JM Financial suggests 10 large cap stocks to beat COVID-19 after-effects

SUMMARY

JM Financial in its recent report listed out 10 stock ideas for a large cap portfolio that would remain unaffected from the COVID-19. These recommendations by the brokerage includes Reliance Industries, Bharti Airtel, ICICI Lombard, Kotak Mahindra Bank, to name a few. All these stocks recommended by the broker house at a fixed target price earlier have risen up to 30 percent to current levels now.

By Mousumi Paul May 20, 2020 7:38:40 AM IST (Updated)

Reliance Industries Ltd has surged to Rs 1,580 from brokerage's recommendation of Rs 1,190 earlier. JM Financial feels that the company faces near-term headwinds but part of it will be partially mitigated by a hike in telecom tariffs. We continue to value refining and petchem business on EV/EBITDA (7x on FY22 EBITDA) to arrive at an EV of Rs 3,854 billion, added the brokerage. (Company Image)

Bharti Airtel surged to Rs 554 from brokerage's recommendation of Rs 460 earlier. The broker house believes that COVID-19 has had limited impact on the company. The competitive intensity amongst telcos have reduced since Vodafone Idea's survival remain questionable. The subscriber base of 30 crore and the ARPU increase offers tremendous

delta for Bharti by which it can meaningfully increase its EBITDA, added JM Financial.

ICICI Lombard 's shares have risen to Rs 1,325 from brokerage's recommendation of Rs 1,120. The company is expected to remain stable despite taking a slight knock in Q1FY21 as growth is set to rebound from Q2, said the report. It further added that management remains confident of 20 percent RoEs in the future and leverage at around 4.1x.

Kotak Mahindra Bank's stock price has surged to Rs 1,357 from JM Financial's recommendation to Rs 1,187. The brokerage report said the bank has one of the cleanest balance sheets in the sector and the deposit accretion is a reflection of its strong liability franchise.

Muthoot Finance's share price has surged to Rs 875 from brokerage's recommendation of Rs 675. Strong promoter interest (73.5 percent) and even stronger business model makes JM Financial bullish on the stock. It said, "Well placed owing to strong collateral, granular loan book, comfortable ALM and liquidity. The stock still trades at in-expensive valuations of 8.3x FY22E EPS." (Company Image)

HDFC Life Insurance's shares has increased to Rs 527 from brokerage's recommendation of Rs 476. The company's strong parentage and return ratios, balanced product mix, strong distribution network and lower operating cost is why JM Financial is bullish about this stock. The broker house also believes that the company will continue to generate superior RoEVs amongst its competitors. (Representational Image)

Asian Paints (APL) share price has risen to Rs 1,864 from brokerage's recommendation of Rs 1,610. The report said, "APL's Mysore and Vizag facility provides a strong visibility of growth. After the pandemic, APL with its strong track record and healthy balance sheet would be more agile in capturing incremental market share from weaker players." JM Financial expects revenue, EBITDA and earnings to grow at CAGR of 14 percent. 18 percent and 22 percent respectively in FY19-22E.

Titan's stock price has risen to Rs 1,044 from the brokerage's recommendation of Rs 915. The brokerage report said Titan's store count in the jewellery segment has increased by almost 40 percent over last 2 years. "We expect Titan to extend its growth run led by market share gains, rising share of studded jewellery, launches and retail expansion. Going forward, its revenue, EBITDA & PAT are likely to grow by CAGR 13 percent, 14 percent and 15 percent respectively," added the brokerage.

Sanofi India's target price has surged to Rs 8,584 from brokerage's recommendation of Rs 7,250. The company has one of the largest diabetic portfolio in India. The brokerage expects domestic business to continue to outperform, with revenue CAGR of 11.1 percent during CY19-21E. "We expect Sanofi India could achieve 100 bps improvement in margins in next 2 years due to increase proportion of domestic branded business," the report added. (Representational Image)

Cipla's stock price jumped to Rs 633 from brokerage's recommendation of Rs 512. "Given its strong domestic franchise and a smaller base business in US, we expect Cipla to

be relatively shielded from COVID-related disruptions as compared to peers," said JM Financial's report. It further added that the balance sheet quality continues to

improve with Cipla expected to turn net cash positive in FY22. (Company Image)