Have a medium-risk portfolio? Look at these 7 stocks by HDFC Securities

Bharti Airtel: Bharti Airtel is a global communications solutions provider with an overall customer base of 491 million across 16 countries, noted the brokerage. It added that Airtel continues to steadily increase its 4G customer base which is high ARPU accretive. It also enjoys industry-leading ARPU, at ₹178 in Q4FY22 vs ₹163 in Q3FY22, noted HDFC. Bharti Airtel intends to reach its target of ₹300 ARPU in five years and expects the next tariff hike which is pending this year to drive the company's APRU to ₹200 mark, the brokerage pointed out. It further noted that the firm's net leverage is likely to improve and sustain below 2.5 times in the near term. Regulatory and policy changes, technological changes, geopolitical risk, over-pricing of auctions as well as delays in launching of 5G services in India are key risks for Bharti Airtel, it added.

Cipla: Cipla is a global pharmaceutical company and has a presence across domestic formulation, North America, Europe and South Africa. As per the brokerage, the firm's US business outlook remains strong as respiratory/niche filings add longer-term growth visibility. Management has guided for additional revenue of $300-500mn by FY25 with some key launches, it added. HDFC also noted that the firm has guided for 6-7% of sales as R&D spend in FY23. The company enjoys strong return ratios and has a robust cash-rich Balance sheet as of Mar-2022 and HDFC expects an 11% CAGR in revenue and 18% CAGR in net profit over the next two years. Lower-than-expected growth in India business, slower market share gains in its key products, higher price erosion in the US, and delay in product approvals in the US business would remain key risks, it added.

ICRA: As per HDFC Sec, credit growth, which had been languishing through 2021 due to Covid-19 and also deleveraging of balance sheets by large corporates, has been recovering as indicated by the RBI data. Increasing credit would drive higher demand for ratings, noted the brokerage. SEBI and the RBI have brought in regulations that require large corporates to increase reliance on financing through the debt capital market. This has opened up another source of revenue for the credit rating agencies as these instruments also need to be rated, it further stated. Economic slowdown, buoyant capital markets and an increase in interest rates could reduce business volumes, it added.

ITC: Apart from having a near-monopoly in its traditional business of cigarettes, ITC is the country's leading FMCG marketer. ITC delivered a beat on revenue growth in Q4FY22, sustaining healthy growth across all segments, noted HDFC. It added that besides FMCG, the company also delivered a strong performance across its hotel, agri and paper businesses. Paper continues to see strong momentum, while paperboard volumes were at a record high and the hotel business, too, is sustaining smart recovery after the pandemic, said HDFC. The company is one of the leading FMCG companies in the country and, at these valuations, there is limited downside risk, and the risk-reward ratio in the current market scenario is favorable for ITC, it noted.

M&M: On the back of a record-high order backlog and the soon-to-be-launched new Scorpio, M&M is expected to recover market share in the coming quarters, said the brokerage. It also noted that the company plans to launch 16 electric vehicles by 2027, out of which 8 will be electric SUVs and 8 light commercial vehicles. The tractor segment is seeing a demand revival in Apr-May on the back of which management expects the industry to grow in single digit for FY23, it stated, adding that M&M is targeting a 10x increase in the agri implements segment to drive growth in the medium term (to ₹12,000 crore market size by 2027). Chip shortage, commodity price inflation and below-average monsoons are key risks going forward, said HDFC.

NTPC: As per the brokerage, NTPC accounts for 17 percent and 23 percent of India’s installed power capacity and generation, respectively and the company plans to add 20 GW of power capacity in the next five years. The company’s vision is to become an over 130 GW company by 2032 of which 60 GW would be contributed by renewable energy (RE), it noted. NTPC operates on a risk-averse regulatory business model, with a fixed return on project equity and the earnings growth mirrors its rise in regulated equity, driven by its cost plus model, where it earns 15.5 percent RoE on project equity, stated the brokerage. Overall, the company has 13 GW of thermal projects under execution, which provides strong growth visibility in regulated equity over the next three years, moreover, expansion in renewable energy space would improve its growth trajectory, it added.

TVS Motor: TVS has outperformed the industry over the last few years in most of the segments it is present in gaining 660 bps market share in scooters over FY17-22, 700 bps share in the 150-250 cc motorcycle segment, noted the brokerage. It further said that TVS is the only auto player within the listed space that witnessed margin improvement, even in FY22, in a weak demand environment and despite a sharp rise in input costs led by improvement in product mix and cost-cutting initiatives. Also, TVS is readying a complete portfolio of 2W-3W EVs to be launched over the next 24 months, added HDFC. The slowdown in 2W sales in India/markets abroad, and rising competition in electric vehicles from established players/start-ups are key concerns, it stated.