Looking to buy stocks? From ICICI Bank to Infosys; Look at these 8 top stock picks by Kotak

Pranati Deva
Updated: 03 Aug 2022, 10:20 AM IST
TL;DR.

After three months of downturns, Indian benchmark indices bounced back with over 8% returns in July 2022. Flattening of inflation, softening of commodity prices and pickup in monsoon improved investors sentiments. In addition, reduced aggression in selling by FIIs also gave cheers to the investors. In a recent note, brokerage house Kotak Institutional Equities noted that domestic inflationary pressures showing early signs of easing, pick-up in monsoon and softening of commodity supply will provide respite to cost inflation and margins of corporates in the coming quarters. It believes that the Indian market is expected to follow global markets in the near to medium term. against this backdrop, it has come out with 8 top stock picks for August. Let's take a look:

Axis Bank: The brokerage has a 'buy' call on the stock with a target price of ₹960, indicating an upside of 32.5%. Kotak noted that the private sector lender posted 90% YoY earnings growth s well as a 90% YoY decline in provisions. Its net interest margin also improved 10 bps QoQ and the fee income growth came in solid at 35%, added the brokerage. Another positive for the lender is that its asset quality is not showing any signs of concern, hence, the bank is well positioned for a re-rating from current levels, said Kotak.

ICICI Bank: Kotak is bullish on the stock, and has a 'buy' call with a target of ₹975, indicating an upside of 19%. As per the brokerage, the lender posted a 50% YoY earnings growth led by a 60% YoY decline in provisions. Its RoEs have also normalized to best-in-class levels and all operating metrics are solid, noted Kotak. The bank is well placed to justify its premium valuation and is Kotak's top pick. In uncertain times, as we are in today, we believe it is the best idea in large caps, the brokerage said.

Infosys: The brokerage sees a 9% potential upside in the stock to ₹1,690. It has a 'buy' call on the IT major. In the June quarter, the company witnessed strong revenue growth, however, its margins were weak and a sharp increase was seen in unbilled revenues said Kotak. It estimates EBIT margin to be at the lower end of the 21-23% band and the Daimler deal to be the focus. Kotak raised its FY23E revenue growth guidance for the firm to 14-16% growth from 13-15% earlier and expects earnings (EPS) to grow by 7.4% in FY23E and 15.3% in FY24E.

M&M: Kotak has a target price of ₹1,400 on the stock, implying a potential upside of 20%. It has a 'buy' call on the auto major. British International Investment will invest ₹1,925 crore in M&M’s passenger electric vehicle (EV) arm, noted Kotak adding that the passenger EV arm to focus on launching electric SUVs over the coming years. Kotak increases its FY23-25 EPS estimates by 9-12% on higher volume assumptions and sees earnings per share (EPS) growing 33.0% in FY23E and 19.0% in FY24E.

Reliance Industries: The brokerage has a 'buy' call on the stock with a target price of ₹2,980, indicating a potential upside of 18.8%. As per Kotak, RIL's sequential EBITDA improvement in each segment and realizations sharply increase. It has a robust outlook on the stock. It also said that Jio is ahead driven by higher net adds and higher realized tariffs. It expects earnings (EPS) to grow by 24.4% in FY23E and 19.1% in FY24E.

Sapphire Foods: Kotak sees the stock rising 24.2% to its target of ₹1,425 in 12 months. It has a 'buy' call on the stock. Sapphire is a franchise of Yum Brands in India, Sri Lanka & Maldives. Kotak expects the firm to be one of the fastest-growing QSR chains in India. It sees EPS of 17.4 in FY23E & EPS of 25.3 in FY24E. The stock is currently trading at a valuation of 57.1x P/E FY24E EPS, it said.

SRF: The brokerage is bullish on the stock with a target at ₹2,660, implying an upside of 9.5%. Kotak noted that the Q1FY23 earnings were strong, as widely expected with the EBITDA growing 48% YoY. SRF’s cautious outlook for packaging films (PFB) is offset by a bullish outlook for the chemicals segment, it stated. It sees a sharp jump in capex outlay for FY23 and expects earnings to grow 26.9% in FY23 and 16.5% in FY24.

Supreme Industries: The brokerage has a 'buy' call on the stock with a target at ₹2,210, a potential upside of 16.5%. Better than expected Q1FY23 led by sharp growth in volume on a low base, said Kotak, adding that the fall in polymer prices is expected to boost demand for plastic pipes. Management expects 15% volume growth in FY23 with a 15% EBITDA margin, noted the brokerage. It cut earnings estimates for FY23/FY24 in the range of 2.8-9.5%.

First Published: 03 Aug 2022, 10:19 AM IST