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Motilal Oswal’s top largecap investment ideas amid second COVID wave; ICICI Bank, Infosys, Titan and more

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Motilal Oswal’s top largecap investment ideas amid second COVID wave; ICICI Bank, Infosys, Titan and more

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Up to date : Could 14, 2021 03:22 PM IST

The arrival of the second COVID wave has muddied sentiment and impaired the FY22E earnings visibility. With a number of states coming into into prolonged lockdowns and restrictions, brokerage agency Motilal Oswal sees draw back dangers to its FY22 earnings estimates. The interaction of the resurgence in COVID circumstances and the tempo of vaccination would resolve the trajectory of financial restoration going ahead. The brokerage is Obese on BFSI, IT, Metals and Cement, Impartial on Shopper, Healthcare, Auto, Telecom and UW on O&G, Infrastructure.


Ankit Gohel


Infosys | Motilal Oswal continues to see Infosys as a key beneficiary of a recovery in IT spends in FY22E, given its capabilities around Cloud and Digital transformation. Leading operational performance in FY21 and strong deal wins should translate into strong outperformance in EPS growth versus the sector.

Infosys | Motilal Oswal continues to see Infosys as a key beneficiary of a restoration in IT spends in FY22E, given its capabilities round Cloud and Digital transformation. Main operational efficiency in FY21 and powerful deal wins ought to translate into sturdy outperformance in EPS progress versus the sector.



ICICI Bank | The bank has delivered double-digit RoE (~12.6%) for the first time post FY17 and we expect RoA/RoE to improve to 1.7%/15.2% in FY23E, Motilal Oswal said.

ICICI Financial institution | The financial institution has delivered double-digit RoE (~12.6%) for the primary time put up FY17 and we anticipate RoA/RoE to enhance to 1.7%/15.2% in FY23E, Motilal Oswal mentioned.



UltraTech Cement | We estimate an 11%/19% consolidated EBITDA/PAT CAGR over FY21–23E, driven by an 11% volume CAGR, lower operating costs, and lower interest costs, the brokerage firm said.

UltraTech Cement | We estimate an 11%/19% consolidated EBITDA/PAT CAGR over FY21–23E, pushed by an 11% quantity CAGR, decrease working prices, and decrease curiosity prices, the brokerage agency mentioned.



Hindustan Unilever | The strong outlook on rural, GSK Consumer Healthcare synergies, and sustained growth and premiumization in Skin Cleansing offer further medium-term tailwinds, the brokerage said.

Hindustan Unilever | The sturdy outlook on rural, GSK Shopper Healthcare synergies, and sustained progress and premiumization in Pores and skin Cleaning provide additional medium-term tailwinds, the brokerage mentioned.



Mahindra & Mahindra | Tractors and Pickup UVs are on a strong footing in terms of outlook, M&M’s competitive positioning, and industry-level consolidation. However, M&M’s SUV business is severely challenged. Further, it has guided for an almost 90 percent reduction in international subsidiary losses in FY22E, driven by the completion of phase-1 of the capital allocation exercise, Motilal Oswal said.

Mahindra & Mahindra | Tractors and Pickup UVs are on a powerful footing by way of outlook, M&M’s aggressive positioning, and industry-level consolidation. Nonetheless, M&M’s SUV enterprise is severely challenged. Additional, it has guided for an nearly 90 % discount in worldwide subsidiary losses in FY22E, pushed by the completion of phase-1 of the capital allocation train, Motilal Oswal mentioned.



SBI | The brokerage believes the earnings normalization cycle for SBI has begun as the uncertainty ushered by COVID-19 has receded significantly. IT maintains FY22E/FY23E estimates and projects RoA/RoE of 0.8%/14.5% by FY23E.

SBI | The brokerage believes the earnings normalization cycle for SBI has begun because the uncertainty ushered by COVID-19 has receded considerably. IT maintains FY22E/FY23E estimates and initiatives RoA/RoE of 0.8%/14.5% by FY23E.



SBI Cards & Payment Services | Gradual decline in the RBI RE book and an increase in the revolver mix, coupled with controlled funding cost, would support margins over the medium term. We estimate a loan book/earnings CAGR of 24%/60% over FY21–23E. We estimate RoA/RoE to improve to 6.8%/28% in FY23E.

SBI Playing cards & Fee Companies | Gradual decline within the RBI RE e-book and a rise within the revolver combine, coupled with managed funding value, would assist margins over the medium time period. We estimate a mortgage e-book/earnings CAGR of 24%/60% over FY21–23E. We estimate RoA/RoE to enhance to six.8%/28% in FY23E.



HCL Technologies | Given its deep capabilities in the IMS space and strategic partnerships, investments in cloud, and digital capabilities, the brokerage expects HCL Technologies to emerge stronger on the back of an expected increase in enterprise demand for these services.

HCL Applied sciences | Given its deep capabilities within the IMS house and strategic partnerships, investments in cloud, and digital capabilities, the brokerage expects HCL Applied sciences to emerge stronger on the again of an anticipated improve in enterprise demand for these companies.



Titan Company | There is a strong growth runway given Titan's market share of less than 10% and the continuing struggles of unorganized and other organized peers. Balance Sheet improvements, especially on the working capital front, were impressive. If sustained, these could significantly elevate the medium to longer-term RoCE, especially for a business that has prospects of 20% topline growth beyond the near term COVID-related blip, Motilal Oswal said.

Titan Firm | There’s a sturdy progress runway given Titan’s market share of lower than 10% and the persevering with struggles of unorganized and different organized friends. Steadiness Sheet enhancements, particularly on the working capital entrance, had been spectacular. If sustained, these may considerably elevate the medium to longer-term RoCE, particularly for a enterprise that has prospects of 20% topline progress past the close to time period COVID-related blip, Motilal Oswal mentioned.



Hindalco Industries | Hindalco Industries is Motilal Oswal's preferred non-ferrous pick owing to its strong profitability in the India Aluminum business from its low-cost integrated operations, a positive outlook for Novelis, driven by a recovery in auto demand and cost synergies from Aleris, solid FCF generation, which should reduce leverage sharply, and reasonable valuations.

Hindalco Industries | Hindalco Industries is Motilal Oswal’s most well-liked non-ferrous choose owing to its sturdy profitability within the India Aluminum enterprise from its low-cost built-in operations, a constructive outlook for Novelis, pushed by a restoration in auto demand and price synergies from Aleris, stable FCF era, which ought to cut back leverage sharply, and cheap valuations.



Divi’s Laboratories | We are encouraged by promising demand prospects and multiple growth levers – a) new product additions, b) a strong chemistry skill set, c) efficient manufacturing capabilities, d) scale-led advantage in legacy molecules, e) minimal financial leverage, and f) sufficient cash available for new projects. We expect 27%/38% sales/earnings CAGR over FY20-23, the brokerage house said.

Divi’s Laboratories | We’re inspired by promising demand prospects and a number of progress levers – a) new product additions, b) a powerful chemistry ability set, c) environment friendly manufacturing capabilities, d) scale-led benefit in legacy molecules, e) minimal monetary leverage, and f) enough money obtainable for brand new initiatives. We anticipate 27%/38% gross sales/earnings CAGR over FY20-23, the brokerage home mentioned.


Revealed : Could 14, 2021 03:22 PM IST




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