The Indian market has had a good up-move in calendar year (CY) 2022 when compared to the global markets, but it has seen high volatility.
It was the only economy to return to its pre-pandemic growth pace despite supply bottleneck issues brought on by geopolitical crisis, rising interest rates to combat inflation, among other factors.
Even though it is anticipated that the Indian benchmark indices would reach new highs in 2023, uncertainty remains a concern.
However, YES Securities (India) Ltd claims that India is poised to shine in 2023 despite a global storm. The brokerage has chosen five stocks that are expected to perform well this year. Let's take a look at them.
As the global desalination industry's compound annual growth rate (CAGR) is projected at 9.3 percent and India's market for wastewater treatment plants is forecasted 6.9 percent CAGR, YES Securities (India) believes that Va Tech Wabag Ltd has promising long-term prospects.
The company is involved in design, supply, installation, building, and operational management of desalination, waste water treatment, and drinking water facilities.
The brokerage added that the water treatment industry is well positioned for secular, long-term expansion given the government's and multilateral funding organisations' rising focus to an intensifying water shortage situation.
The company is optimistic on a strong order inflow from the domestic markets by way of various schemes such as Namami Gange Program, Swachh Bharat Mission, ZLD Solutions and desalination projects. Due to the resolution of supply chain challenges, the company's execution has also improved, especially in the global markets.
On the earnings front, the brokerage believes the second half of FY2023 should be better both in terms of margins and scale.
Further, the brokerage expects order intake to be robust in H2FY2023. The order book stands at ₹10,300 crore including framework orders executable over a period of 2.5‐3 years.
Also, the brokerage believes that the company's sizable order book, which thrives on solid market leadership, execution ramp-up, and operational efficiencies, would allow it to take advantage of the next prospects.
YES Securities (India) has 'buy' rating on the stock, and expects a potential return of 21 percent.
Due to its strong financial standing, leadership position in the medium-density fiberboard (MDF) market, the brokerage ranks Greenpanel Industries Ltd as its second choice.
The company with 29 percent market share is India’s largest manufacturer and exporter of MDF, in addition to making allied products, such as plywood, wood floors and veneers, among others.
"Low penetration, rising acceptability, strong revival in demand for housing units and readymade furniture are the key drivers. The company, being an established player, is perfectly placed to capitalise on the huge opportunity in the MDF industry," said the brokerage.
On the earnings front, for the next 18 months, management anticipates margins to remain at their current levels, but in the long run, it believes margins of 27 to 28 percent should be sustainable.
According to the brokerage, its realisations and margins should improve going forward given its focus on direct distribution and value‐added products.
The brokerage has 'buy' rating on the stock and expects 30 percent potential return.
According to YES Securities, the construction company is well-positioned to grow owing to its exceptional execution track record with steady margins, strong management background, healthy order book, lean financial sheet, and asset-light business model.
For Capacit'e Infraprojects Ltd, FY22 was a successful year driven by its primary strategies of great performance combined with financial discipline. The company has continued to place a priority on winning new orders, enhancing relationships with current clients, and developing great execution capabilities.
Further, with increasing infrastructure spending, government programmes like Atmanirbhar Bharat, stamp duty reduction, affordable rental housing complexes, and the promotion of smart cities, among other things, India is undergoing a paradigm shift that is anticipated to accelerate overall growth.
"Management indicated the ordering pipeline continues to remain robust such as residential, commercial, institutional, healthcare etc. and expects order inflow to the tune of ₹2,200 crore for FY23E and ₹2,600‐3,000 crore in FY24E," added the brokerage.
The brokerage has 'buy' rating on the stock and expects 30 percent potential return.
According to the brokerage, the goals of Kotak Mahindra Bank Ltd are to increase market share, build stronger client connections, and acquire high-quality customers.
The bank is updating its risk models and analytics setup for a better credit review procedure, and it has considerably improved its sales and service.
Further, as per the brokerage report, the bank's management has reiterated its intention to increase the share of unsecured retail loans including microfinance. The share of unsecured retail including microfinance is 8.5 percent in the overall loan book and the management is comfortable in taking this share to mid‐teens.
"We believe the bank is well capitalised with a Capital to Risk (Weighted) Assets Ratio (CRAR) of 22.6% and Common Equity Tier 1 (CET1) ratio of 21.5% thereby giving the bank the freedom to be bold in its decisions and capture the best opportunities in the current credit upcycle. Also with a seasoned and capable management and the strong liability franchise that the bank holds, we feel Kotak will only emerge stronger and bigger out of this cycle," said the brokerage.
The brokerage has 'buy' rating on the stock and expects 20 percent potential return.
Home First Finance Company Ltd
Home First Finance Company Ltd, a retail financier of affordable housing, stands among one of the best choices of the brokerage in 2023. The retail financer operates mainly in urban centres / Tier 1 / Tier 2 cities. It has presence across 13 states with a lean distribution network of 101 branches.
According to the report, the company is looking at growing its assets under management (AUM) by 30 percent per annum in the next 3‐4 years underpinned by distribution expansion and market share gains.
"We believe Home First’s core management team, infrastructure and process are in place to drive healthy AUM growth going ahead in risk calibrated manner. Sustained robust execution on growth and asset quality underlies our conviction on Home First," said the brokerage.
YES Securities (India) has 'buy' rating on the stock, and expects a potential return of 28 percent.
