HDFC Securities' top stock picks for 2022: SBI, TechM, GAIL, Zee, M&M and more

SUMMARY

With 2021 almost nearing the finish line, HDFC Securities has picked a few stock investment ideas. Some among those are Zee Entertainment Enterprises, Tech Mahindra, GAIL India, State Bank of India, Hindustan Zinc and Mahindra and Mahindra. Here are the top stock picks by the brokerage house for 2022:

By Dipti Sharma Dec 27, 2021 12:53:37 PM IST (Published)

Aditya Birla Capital | Aditya Birla Capital, the holding company of all the financial services businesses of the Aditya Birla group, continues its makeover journey to drive consolidated return ratios closer to franchise potential over the next three years. According to the brokerage house, stiff competition from peers and new entrants and worsening of asset quality in the lending book due to the third wave of COVID pandemic or slowdown in the economy are key concerns for the stock.

GAIL (India) | GAIL is planning to expand in petrochemicals, speciality chemicals and renewables to supplement growth in its core business of natural gas marketing and transportation. The gas transmission and distribution company plans to bid for new pipelines put on offer by the regulator. As per the brokerage house, volatility in oil and gas prices, higher tariff reduction in existing pipelines, regulatory changes and a general economic slowdown could impact the company's growth story in the near future.

Hindustan Zinc | Hindustan Zinc is one of the world’s largest and India’s only integrated manufacturers of zinc-lead and silver. It is the world’s second-largest zinc-lead miner and one among the lowest-cost producers of zinc globally. The company is India’s largest primary zinc producer. The brokerage house believes Hindustan Zinc should sustain as a low-cost producer of zinc over the medium term. However, the company also faces regulatory and environmental risks as all mines are clustered in Rajasthan, the brokerage house added.

Ipca Laboratories | The company's key therapeutic segments include cardiac, pain management, anti-malarial and antidiabetic, anti-infectives and others. Strong volume growth in domestic formulation across therapeutic areas, cost-competitive and consistent quality driving better business prospects in API segment, robust debt-free balance sheet and strong return ratios along with better traction in the international markets such as Europe and Asia, has made the brokerage firm positive on the stock. However, change in the regulatory landscape, negative outcome of key facility inspections by the US FDA may affect the company's earnings prospects. Ratlam, Silvasa and Indore facilities continue to be under the US regulator's import alert, while the addition of drugs in the National List of Essential Medicines might hurt Ipca's domestic business.

Mahindra and Mahindra | M&M is the world’s largest tractor manufacturer and the third-largest passenger vehicle manufacturer in India. It is planning to launch 13 new products across Light Commercial Vehicles, Sport Utility Vehicles, and three-wheelers to drive growth in the medium term; of this, 20 percent will be Electric Vehicles. The brokerage believes chip shortages, commodity price inflation and the possibility of a third pandemic wave are key risks for the company going forward.

Max Financial Services | A diversified product portfolio and strong distribution reach has made Max Financial the fourth-largest private life insurance player in India. Given the strong brand, leadership and tailwinds on the back of financialisaton of savings, the brokerage house remains optimistic about the future growth of the company. According to the brokerage, the rising competition poses pricing and volume risk for traditional players while high promoter pledging is one of the reasons why the stock has been given a lower valuation multiple compared to other listed peers.

Max Healthcare Institute | Max Healthcare Institute is one of India’s leading hospital chains with 17 facilities and around 3,400 beds and was formed after the merger of Max Healthcare and Radiant. The company enjoys higher occupancy levels across network hospitals, and has reduced its net debt significantly. Strong free cash flows and low debt provides adequate headroom to expand through brownfield, greenfield, mergers and acquisitions, the brokerage house said. Delay in capacity addition and delay in improvement in payor mix are some negatives, the brokerage house said. A substantial portion of the company’s healthcare operations are concentrated in North India and a regional slowdown or political unrest or disruption in NCR could impact the company's business, the brokerage house pointed out.

State Bank of India | SBI remains the best play on the gradual recovery in the Indian economy, with a healthy PCR, robust capitalization, a strong liability franchise and an improved asset quality outlook, the brokerage house believes. SBI is the largest Public Sector Bank with over 22,000 branches and is better-placed to curtail asset quality worries than many other large banks because of its quality of loan books. However, the brokerage house is concerned that increasing geographic penetration by newer private sector banks, macro-economic risk can lead to a faster-than-expected decline in market share.

Tech Mahindra | Tech Mahindra is well-positioned to expand a fair share of 5G network services and the company is experiencing a large deal strategy and customer-led approach. Though, Indian rupee appreciation against the US Dollar, pricing pressure, higher attrition rate and retention of the skilled headcounts, strict immigration norms and rise in visa costs are key concerns for the company, according to the brokerage firm.

Zee Entertainment Enterprises | The entertainment major has strong recognition in the media and entertainment industry and it has a long and successful track record. Further, Zee and its affiliate companies have presence across varied media value chains. High regulation in the media and entertainment industry, competition, implementation of New Tariff Amendment Order, increasing smartphone penetration, affordable data tariffs and relatively poor corporate governance standards are key concerns for Zee, the brokerage house highlighted.