Trade Call: 16 Stock Picks For 2024 By Neeraj Chadawar of Axis Securities

Neeraj Chadawar, Axis Securities' Head of Fundamental and Quantitative Research, has selected sixteen stocks from the healthcare, materials, financial, consumer discretionary, consumer staples, communication services, and industrial sectors.

In 2024, a number of events are scheduled, and the market will continue to keep a careful eye on the happenings surrounding them. The US election in November 2024, the interim budget, the general election in 2024, the full-year budget in July, the expectation of a rate cut by the RBI, and the FED rate cut in May - June are the major events which are likely to keep the market volatile.

Market Outlook 2024

"The Indian economy continues to be a 'star performing' economy as against other emerging markets. Moreover, we firmly believe that it is likely to continue its growth momentum in 2024 and remain the land of stability against the backdrop of a volatile global economy. On top of it, the macroeconomic scenario has changed in favour of the equity market in the last one month and multiple indicators are now indicating a positive start for 2024," said Neeraj Chadawar.

"It is also noteworthy that the US bond yields witnessed a correction of 120bps from its peak in the last one month, which is further supporting the rally. The bolstered balance sheet strength of corporate India and the significantly enhanced health of the Indian banking system are additional positive factors that, we believe, will facilitate Indian equities in achieving double-digit returns over the next 2-3 years. This will be supported by robust double-digit earnings growth," he further stated in a note.

Stocks To Buy In 2024

Here are the stocks to buy in 2024 as recommended by Neeraj Chadawar, Head of Fundamental and Quantitative Research of Axis Securities.

ICICI Bank

The bank has been consistently outperforming its peers and has been firing on all cylinders. We continue to like ICICIB for its (1) Strong retail-focused liability franchise, (2) Buoyant growth prospects, (3) Stable asset quality along with healthy provision cover, (4) Adequate capitalization, and (5) Potential to deliver robust return ratios. We maintain our BUY rating on the stock with a target price of Rs 1,250/share (SOTP basis core book at 3x FY25E and Rs 157 Subsidiary value).

Maruti Suzuki India (MSIL)

MSIL has completely refreshed its portfolio and higher share of premium MPV/SUVs in the sales mix will drive the Revenue/EBITDA/PAT growth in FY23-26E. 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%/20%/19% from FY23-26E. We maintain our BUY rating on the stock and value it at 27xP/E of its Sep'25E EPS (unchanged) to arrive at our TP of Rs 11,800/share which implies an upside of 14.6% from the CMP.

State Bank of India (SBIN)

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. We believe despite the margin pressures, SBIN remains well poised to deliver RoA/RoE of 1%/15-17% over FY24-25E supported by stable credit costs and steady cost ratios. We maintain our BUY rating on the stock with a target price of Rs 800/share (core book at 1.2x Sep'25E and subsidiaries at Rs 192/share).

Varun Beverages (VBL)

CMP: Rs 1,237, target: Rs 1,450, upside: 17%

We believe VBL is expected to continue its strong growth momentum on account of 1) Normalcy of operation and market share gains of newly acquired territories post COVID-19 disruptions, 2) The management's continued focus on the efficient go-to-market execution in acquired and underpenetrated territories as reflected in its recently commissioned Bihar plant operations (it has started gaining market share), 3) Expansion in its distribution reach to 3.5 Mn outlets in CY23 from 3 Mn currently, 4) 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 5) Robust growth in the International geographies.

Bank of Baroda (BoB)

With strong advances growth, stable margins, healthy NII, asset quality under control and adequate capital, we believe the bank is well-positioned to deliver a sustainable RoA of 1% going forward. We believe current valuations of 0.9x FY25E ABV are attractive and believe BoB is ripe for re-rating, especially given its growth potential. We value BoB at 1.1x FY25E ABV to arrive at a target price of Rs255/share.

ITC

CMP: Rs 462, target: Rs 540, upside: 17%

We believe the narrative around the ITC is getting stronger as all its businesses are on the right track - 1) Stable cigarette volume growth led by market share gains and new product launches; 2) FMCG business reaching the inflexion point as its EBIT margins expected to inch up further and would be driven by - the ramp up in the outlet coverage, effective implementation of localisation strategy, driving premiumisation, leveraging technology on demand and supply side; and moderation of raw material input cost; 3) Strong and stable growth in hotels as travel, wedding, and corporate activities pick up; 4) Stedy 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.

Bharti Airtel

We maintain our BUY rating on the stock given the company's superior margins, stronger subscriber growth, and higher 4G conversions. We value the stock at Rs 1,155/share based on SOTP valuation and the TP indicates a robust upside of 14% from the CMP.

TVS Motor Company Ltd. (TVSL)

We continue to like TVSL considering its strong focus on the EV product pipeline ahead of incumbent 2W OEMs, product premiumisation in the ICE category, and growth in export markets. Being well-placed among listed players, we expect the company's Revenue/EBITDA/PAT to grow by ~18%/24%/28% CAGR over FY23E-26E. FY24/FY25 to be critical for the company as it executes its EV strategy for the domestic and export markets.

Based on the above strong fundamental outlook, we expect the company to deliver a strong ROE ranging between 25%-29% over the next few years. We reiterate our BUY rating on the stock with a revised TP at Rs 2,350/share, valuing it at a sustainable premium P/E multiple of 34X (earlier 30X) on Dec'25 core EPS and other investments at 1x P/BV and TVS Credit Services at 2XP/BV. The TP implies an upside of 16% from the CMP.

Lupin

Lupin has a strong pipeline of niche products for the US markets with limited competition. In a few of these products, LUPIN has a first-mover advantage. We believe these products would increase the company's gross margins by 150bps in the next two years. Moreover, further developments in the business could add value in its business such as 1) New launches such as Xyrem, gTolvaptan, Cynocobalamin, Diazepem Gel, Vereniciline, Bromfenac, etc. in the US market 2) Double-digit growth in the India business as the company has already increased MR numbers to 1,000, and 3) An uptick in the API business with the API industry witnessing demand comeback. Lupin's margins at 13% are still below the industry levels of 22%. We, therefore, foresee a significant scope for margin improvement in the upcoming quarters. We expect the macro environment to be in favour of the industry, led by a fall in raw material prices along with low logistics and fuel costs. At the CMP, the stock trades at 24.0x and 20.4x its FY25E and FY26E earnings.

Federal Bank (FB)

FB's key strengths continue to be i) Sustained credit growth, ii) Strong liability franchise, iii) Improving fee income with the bank looking to deepen the relationship with corporates to improve client wallet share, iv) Improving Cost Ratios, and v) Benign credit costs backed by robust asset quality metrics. We maintain our BUY rating on the stock with a target price of Rs 180/share (1.4x FY25E ABV).

Relaxo

CMP: Rs 904, target: Rs 1020, upside: 13%

The Q2FY24 result was strong and the management's FY24 outlook gives us confidence that the worst is behind the company as - a) Demand environment is likely to recover in FY24, especially in rural India, 2) Raw material prices are now stable, which will aid in gross margins expansion, 3) The company is regaining its lost market share from unorganised players, 4) It is focusing on premiumisation by increasing the share of a fast-growing sports and athleisure category, and 5) The company is doubling its capacity of Sparx from the current 50,000 pairs/day to 100,000 pairs/day at Bhiwadi (Rajasthan), which we believe is a step in the right direction from the long-term perspective.

JTL Industries Ltd (JTL)

With the phase-wise volume expansion in progress, we model Revenue/EBITDA/PAT CAGR of 46%/45%/51% over FY23/25E. We maintain our BUY rating on the stock and value JTL at 23x it's FY25 EPS to arrive at our 1-year forward target price of Rs 265/share, implying an upside potential of 11% from the CMP.

Mahindra CIE Automotive(MCIE)

We continue to like the company's growth story driven by (a) Operational Performance and Focus on building an EV product portfolio, (b) Healthy order book position and steady growth in Indian operations, (c) Strong FCF generations and negligible debt on the balance sheet, (d) Capacity building to meet demand from India OEM's. The growth trajectory in EU operations is expected to gradually recover in H2CY24 by the management.

Keeping these factors in view, we forecast the company to post a Revenue/EBITDA/PAT CAGR of 9%/17%/19% over CY22-25E. We like CIEAUTO and reiterate our BUY rating on the company at a 1-year Forward PE multiple of 24x on Indian operations (aided by overall industry growth and demand-backed capacity expansions) and 10x (unchanged) on moderate European operational earnings for CY25 EPS. Based on this, we arrive at our SOTP-based TP of Rs 585/share, implying an upside of 24% from the CMP.

WestlifeFoodworld Ltd (WFL)

CMP: Rs 817, target: Rs 1000, upside: 22%

We maintain our positive outlook on WLDL. Our confidence in the company's bright future prospects is supported by its strong execution track record of Revenue/EBITDA growth of 17%/51% over FY16-20, which was driven by new product launches and cost rationalization programs (100-200bps cost reduction every year). We expect the company to deliver healthy Revenue/EBITDA growth of 28%/43% CAGR over FY22-25E (Post Ind. AS) led by above growth tailwinds.

CreditAccess Grameen (CAGrameen)

We prefer CAGrameen amongst the microfinanciers, despite its premium valuations. We believe the company remains well-poised to deliver superior performance over the medium to long term. This will be supported by (a) Strong rural presence and strong rural focus, (b) Customer-centric approach, (c) Robust technology infrastructure, (d) Strong Risk Management Framework and (e) Adequate capitalization.

Post a strong show in H1FY24, the management has revised its guidance upwards on a few operational parameters. We expect CAGrameen to continue delivering strong RoA/RoE of 5.5+/23- 25% over the medium term. We maintain our BUY recommendation with a revised target price of Rs 1,935/share and value CAGrameen at 3.3x Sep'25E BV.

PNC Infratech

Stock is currently trading at 12x and 11 x FY24E/FY25E EPS which is attractive. We recommend a BUY rating on the company and value the stock at 11x FY25 EPS and HAM portfolio at 1x book value to arrive at a target price of Rs 415/share, implying an upside potential of 18% from CMP.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.