports drink (Gatorade) and Juice segment and robust growth in the international geographies.

ITC | Buy | Target Price: Rs 540 | Current Price: Rs 447.5 | Upside: 21%

Axis Securities believes the narrative around the ITC is getting stronger as all its businesses are on the right track – stable cigarette volume growth led by market share gains and new product launches; FMCG business reaching the inflexion point, leveraging technology on demand and supply side; and moderation of raw material input cost; strong and stable growth in hotels as travel, wedding, and corporate activities pick up; steady and decent performance in paperboard and agribusiness witnessed in the last few quarters. Moreover, reasonable valuation among the entire FMCG pack provides a huge margin of safety.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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