“Amid a volatile global landscape, India remains in a favourable position for growth, which will be a significant driving force behind Indian equities in the foreseeable future. The improvement in the balance sheet strength of corporate India and the much-improved health of the Indian banking system are other positive attributes. They will ensure that Indian equities readily deliver double-digit returns in the next 2-3 years with the support of double-digit earnings growth,” said Pranav Haridasan, MD & CEO, Axis Securities.
On the occasion of Children’s Day, we reached out to experts to find out which stocks they recommend buying for the long term.
Raghav Wadhwa of Samar Wealth
1) Praj Industries
It is an Ethanol Plant and machinery supplier and a clean energy solutions provider. With the government setting a target of blending at least 80% of petrol with ethanol by 2030, Praj is set to be a major beneficiary being the largest machinery supplier to the Ethanol producing companies. The company is growing its topline at 47% CAGR and has improved its margin through efficient use of operating leverage. The rich valuation (38 times EPS) seems fair considering the high growth phase for the company in the next 5 years-10 years.
2) Canara Bank
It is one of the most undervalued companies in the banking space and probably has the cleanest books among PSU banks. NPAs have reduced and the net interest income has shown a healthy uptick of 20%. The company is trading at a Price to Book value of 0.91 which makes it the cheapest among its peers.
Sneha Poddar, Associate Vice President, Broking & Distribution, Motilal Oswal Financial Services
3) Maruti Suzuki (TP 12300)
Management expects 6% volume CAGR in the domestic PV industry until FY31, and 14-15% CAGR in export volumes until FY31, which implies 7-7.5% CAGR in total volumes for MSIL until FY31. The company is looking to add another 2m units capacity by FY31 (vs. current 2.25m units) to meet this demand. MSIL aims to achieve market leadership in the SUV segment in FY24. For non-premium hatchbacks, it expects <2% CAGR for the industry. Hence, MSIL is restructuring its production facilities to conform to the new realities. The EV development is underway at the Gujarat plant and the first model is expected to be launched in FY25. By FY31, it expects to have six EV models that would contribute 15-20% to its total sales.
4) Titan (TP 3900)
Titan is on track to achieve jewellery revenue guidance of 2.5x FY22 revenue by FY27, implying an impressive CAGR of 20%. With a current market share of ~7% in a sizable ~INR5t market, there is significant headroom for growth. Emerging businesses like fragrances & fashion accessories, and Indian dresswear too are expected to record double-digit growth. Titan’s healthy growth outlook, favourable industry trends, and strong balance sheet make it a compelling option in the discretionary sector. It has an impressive track record of outperforming its peers as well as exceptional long-term growth potential, all of which justify its premium valuations.
5) ICICI Bank (TP 1120)
ICICI Bank has been reporting a robust performance, led by a strong core PPOP, controlled provisions, and steady asset quality. A healthy mix of a high-yielding portfolio (Retail/Business Banking) and a low-cost liability franchise has helped sharp margin recovery over FY23. The bank is witnessing strong traction across key segments such as Retail, SME, and Business Banking. Asset quality trends remain steady, while an additional COVID-19 provision buffer (1.2% of loans) renders further comfort. Ahead of the new growth cycle, the bank is well-positioned with a superior margin, strong RoE and asset quality, and robust capitalization levels. We estimate ICICBC to deliver RoA/RoE of 2.3%/18.3% in FY25. We estimate earnings growth of 15%/16% over FY25/FY26.
6) TCS (TP 4060)
We expect TCS to deliver superior growth in FY25 among our Tier 1 coverage, driven by its leadership in cost efficiency, which has led to strong deal inflows in recent quarters. We expect the trend to continue, providing better visibility for FY25 revenue growth despite an uncertain demand environment. We factor in a USD revenue CAGR of 7.6% over FY23-25E. Given its size, order book and exposure to long-duration orders and portfolio, TCS is well positioned to withstand the weakening macro environment and ride on the anticipated industry growth. Owing to its steadfast market leadership position and best-in-class execution, the company has been able to maintain its industry-leading margin and demonstrate superior return ratios.
7) Ultratech (TP 10090)
We like Ultratech, given its: a) leadership position in the industry, b) robust expansion plans without leveraging the balance sheet, and c) structural cost improvement measures. The management has set its long-term capacity target of 200mtpa, which implies ~7% capacity CAGR. Phase II expansion is at full swing and likely to be completed by 1HFY26. Post completion of this expansion, its cement capacity will increase to ~160mtpa vs. 132.65mtpa currently. The next phase of the expansion plan should be finalized in CY23.
Divam Sharma, smallcase manager and Green Portfolio, PMS founder
8) Bharat Forge
The main trigger is their defence business which will sustain and thrive over the coming years. This segment has an order book of INR 3,000 Crores, also the management is expecting a good order inflow by February 2024 for their ATGS guns. We are expecting a revenue growth of 15% for the next 3 years followed by an even stronger profit growth.
We foresee strong growth led by their telecom product segment. Many new products have been developed which has tremendous market opportunity. Their traditional business which houses optical fibre and optical fibre cables is also expected to see strong growth given the strong Capex they have adhered to.
10) Piramal Pharma
Their history with the FDA is splendid. The main value creation for this business would come from its branded drug (Indian consumer healthcare) segment. They have spent heavily for marketing and establishing a name for their branded drugs for which the results are yet to reflect. Strong revenue growth along with tremendous margin growth is what we are looking at in the long term.
11) Paramount Communication
We expect a strong turnaround in their business supported by debt pre-payment of INR 100 Crores. Margin growth, export growth, along with favourable product mix are expected to drive value for the business. Compared to peers in the cable space, Paramount trades at half their valuation.
12) Aarti Pharma
Pharma has been a neglected space for the last couple of years. Aarti Pharma has recently commissioned its new facilities and a ramp-up of intermediaries is taking place. They are also coming up with new Capex as part of backward integration which shall expand their margins. We are already seeing a clear margin improvement given the cool-off in raw material prices. Product mix, ramp-up of new capex and sale of new value-added products should drive revenue and margins for the years to come.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)