From RIL to Maruti: ICICI Direct lists top stock picks for 2023 that can rise up to 35%

Kajaria Ceramics: The brokerage has a target price of ₹1,340 for the stock, indicating an upside of 22%. Kajaria with a net cash balance sheet and superior brand is a solid play on the tiles sector with expanding reach to tier II, and III cities, said the brokerage. It believes while Q3 could witness modest volume growth, double-digit growth is likely from Q4 with underlying real estate demand remaining robust. ICICI sees a 12% CAGR in tiles volume and realisations CAGR of 3.4%, resulting in tiles revenues CAGR of 16% over FY22-25 to ₹5,237 crore. Margins are also reverting to a historical average of 16% in FY24, with softening gas prices, it added. Key risks: Gas price volatility, demand moderation.

Sterlite Tech: The brokerage has a target price of ₹220 for the stock, implying an upside of 28%. As per the brokerage, STL is uniquely positioned to benefit from the 5G/FTTH (Fiber to the Home) deployment cycle both domestically and globally. It believes that with a renewed focus on ramping down/exiting the loss-making segment and focusing on improving services segment profitability, STL will likely see improvement in earnings momentum ahead. With improved margins in services (led by project mix), stable optical products margins and reduced losses led by the exit from the wireless software business, margins are likely to recover sharply to 15% in FY24 vs sub 10% currently, noted ICICI Direct. Key risks: Volatility in the margin, continued leverage. 

Maruti Suzuki: The brokerage has a target price of ₹11,200 for the stock, indicating an upside of 35%. MSIL is well placed to play upon the underpenetrated PV segment domestically, noted the brokerage. ICICI sees a 16.6% volume CAGR, 24.7% revenue CAGR and 67.6% PAT CAGR for MSIL over FY22-24E. On the balance sheet front, MSIL is net debt free with surplus cash amounting to ₹42,000 crore (FY22), the brokerage stated. With exciting product launches in the offing it is traversing well on its path to regain 50% market share in domestic PV space, going forward, it added. Key risks: Covid-led slowdown in demand, and adverse currency moves i.e. unexpected appreciation of the Yen vs rupee. 

Mahindra CIE Automotive: The brokerage has a target price of ₹410 for the stock, implying a potential upside of 26%. Improving order win momentum (including EV programs), thrust on exports and shift in the global automotive supply chain away from China are seen as some of the tailwinds in coming years, ICICI pointed out. At the margin level, the company is poised to benefit from past restructuring actions and reduced breakeven points, it said. Going forward, the brokerage sees a 14.7% sales CAGR over CY21-24E along with an uptick in margins to 12.8% by CY24E. At the current market price, it trades at 13x P/E on CY24E EPS with RoCE inching toward the 14% mark. Key risks: Slowdown in global economy and slower than anticipated margin recovery profile. 

IndusInd Bank: The brokerage has a target price of ₹1,450 for the banking stock, implying an upside of 21 percent. According to ICICI Direct, the bank’s operating performance remains on a steady track led by healthy business growth. With a focus on new growth engines, investment in retail franchises and gradual retaliation of liabilities, the bank is poised to pedal growth and report a healthy margin trajectory, it said. Continued investment in physical & digital capabilities to aid healthy business growth while gradual improvement in efficiency will aid earnings, it added. It expects robust growth in earnings at ₹9,652 crore and RoE at 15% in FY25E, though, focus on distribution capabilities and tech spends will keep opex elevated in the near term. Key risks: The slower pace of liabilities accretion could impact NIM; moderation in earnings momentum led by elevated opex.

HDFC AMC: The brokerage has a target price of ₹2,600 for the stock, implying an upside of 20%. HDFC AMC’s healthy performance in equity schemes from Q2FY22 onwards was expected to drive inflows with a lag. In H1FY23, erosion in market share was reversed, noted the brokerage. It believes the market share gain should be visible from Q3FY23 onwards. Tech investments, business promotion activities, new launches will keep opex elevated in the near term but should reflect in business growth, added ICICI Direct. Likely improvement in market share on the back of healthy scheme performance and superior earnings trajectory makes the brokerage positive on the stock. Key risks: Elevated redemption in non-SIP AUM and increase in competitive intensity impacting yields. 

Nesco: The brokerage has a target price of ₹800 for the stock, implying an upside of 33%. The firm is in the business of development and management of commercial/IT-ITeS real estate, exhibition centres and foods business. Post a washout of 2.5 years for the exhibition business, the brokerage expects H2FY23 to witness a full recovery to pre-Covid levels. The IT park business is also expected to be boosted as occupancies have improved and further improvement will be seen over the next couple of quarters, it added. Key Risks: a) Any further Covid wave; b) Any exit and failure to release in commercial business. 

V-Guard Industries: The brokerage has a target price of ₹310 for the stock, implying an upside of 19%. V-Guard is a well-known FMEG brand in electrical and electronics. As per the brokerage, V-Guard’s revenue is likely to grow at a CAGR of 17% over FY22-25E led by new product launches (post Sunflame acquisition) and dealer expansion. On the margin front, the EBITDA margin is likely to expand by 130 bps over FY22-25E led by improved sales mix and cooling of raw material prices from its peak, noted ICICI Direct. As a result, PAT is likely to grow at a CAGR of 18% over FY22-25E, it added. V-Guard is likely to have a debt burden on its books in the near term but ICICI Direct believes the same would start easing from FY25 onwards supported by its strong operating cash flow and no major capex over the next two years. Key Risks: Slow rural demand and reversal in commodity prices may delay margin recovery.

Reliance Industries: The brokerage has a target price of ₹3,050 for the stock, indicating an upside of 20%. Reliance Retail has been one of the fastest, largest growing retailers in recent times, noted ICICI Direct, adding that In FY18-22, it recorded a staggering 30% revenue CAGR with sales worth nearly ₹2 lakh crore in FY22. The brokerage sees revenue and earnings CAGR of 25% and 36%, respectively, in FY22-25. It further stated that the 5G launch has begun for Jio in the last couple of months and is likely to reach pan-India by December 2023. It expects Jio (long with Airtel) to gain subscriber market share as third telco VIL has not laid out 5G plans as yet. It sees the ARPU and EBITDA of Jio to grow at 12%, and 22%, respectively, over FY22-25E. Meanwhile, On the O2C front, Singapore GRMs, which had declined during the start of Q3, have started improving. This would likely improve Reliance's GRMs and its refining segment earnings, it said. Key Risks: Lower discretionary spends owing to higher inflation can subdue sales, and lower-than-expected refining margins.