On the back of the increased capital expenditure theme of Budget 2022, the analysts at brokerage firm Axis Securities have picked five value and quality stocks from the mid-cap sector, which they believe have huge potential for bumper returns when played in the rotation.
On the back of the increased capital expenditure theme of Budget 2022, the analysts at brokerage firm Axis Securities have picked five value and quality stocks from the mid-cap sector, which they believe have huge potential for bumper returns when played in the rotation.
In Budget FY23, the finance minister Nirmala Sitharaman had raised capital expenditure by around 35 per cent to Rs 7.5 lakh crore, from 5.5 lakh crore in FY22.
While explaining about the value aspect, the brokerage said, “Value continues to be a robust theme over a slightly longer time horizon and these stocks will witness significant improvement in the financial matrix as the economy improves.”
Similarly, the quality theme may outperform the broader market from the current levels considering a notable market correction and significantly increased volatility in the last three months, it added.
Below are the five stocks that Axis Securities see an upside of at least 34 per cent, which belong to various segments such as financials, consumer staples, healthcare, auto and consumer discretionary.
Ashok Leyland:
The brokerage sees an upside of 34 per cent to a target price of Rs 175 per share. It suggests to Buy the stock at between 134-136 per share levels. The stock on Friday closed flat to Rs 136.2 apiece. The 12-month forward P/E and P/BV as per brokerage of the scrip is 442.3 and 5.8 respectively.
It said, the Indian automobile sector has seen a significant demand improvement and most categories are witnessing good traction and maintains Equal-Weight stance on the sector.
Federal Bank:
The brokerage sees an upside of 25 per cent to a target price of Rs 125 per share. It suggests to Buy this stock at Rs 100 per share levels, as on Friday it closed at 98.85 apiece, down over 2 per cent. The 12-month forward P/E and P/BV as per brokerage of the scrip is 11 and 51.3 respectively.
“The BFSI outperformed the broader market from Nov’20 to Feb’21 as the COVID-19 challenges were less significant than anticipated and banks were better prepared,” Axis Securities said maintaining an Equal-Weight stance on the sector.
Krishna Institute of Medical Sciences:
The brokerage sees an upside of 19 per cent to a target price of Rs 1600 per share. It suggests to Buy this stock at Rs 1342 per share levels. The stock on Friday closed at Rs 1350 apiece, down nearly 2 per cent. The 12-month forward P/E & P/BV as per brokerage of the scrip is 36.7 & 8.1 respectively.
“We believe moderate recovery is likely to continue in domestic Pharma and healthcare revenues while significant improvement in operating metrics is needed for further re-rating,” Axis Securities said maintaining an Equal Weight stance on the sector.
Varun Beverages Ltd:
The brokerage sees an upside of 14 per cent to a target price of Rs 1050 per share. It suggests to Buy this stock at Rs 918 per share levels. The stock on Friday closed flat at Rs 949 apiece. The 12-month forward P/E and P/BV as per brokerage of the scrip is 59.9 and 9.8 respectively.
“The Consumer Staples sector witnessed a good demand recovery and posted robust top-line growth in Q4FY21. The sector has strong earnings visibility and best-in-class return ratios,” Axis Securities said maintaining the FMCG sector to Equal Weight.
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Bata India Ltd
The brokerage sees an upside of 14 per cent to a target price of Rs 2,300 per share. It suggests to Buy this stock at Rs 2025 per share levels. The stock on Friday closed at Rs 1940 apiece, down over 2 per cent. The 12-month forward P/E & P/BV as per brokerage of the scrip is 152 & 13.5 respectively.
“While the Consumer Discretionary space is witnessing a strong revival and many categories are normalizing, the current lockdowns are posing serious challenges to the recovery rate. However, with improvement in the COVID-19 trajectory, the outlook of the sector is improving,” Axis Secutiries said maintaining Equal Weight stance on the sector.
