June stock picks: Axis Securities lists 5 largecap stocks with up to 23% upside potential

ICICI Bank: The brokerage has a buy call on the private sector lender with a target price of ₹1,150, indicating an upside potential of 21%. According to Axis, the bank has been outperforming its peers and has been firing on all cylinders. ICICI has ticked most boxes on growth, margins, and asset quality, it said, adding that it continues to like ICICI 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. On the valuation front, it believes the bank continues to be on a comfortable footing.

Maruti Suzuki: The brokerage is bullish on the auto major with a target of ₹10,500, implying a 10% upside potential. Axis noted that the company expects to outpace the industry growth rate led by good order books and new launches (Jimy and Fronx). Strong order book, a  higher share of premium SUVs, and CNG vehicles in the sales mix to improve average sales price in FY24/25, it stated. Further, improved chip supplies and stable commodity prices to drive the EBITDA growth in FY24/25, it added. Axis revised its EBITDA upwards by 2%/7% in FY24/25E against its previous estimates. 

State Bank of India: Axis has a buy call on India's biggest lender with a target of ₹715, indicating an upside of 23%. 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, said Axis. It believes that normalization in the credit costs and the ability to deliver healthy growth should enable the bank to deliver RoA/RoE of 1%/15-17% over FY24-25E. It expects SBIN to report healthy advances/NII/PAT growth of 13/13/12% CAGR over FY23-25E. 

Varun Beverages: The brokerage has a buy reco on the FMCG stock with a target of ₹1,860, implying a 10% potential. It believes VBL is well-placed under the current market situation as a strong summer season is expected to drive overall beverage sales across regions. Furthermore, the initial report on possible El-Nino (deficit rainfall) could delay the rural recovery which would lead the entire FMCG pack (ex-ITC) under wait-and-watch mode, it added. Hence, in this current volatile market situation, it sees VBL providing better earning visibility than other FMCG peers in the near term.

ITC: Axis sees the FMCG major rising 10% to ₹490. It has a buy call on the stock. The brokerage believes 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 inflection point as its EBIT margins expected to inch up further; 3) Strong and stable growth in hotels as travel, wedding, and corporate activities pick up; 4) Steady 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, it added.