12 largecap stock picks for systematic long term investing by HDFC Securities

SUMMARY

HDFC Securities’ Retail Research has prepared a list of large-cap stocks which can be used by investors who seek to invest in them systematically over the next few years

By CNBCTV18.comMay 10, 2021 4:11:41 PM IST (Updated)

Reliance Industries | The company's strong market position is reflected in its leadership position across several formats and has been supported by consistent growth. (Disclosure: Reliance Industries Ltd, which owns Jio, is the sole beneficiary of Independent Media Trust that controls Network18, the parent company of CNBCTV18.com)

Infosys | The company reported healthy margins despite a wage hike in Q4FY21. The brokerage expects many levers like offshoring, revenue growth, pyramid rationalisation, rupee depreciation and automation could be positive for Infosys and the company could surpass the top end of its guidance in FY22E.

Hindustan Unilever | HUL is a play on consumption growth in India. It has proved its ability to implement effective price hikes and to grow ahead of the market. Disruptive times are particularly hard on unorganized players, which may lead to HUL gaining market share. HUL has the best of breed earnings growth potential in the longer term owing to its diversified portfolio, execution strengths, HDFC Securities said.

ICICI Bank | The brokerage believes that the bank’s comfort and confidence in kick-starting growth in its corporate portfolio holds a gradual re-rating potential on the back of reducing concentration risk from a single growth/profit engine.

State Bank of India | SBI is almost immune to any liability-side risks at this juncture, given its expansive, granular deposit base and government’s majority holding. It is better placed to curtail asset quality worries than many other large banks because of its quality of loan book.

ITC | ITC is one of the leading FMCG companies in the country and at such low valuations, we feel there is very limited downside potential with the risk-reward ratio in the current market scenario in favour of ITC, HDFC Securities said.

Larsen & Toubro | L&T’s order inflow correlates to India’s economic growth. L&T has a robust order book of around Rs 3.3 lakh crore which offers healthy revenue visibility for the next 2-3 years with higher revenue visibility and incremental order inflow, especially in Infrastructure, hydrocarbon, Power & defence.

Sun Pharmaceutical Industries | HDFC Securities remains positive on the company given strong management team, robust balance sheet, strong earnings growth expected over FY20-23E and compelling valuations.

HDFC Life Insurance | The brokerage feels that HDFC Life is a long term compounding growth story. The company’s focus on superior product mix with a greater focus on high margin business, diversified distribution mix and high technology focus puts the company ahead of the curve. On the back of consistent performance, the brokerage firm feels that the company can continue to fetch higher multiples compared to other listed peers.

Bajaj Auto | Bajaj Auto has negligible debt levels and is likely to maintain its debt-free status, given that its annual capex requirement of around Rs 500-800 crore can be easily met through internal cash accrual of Rs 2500-3000 crore post dividend payout. Return ratios continue to remain strong above 20 percent, the brokerage said.

Dabur India | Dabur has shown agility in the overall execution of its strategy over the last few quarters, which has helped it in delivering ahead-of-the-market growth. HDFC Securities expects the company to gain market share across its domestic core portfolio through its focused power brands strategy, innovation across portfolio, aggressive above-the-line spends and improvement in its distribution reach.

Tata Motors | Tata Motors has demonstrated its capability to achieve the set cost rationalization that has cumulatively delivered cost savings of £5.7 billion till 9MFY21, the target to be achieved by FY21 is £6 billion. The operating performance of the company has improved significantly on the back of a recovery in volumes coupled with favourable mix and cost savings.