From ITC to Titan, 8 blue chip stocks Motilal Oswal advises buying in 2023

Pranati Deva
Updated: 26 Dec 2022, 06:03 PM IST
TL;DR.

Despite a roller coaster ride, Nifty gained 4% (as of 22nd December) for the year as compared to a 10-20% fall in most of the global indices. In fact, it touched a fresh lifetime high of 18,888 in November. As we step into 2023, the global factors like recessionary fears, geo-political risks and rising Covid cases in China could keep the equity markets volatile. Amid this backdrop, Motilal Oswal expects two themes to play out in CY23 - credit growth and capex and thus sectors like BFSI, capital goods, infrastructure, cement, housing, defence, railways could be in focus. It has listed 8 blue chip stocks to pick for the upcoming year. Let's take a look:

Infosys: While the stock lost 20 percent in 2022 YTD, MOSL noted that the IT major continues to see traction in the large deal pipeline, despite an adverse demand environment. It is a long-term beneficiary of an acceleration in IT spends, given its capabilities around Cloud and Digital transformation, added the brokerage.

SBI: The largest public sector bank in the country rallied 28 percent in 2022 YTD. As per the brokerage, SBI is one of the few large-cap stocks available at a reasonable valuation with high growth visibility (expect ~32% PAT CAGR over FY22-24), led by strong retail loans and pick-up in the corporate segment. Asset quality remains strong, with continuous improvement, while the restructured book remains under control at 0.9%, it noted. The high mix of floating loans, which will benefit from loan re-pricing, will continue to support the NII and overall earnings, predicted MOSL.

ITC: It was a fantastic year for the FMCG blue chip, which soared over 50 percent in 2022 YTD. The brokerage noted that a stable tax environment for cigarettes in recent years has allowed ITC to calibrate price increases and it expects this trend to continue, which should drive earnings visibility over the medium term. MOSL is positive on ITC fueled by a: a) better-than-expected demand recovery and a healthy margin outlook in cigarettes, b) healthy sales momentum in the FMCG business, c) smart recovery from the hotels business, and d) better capital allocation in recent years. 

L&T: The blue chip advanced 10 percent in 2022 YTD. MOSL stated that L&T has a dominant position and market share in most of its operating verticals and is beneficiary of record high order book. Strong projects pipeline in verticals like transportation (railways, metro, and roads) and factories and buildings augurs well for L&T, it added.

Axis Bank: The private bank rallied 36 percent in 2022. As per the brokerage, Axis Bank has been witnessing strong growth in the retail and mid-corporate segment, which along with MSME, would remain the key growth drivers. It expects the cost-to-assets ratio to moderate at 2% by the end of FY25, which, coupled with a benign credit cost, would aid RoE expansion. MOSL estimates the lender to deliver FY24E RoA/RoE of 1.8%/18.1%.

Maruti: The auto major rose 11 percent in 2022 so far. It noted that Maruti is on a strong footing for a recovery in market share and margin with launches gaining traction and semiconductor shortages easing. The firm can gain further market share, led by an expected shift towards petrol and hybrid vehicles, resulting in a 14% volume CAGR over FY22-25E, added MOSL.

Titan: The stock has given muted returns in 2022. However, MOSL pointed out that Titan has a strong runway for growth, given its market share of sub-10% in jewelry and the continued struggles faced by its unorganised and organised peers. Its medium-to-long term earnings growth visibility is nonpareil among large-cap consumer and retail companies, said the brokerage. It expects this trend to continue, with a 31% earnings CAGR over FY22-24.

UltraTech Cement reported a 47.6% year-on-year (YoY) rise in consolidated net profit at ₹2,620 crore for the quarter ending 31 March 2022.

First Published: 26 Dec 2022, 06:03 PM IST