As India prepares to celebrate festivals next month stock brokers see growing signs of an economic recovery with the gradual unlock and increased pace of vaccination as a reason to cheer and advise investors to buy consumer goods and travel stocks as Indians will go on revenge spending. Companies in sectors including FMCG, auto, and travel are among their top picks as business activity in the nation picks up pace.
Axis Securities has shortlisted these six stocks as its festive pick.
HUL’s superior agility and nimbleness despite it being larger than peers in capitalizing on the emerging growth trends and remaining ahead of the competition. Management has set a target to achieve modest EBITDA (Earnings Before Interest Tax Depreciation & Amortization) Margin improvement while driving double-digit EPS (Earnings Per Share) growth over FY21-30. Near term growth drivers like pick up in the discretionary portfolio, tailwinds from GSK-CH integration and gains from investments in digitization, distribution are key growth enablers.
The brokerage firm has marginally revise its FY23E/24E and maintained ‘BUY’ with a revised target price of Rs. 3,100.
Axis Securities is of the opinion that Hero will continue its dominance in the 2W industry driven by the benefits of premiumisation of its products, a strong foothold in the entry-level motorcycle segments, and aggressive product offerings in the scooters segment. Its partnership with Ather Energy, Harley Davidson & Gogoro will help increase its presence in new technology and premium segment bikes. A strong recovery in FY22 and FY23 driven by the normalisation of the economy.
It has maintained a ‘BUY’ rating on the stock and arrive at a target price of Rs 3,400 per share as it values the stock at 16x its FY24E EPS.
SBI Cards has regained its lost momentum in terms of spends and customer sourcing as COVID 2.0 headwinds weakened. The positive trend on the asset quality front and a notably lower quantum of restructuring 2.0 provide relief. Axis Securities believes SBI Cards has strong moats which will support robust long-term growth and aiding market share gains.
It recommends a ‘BUY’ rating on the stock and values it at 44x FY23E EPS (Earnings Per Share) to arrive at a target price of Rs 1,210/share.
With a strong portfolio of footwear products and expansion in distribution reach (especially in southern markets), Relaxo is well poised to achieve revenue and earnings CAGR (compounded annual growth rate) of 19% and 22%, respectively, over FY21-FY24E. Further, strong operating cash flows, healthy asset turns (3x), sustained improvement in EBITDA (Earnings Before Interest Tax Depreciation & Amortization) Margins and efficient working capital are key positives from a longer term perspective. Strong earnings visibility and strengthening of balance sheet will keep valuations at a premium.
Axis Securities upgrades the stock to ‘BUY’ with a revised target price of Rs. 1,290/share.
Aditya Birla Fashion & Retail has built a strong brand with high growth potential catering to various categories in the fashion segments. The brokerage firm expects lifestyle brands (Louis Philippe, Van Heusen, Peter England and Allen Solly) to lead in the men’s formal and casual wear in the mid-premium and premium space and yield a healthy return over the medium term. Pantaloon is also well set in the value range apparel market after years of investments and business restructuring. Innerwear and other fashion ventures including leisure and ethnic wear are likely to provide the company with incremental growth opportunities. In light of the immense growth potential, we continue with our ‘BUY’ rating and a SOTP (sum of the parts) based target price of Rs. 250/share.
The long-term outlook for the sector looks promising given multiple growth drivers such as the accelerated shift in consumer preferences from unorganized labels to brands, rising leisure travel, increased focus on strengthening the Safari brand, and de-risking of sourcing from China to alternate sources such as Bangladesh and India.
Axis Securities maintains ‘BUY’ rating and upgrade our FY24E estimates and target price given the strong growth outlook in the domestic leisure travel and gradual opening up of the international travel while continue valuing the stock at 45x P/E (Price to earning) on its FY24E EPS (premium to its peer) as we expect Safari to report strong growth over FY21-24E.
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