BQ Prime's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer BQ Prime's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Axis Securities Report
Here are our top picks for May 2023:
SBI - Ripe for re-rating (Potential Upside: 28%)
Among public sector banks, State Bank of India remains the best play on the gradual recovery of the Indian economy on account of its healthy provision coverage ratio, robust capitalisation, strong liability franchise, and improved asset quality outlook. We believe normalisation in the credit costs and improved growth outlook should lead to double-digit return on equities of ~16% over FY23-25E.
Key risks: slowdown in credit growth
Federal Bank - Levers for RoA expansion in place (Potential Upside: 26%)
Federal Bank Ltd.'s credit growth witnessed continued growth momentum and remained robust in Q3 FY23 with advances growing at 19/4% YoY/QoQ. We expect the book to grow at an ~19% compound annual growth rate over FY22-25E, supported by a broad-based demand pick-up across segments, strong growth in newer segments such as credit cards and personal loans, and ample opportunities in the core segments.
Federal Bank is also keenly focused on neo-banking tie-ups to reach the country's under-banked population and expects these partnerships to contribute meaningfully to the overall business growth moving forward. We believe this will not only keep the bank's customer acquisition costs low but.
Key risks: Asset quality trends in the upcoming quarters, loan growth moderation.
Aarti Drugs – Improved demand; stable realisations (Potential Upside: 43%)
Most of active pharma ingredient players reported increase in volume uptick backed by improved demand and stable realisations. We expect demand for API could continue in upcoming quarters with the ease of supply chain bottlenecks.
Increase in volume and fall in solvent prices also led to improve in Ebitda margins led by operating leverage. Aarti Drugs, being leader in the domestic industry is well placed to grab this opportunity in future.
Valuation: Stock is currently trading at price-to-earning multiple of 15.9 times and 12.2 times for FY24E and FY25E earnings per share which is attractive.
Praj Industries – Well placed to grow, less impact of global geo-political volatility on business (Potential Upside: 55%)
During Q3 FY23, ethanol capacity creation continued momentum. Praj Industries Ltd. has also seen traction gaining in engineering segment with focus CPES business catering to Green Hydrogen Sector which has growing interest across the globe. Company also got its first semiconductor order which is another booming industry, thus Praj is supported from multiple levers.
Key risks: Raw material cost pressure in steel; volatile raw material weighing on operating profitability in the near term; Russia-Ukraine crisis to dampen business in the Euro region.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
