From Maruti Suzuki to UPL, JM Financial's 7 picks that can deliver up to 46% returns in 2023

Maruti Suzuki: The brokerage has a target price of ₹11,000 for the stock, indicating an upside of 29%. The brokerage estimates revenue/EPS CAGR of 18%/57% over FY22-25E. After two consecutive years of volume decline, it believes that MSIL is at the cusp of a new upcycle. New model launches in the coming months, healthy order book and commodity/currency tailwinds will further support strong performance going ahead, it added. The product launch pipeline remains strong and it expects three more SUV launches to bolster MSIL’s presence in the B-segment. The benefit of recent softening commodity costs and favorable currency movement will continue in Q3FY23, said JM. 

UPL: The brokerage has a target price of ₹1,060 for the stock, indicating an upside of 38%. JM Financial said UPL's net debt at September-end stood at ₹28,512 crore against ₹18,900 crore in March 2022. The company has maintained its guidance of 12-15 percent revenue and 15-18 percent Ebitda growth in FY23E, hence, with the reduction in working capital in H2FY23 and robust Ebitda growth, it believes UPL should be able to meet its $400-500 million net debt reduction guidance in FY23. It has kept its estimates unchanged and maintained BUY as UPL stands to benefit from robust crop protection demand 

Patanjali Foods: The brokerage has a target price of ₹1,800 for the stock, indicating an upside of 46%. The brokerage expects Patanjali’s food & nutraceutical business to be a major growth driver for the next decade. The edible oil business is expected to grow in single-digit and the palm oil business will start contributing from the 5th year onwards, it said. JM Financial said the main story of Patanjali lies in the merged food business of Patanjali with Ruchi Soya. This is where growth, as well as valuation trigger lies, it added. The food business of the merged entity is estimated to be in ₹10,000-11,000 crore range by FY25 and is estimated to grow 15-20 percent annually for the next decade. 

Akzo Nobel: The brokerage has a target price of ₹3,200 for the stock, indicating an upside of 40%. In Q3FY23, Akzo reported revenue growth of 25% & PAT growth of 17%. Its revenue growth was stronger than peers AP, Kansai & Indigo consecutively for the last 4 qtrs, noted the brokerage. It believes with a fall in input prices, the company’s margins will improve in H2FY23. Also, price hikes taken in the first half should help. With volumes improving due to measures taken to improve market share & margin headwinds receding, the brokerage sees the stock re-rating significantly in FY24. 

Sapphire Foods: The brokerage has a target price of ₹1,750 for the stock, indicating an upside of 27%. Store addition trajectory remains ahead of expectation which highlights management’s confidence in the scalability of the model, noted the brokerage. Sapphire Foods remains JM's preferred pick in quick-service restaurant space. 

Ujjivan Financial Services: The brokerage has a target price of ₹400 for the stock, indicating an upside of 37%. While the stock has run up by 60 percent in the last 6 months, on the back of steadily improving asset quality and return metrics, the brokerage believes sustained delivery on this performance along with a gradual improvement in liability franchise is critical for further rerating of the stock. Given the cyclical benefit of improving microloan collections/growth, it values Ujjivan SFB at 1.8x FY24E BVPS. Management has indicated that FY23E will be a normalised year for the stock with growth and asset quality parameters reverting back to normalised levels, added JM. 

Gokaldas Exports: The brokerage has a target price of ₹500 for the stock, indicating an upside of 30%. As per the brokerage, Gokaldas Exports is well placed to ride the growth in India’s apparel sector after regaining the confidence of global retailers (GAP, Columbia & Banana Republic). The company’s growth capex of INR3.7bn over FY22-24 will ensure strong double-digit growth CAGR in revenues, highlighted JM. Increasing scale/focus on cost optimization will further improve margins, it added. Gokaldas Exports, in line with near-term demand headwinds, is likely to witness lower revenues/margins during 2H given high inflationary pressure. Despite near-term headwinds, Gokaldas Exports backed by its strong customer engagement, operational excellence and superior business infrastructure, is likely to fare relatively better vs the competition, noted the brokerage.