Infosys, PI Industries, ICICI Bank: Top picks of brokerages for Samvat 2077

Samvat 2076 marked a historical year for the equity markets during which they witnessed extreme volatility and pessimism, owing largely to the Covid-19 pandemic, only to later roar back from their March lows to scale fresh lifetime highs. As Samvat 2077 nears, analysts say that the overall structure of the Indian markets remains positive and with the economic activity recovering fast, more earnings upgrade cannot be ruled out.

"Further strong global markets can keep the liquidity abundant in the system, thus providing support to the overall market. However, intermittent corrections cannot be ruled out as there is a risk of the second wave of Covid-19 and thus sustenance of economic recovery holds the key. We believe another round of fiscal stimulus could help elevate sentiment further," Motilal Oswal said in a note.

Sectorally, PSU index has a fair chance of returning in favour, HDFC Securities said in a note. According to the brokerage, banks seem to be headed higher but with intermittent corrections while metals could be a surprise performer. Information Technology (IT) and healthcare have some more upside, but repeating 2020’s performance will be difficult for them, it said.

According to Axis Securities, the small and midcaps are picking up steam and they should deliver solid returns in 2021 as economic uncertainties will reduce and volatility will decline. "Housing and banking will be major themes to watch out for in 2021 because of correction in real estate prices and lower interest rate regime. Digital and telecommunications will continue to remain major long-term structural themes," it said.

Here's a list of stocks recommended by top brokerage houses for Samvat 2077

Anand Rathi

Ultratech Cement | Target price: Rs 5,300

We are positive on Ultratech due to its strong business model, high operating margins, improving balance sheet, growing retail market share, and potential for further integration and synergy benefits from its mergers & acquisitions.

Divi's Laboratories | Target price: Rs 3,730

We remain positive on Divi’s given its strong market position, strength in API manufacturing, established long-term contracts with customers, and benefit from the ongoing and new capex programs.

Tata Consultancy Services | Target price: Rs 3,230

Going forward, global digital technologies are expected to witness robust growth (around 20% CAGR in the next five years) led by robust growth in cloud, customer experience and robust growth in cloud native technologies. TCS is expected to be a key beneficiary of this trend leading to double-digit revenue growth over a sustainable period.

Tata Consumer Products | Target price: Rs 620

Tata Consumer remains committed to build its core businesses with focus on product launches and doubling the direct reach (1 million outlets for next 12 months). We believe TCPL remains well-positioned for growth owing to its strong portfolio of products, expanding distribution network and the expected synergies from the merger with the consumer business of Tata Chemicals

VIP Industries | Target price: Rs 370

While current macro-economic conditions are likely to keep the demand subdued in the near term but owing to its strong balance sheet and being the market leader, VIP’s business model has the inherent ability to tide over tough market conditions better than its peers.

Axis Securities

ICICI Bank | Target price: Rs 504

ICICI Bank is well placed with a stable net interest margin (NIM), low cost of funds, and healthy capital adequacy. The recent capital raise has improved Tier I to 17.9 per cent which provides an adequate balance sheet buffer. We believe valuations are undemanding for the stock given the strong liability franchise and leveraging opportunities across group products.

State Bank of India | Target price: Rs 261

Among PSU banks, SBI remains the best play on the gradual recovery in the Indian economy, with a healthy PCR, robust capitalisation, a strong liability franchise, and improved core operating profitability. Subsidiaries' performance was also stable in Q2FY21.

Can Fin Homes | Target price: Rs 515

While loan growth moderation is expected along-with slight asset quality deterioration on account of Covid-19, we expect the company to recover faster than its peers due to its loan mix and negligible developer exposure. Lower cost of funds should aid the company in maintaining NIMs while the loan mix profile skewed towards the salaried segment will help in maintaining asset quality. We expect lower provisions and built-in improved NIM for FY21. We remain positive on the stock given its loan book profile, stable liquidity position and robust CAR (25 per cent).

Eicher Motors | Target price: Rs 2,400

Eicher Motors is well-placed to benefit from a potential demand recovery in 2Ws by FY22 given its differentiated products and strong franchise. We expect the company to register Revenue/Ebitda/PAT CAGR of around 9%/11%/8% from FY20-FY23 driven by volume CAGR of 5.5 per cent over FY20-23.

Dalmia Bharat | Target price: Rs 1,083

The revival in cement demand augurs well for the company on the back of demand improvement both in the trade and nontrade channel. With capacity expansion, better monitoring of cost drivers, and increased realisation, Dalmia Bharat is expected to report Revenue/Ebitda/APAT CAGR of 14%/15%/22%, respectively between FY21-FY23.

Varun Beverages | Target price: Rs 865

We expect Varun Beverages to register revenues/earnings CAGR of 11%/30% respectively over CY19-22. This growth will be driven by consolidation in newly acquired territories, distribution led market share gains, and cost efficiencies leading to margin tailwinds to support Ebitda Margin in CY20E/CY21E.

Aarti Industries | Target price: Rs 1,263

We expect Aarti to report earnings growth of 42%/16% in FY22/23. Lower crude prices and cost optimisation could help protect operating margins in the near to medium term. As a result we expect Aarti to report earnings growth of 23%/12% in FY22/23 on the back of a strong recovery in volumes in Specialty Chemicals segment and sustained performance of Pharma division. We expect a strong improvement in FY22/23 ROE from a dip in FY21 owing to adverse impact of Covid-19 on overall business.

Dhanuka Agritech | Target price: 880

We expect Dhanuka Agritech to register revenue/Ebitda/PAT CAGR of 16%/21%/20% respectively over FY20-23 given strong product portfolio with 4-5 new product launches and one or two molecules annually in the domestic formulation business, stable revenue given collaboration with global MNCs, PAN India distribution network of 7000+ dealers and strong marketing team to penetrate further into newer markets.

HDFC Securities

Alembic Pharma | Target price: Rs 1,148

Heavy capex phase is likely to peak out in FY21 with a large part of the company's commercial upside starting from H2FY22. This is on the back of subdued operating performance (on a high base) mainly on account of elevated other expenses and higher depreciation expenses in FY22. Limited competition, ANDA approvals, and continuing shortages in Sartans remain the key near term triggers. We recommend buy on Alembic Pharma at the current market price and add on dips to Rs 877-885 (16x FY22 EPS) with target price of Rs 1148 based upon 21.5x FY22 EPS.

Bharti Airtel | Target price: Rs 597

Price competition with Reliance Jio, regulatory and technological changes, large capex and regulatory payments, and adverse currency movements are key risks for Bharti Airtel. However, we remain optimistic about its revenue and profitability trajectory as well as cost rationalisation efforts going forward. We feel investors can buy the stock at the current market price and add on dips to Rs. 400-403 band (6.0xFY22E EV/EBITDA) for a target of Rs. 597 (8.0xFY22E EV/EBITDA).

Cadila Healthcare | Target price: Rs 508

The company's domestic and wellness businesses should grow in high single digits and low-mid teens, respectively. The stabilisation in the price erosion in the US generics business coupled with a strong pipeline would drive growth in the US business. Moreover, it has reduced net debt by Rs 2,700 crore to Rs 4,030 crore through fund raising of Rs 1,000 crore and a better working capital cycle in H1FY21. The near term uncertainties and the US FDA issues at Moraiya plant would be an overhang on the stock, until successfully resolved. We recommend buy on Cadila Healthcare at CMP and add on dips to Rs 385-393 (19.5x FY22E EPS) with Target Price of Rs 508 based upon 25.5x FY22E EPS.

Credit Access Grameen | Target price: Rs 797

We have envisaged growth of 31 per cent CAGR in NII, 33 per cent CAGR in per provisioning operating profit and 22 per cent in net profit over FY20-22 on the back of fast growing nature of the company and synergy benefits from merger with Madura Micro Finance. Advance growth is estimated at around 18 per cent CAGR over the same period. Asset Quality might deteriorate in FY21 but we feel that the situation will start normalizing from FY22. The company is currently trading at 2.5x FY 22E P/ABV, which looking at the growth potential has room for decent upside.

Gujarat Gas | Target price: Rs 356

The sharp rise in LNG price, changes in the regulations, and marketing exclusivity are key risks for the company. However, it plans to expand the network within existing geographical areas and is expected to report high volume growth going forward. We feel investors can buy the stock at CMP and add on dips to Rs. 270-273 band (15.25xFY22E EPS) for a target of Rs 356 (20.0xFY22E EPS).

ICICI Bank | Target price: Rs 503

Despite such a challenging environment, we think ICICI Bank can deliver up to 11 per cent CAGR growth in NII and 50 per cent in net profit (due to lower base) over FY20-22. Margins and asset quality may remain stable over the same time frame. After stake sales and QIP, the capital positioning of the bank will improve significantly. ROAA is expected to improve to 1.4 per cent in FY22 from the current 0.8 per cent. ICICI Bank will gain market share over the medium term at the cost of PSU banks and weaker private Banks. ICICI Bank quotes at a very large discount to the largest private sector Bank. We see a scope of narrowing the difference.

Infosys | Target price: Rs 1,205

Taking into consideration rupee appreciation against the US dollar, pricing pressure, retention of the skilled headcounts, strict immigration norms and rise in visa costs concern, we remain optimistic on its revenue and profitability trajectory as well as cost rationalisation efforts with robust execution capabilities, robust balance sheet, steady growth momentum going forward.

Mphasis | Target price: Rs 1,511

Foreign currency fluctuation, pricing pressure, and strict US immigration norms, and rise in visa cost are key concerns for Mphasis. Its strong deal wins, healthy balance sheet and expectation of inorganic growth could bring earning visibility in the medium to long term. We feel investors can buy the stock at CMP and add on dips to Rs 1,234-1,238 band (18.0xFY22E EPS).

Radico Khaitan | Target price: Rs 545

Radico is best placed as an attractive value play in the overall IMFL industry in India with a presence in several popular and Semi premium categories. The company has consistently outperformed peers in terms of volume growth and as per management guidance - it should be net debt free by FY22. As margins improve in the future on the back of higher penetration, market share gain, premiumisation and upselling of brands, we believe the company can see significant upside.

United Spirits | Target price: Rs 645

United Spirits has been severely impacted by the pandemic due to the government restrictions. UNSP being the market leader is expected to recover faster than peers on the back of recovery in trade business, increase in at-home consumption, festive season sales, resumption in duty-free sales and benign commodity inflation. We recommend a buy on the stock at CMP and add on declines to Rs 510-491 for a target of Rs 645, valuing the company at 52xFY22 EPS.

ICICI Securities

The Ramco Cements | Target price: Rs 1,000

We model 12.1 per cent revenue CAGR during FY20-23, owing to the fact that the company has been expanding its presence in the eastern region while its capex commitment for FY20-22 stands at Rs 3,730 crore. Though debt levels would rise, debt/EBITDA would improve from 2.8x in FY20 to 1.2x by FY23E. Hence, once capex is complete, it would help improve RoE in double digits. Post expansion, the company is expected to generate an Ebitda of Rs 2,141 crore in FY23E, implying an inexpensive EV/EBITDA multiple of 9.9x on FY23E earnings

SBI Life Insurance | Target price: Rs 1,000

Continued focus on business growth and improvement in product mix has remained the core strength of SBI Life Insurance. In terms of business growth, SBI Life has reported highest NBP growth among top private insurers at around 27 per cent CAGR in the last four years, thereby increasing its market share. We remain structurally positive on the stock given long term growth potential and lower balance sheet risk. Therefore, we remain positive on SBI Life, being a play on growth of life insurance industry led by strong distribution, brand, product mix and operational efficiency

Mahindra Logistics | Target price: Rs 430

Mahindra Logistics has seen a sharp recovery in Q2FY21 that has enabled it to reach pre-Covid levels before peers. MLL has strengthened its already strong liquidity position on the balance sheet and further improved its cash conversion cycle in H1FY21. With its asset light structure, MLL is well placed to face the volatile situation. Also, its recent performance in e-com, pharma, consumer segments, steadily has lowered its dependence on the auto sector.

KPR Mill | Target price: Rs 850

KPR Mill is among select vertically integrated textile players in India (from fibre to fashion) that has displayed consistent revenue growth and positive operating margin trajectory with strong return ratios. We expect garmenting division to be the next growth engine and register revenue CAGR of 15 per cent. Higher proportion of garmenting enhances the overall margin profile as the segment yields margins in the range of 22-23 per cent while high asset turnover would translate into RoCE improvement by 370 bps to 23 per cent in FY20-23. We like KPR as a structural long term story to play the apparel export space

Zydus Wellness | Target price: Rs 2,300

Post consolidation of the Kraft Heinz business, the company would be able to cut cost by reducing redundancies at various stages. This would result in faster decision making and give scale benefits to the company. It would be increasing its direct distribution network to reduce the dependency on wholesales network. Further, the company would reduce distributors from 1,500 to 800 and implement warehouse optimisation, which would reduce the overall cost of logistics. We expect revenue and earning CAGR of 9.1 per cent & 35.4 per cent, respectively, during FY20-23

Syngene International | Target price: Rs 635

The company's management has maintained its guidance for double-digit revenue growth on the back of continuous client additions, an extension of existing contracts, increasing manufacturing and biological contributions besides currency tailwinds. With elite client additions like Amgen, Zoetis, Herbalife, GSK, etc, and multiple year extension of BMS, Baxter contracts, the company remains well poised to capture opportunities in the global CRO space

Cipla | Target price: Rs 900

We expect the company's domestic formulations to be driven by improved productivity of newly inducted field force and product launches besides portfolio realignment for its ‘One-India’ portfolio rationalisation exercise We continue to focus on the management’s long-drawn strategy of targeting four verticals. Another key aspect to watch would be R&D recalibration. Across the board transformation from tenderised model to private model in exports market and towards rapid consumerisation of important Tx, Bx in India bode well to change the investors’ perspective

Kotak Securities

Axis Bank | Target price: Rs 600

We like the bank for its superior franchise at inexpensive valuation and believe it would come out of this crisis relatively stronger. We expect earnings growth of 24.5 per cent in FY22 and 25.4 per cent in FY23. Axis Bank trades at 1.5x FY22E book value. We are valuing the bank at 1.9x book and around 15x on September 2022 Earnings per share for RoEs (Return on equities) of around 12 per cent in FY22 and around 14 per cent in FY23.

Bajaj Auto | Target price: Rs 3,900

Domestic motorcycle retail demand has reached 90 per cent of the last year levels and export motorcycle retail demand has reached 90-95 per cent of the last year levels for the company, which is encouraging. The company will be following a three-fold strategy to gain market share in the domestic two wheeler market. Strong long-term growth potential in export geographies where the company has already established itself as a formidable player. We expect company’s sales volume to grow by 20.5 per cent in FY22 and 14.6 per cent in FY23. We expect gross profit per vehicle to improve to Rs 21,154 in FY23 from Rs 19,307 in FY20 led by richer mix in the domestic two wheeler segment and improvement in export mix.

Larsen & Toubro | Target price: Rs 1,300

We envisage a meaningful recovery in 2HFY21 based on: a strong order inflow pipeline, and favorable gross margin trends sustaining. Existing order backlog can drive a 25 per cent YoY growth in execution in absence of supplychain issues. While domestic market contributes majority of order inflow and backlog, L&T is achieving diversification in regions beyond Middle East. We expect profits to grow by 86.9 per cent and 21 per cent in FY22/FY23, respectively.

Ambuja Cements | Target price: Rs 300

Expansion plans and cost-saving projects provide Ambuja Cements a strong growth visibility. The company is increasing capacity in North India, the most profitable region in the country Strong growth visibility, a robust balance sheet and attractive valuations. The stock is trading at a steep discount to its 10-year mean of 13x EV/EBITDA (Enterprise Value / Earnings Before Interest, Taxes, Depreciation & Amortization) and peers. Our Fair Value of Rs 300/share is based on 8.5x EV/EBITDA December 2022E financials.

ITC | Target price: Rs 260

Cigarette volume dipped a bit in July and August due to local lockdowns but have picked up again in September. FMCG core portfolio (75 per cent of FMCG ex-stationery) is tracking well except for slight moderation in biscuits. ITC has been able to develop strong brands in select categories. The stock offers a good combination of inexpensive valuations (13X Sep 22E PE), healthy dividend yield (6 per cent) and promise of solid LT growth in FMCG. We do not see any structural negative emerge for ITC from the ongoing pandemic.

SBI Life Insurance | Target price: Rs 1,100

We expect SBI Life’s VNB margins to expand 0.3 per cent YoY to 19 per cent in FY21 and further increase to 21 per cent by FY23 led by increasing share of protection mix, pick-up in growth of high-margin non-par savings post slowing down in 2Q, and margin expansion in protection and non-par businesses. We expect improving business momentum in the second half. Strong persistency trends will cushion operating variance.

Infosys | Target: Rs 1,400

Infosys' large deal pipeline remains strong as clients look to accelerate digital transformation programs and focus on automation and cost efficiency. FY21 EBIT margin guidance band is raised to 23-24 per cent from 21-23 per cent earlier. We expect earnings to grow by 12.2 per cent in FY21, 12 per cent in FY22 and 13.2 per cent in FY23. Infosys to lead the industry on growth with success in strategic priorities viz: scaling digital, large deal success, sales and marketing augmentation driving better account mining and stability in management ranks.

Hindustan Zinc | Target: Rs 295

Hindustan Zinc’s strong growth visibility, high payout, Free cash flow yield and inexpensive valuation suggest attractive risk-reward. Our Fair Value works to Rs.295 at an unchanged 8x EV/EBITDA on Mar’22 estimate.

Bharti Airtel | Target price: Rs 710

We believe Bharti remains a solid medium-term bet on improvement in sector fundamentals (regardless of whether the end game is a 2-player structure or a 3-player one and sustained solid execution. Management said that the current tariffs are still at low levels. They have guided for Average Revenue Per User (ARPU) to move to Rs 200 in the short term and Rs 300 in the medium term. We expect Bharti to report free cash flow of Rs 17,227 crore during FY21-23 period. Bharti has sufficient cash on books with no liquidity issues. Bharti can look at asset opportunities but the decision for the same will not be based on pressure to reduce net debt.

Motilal Oswal

State Bank of India | Target price: Rs 300

We believe the earnings normalization cycle for SBI has begun and it remains the best play among the PSU banks, on gradual recovery in the Indian economy, with a healthy PCR of 71 per cent, robust capitalization, a strong liability franchise, and improved core operating profitability

Hero MotoCorp | Target price: Rs 3,700

Hero MotoCorp is poised for faster recovery over other 2W peers due to its rural-focused portfolio and market leadership in the entry and executive segments. Considering its improved competitive positioning post BS6, HMCL should continue to see good demand with its economy-executive focused portfolio.

Infosys | Target price: Rs 1,355

We expect Infosys to be a key beneficiary in terms of recovery in IT spends in FY22. Infosys remains our top pick within the sector given its headroom for margin expansion and strong deal wins.

UltraTech Cement | Target price: 5,600

UltraTech Cement has a strong pan-India distribution network and preferred supplier status for key infrastructure projects. This places it in a good position to tap into expected growth in both retail and institutional (nontrade) cement demand in India.

ICICI Bank | Target price: Rs 525

ICICI Bank continues to see strong growth in retail deposits and has succeeded in building a robust liability franchise over the past few years which continues to improve. Business trends are improving, with disbursement reaching pre Covid / higher than pre-Covid levels (in some segments).

Crompton Consumer | Target price: Rs 360

Crompton has further consolidated its position in the fans and pumps market, and has become the no.2 player in the Water heaters segment. Despite strong element of pent-up demand playing out recently, we believe underlying demand to be in positive territory, which should sustain/improve going forward.

Dabur India | Target price: Rs 600

Dabur’s investment case is strong, supported by: (a) dedicated focus on the Herbal segment, (b) power brand strategy, (c) a spate of new launches, (d) an increasing direct distribution reach and (e) cost savings which would be plowed back into the business.

PI Industries | Target price: Rs 2,611

We believe PI has levers in place to sustain growth momentum, led by (a) ramp-up in operations of two multi-purpose plants , (b) revenue from the Isagro acquisition, (c) sustained growth momentum in the CSM business, and (d) product launches in the domestic market providing earnings visibility.

Divi's Lab | Target price: Rs 3,520

We are positive on DIVI given favorable demand for its APIs, margin enhancement owing to an increase in the in-house manufacturing of intermediates, and additional revenue from new capex.

IDBI Capital

APL Apollo Tubes | Target: Rs 3,740

APL Apollo’s management has a strategy to strengthen balance sheet during the lockdown. We believe steel prices are unlikely fall meaningfully hereon which bodes well for APL’s margins. We expect strong recovery in volumes and profitability from H2FY21. APL‘s stock is trading at an attractive valuation of 17x FY22 P/E given that we forecast its EPS to grow 50 per cent in FY22.

Alembic Pharmaceuticals | Target: Rs 1,360

The company has filed 8 ANDAs during the Q2FY21 and received approvals for 4 ANDAs. Cumulatively, company now has 191 ANDA filings, with 125 approvals & 79 products launched so far. Company launched 3 products in the US in 1QFY21, and will launch 5 products in 2QFY21. For full year FY21, company plans to launch 15-20 new products. The stock is trading at a PER of 17.5x FY21 Bloomberg EPS estimates which looks attractive.

Bayer CropScience | Target: Rs 6,850

We believe agrochemicals segment is least affected due to any natural calamity as food cultivation remains at the heart of any activity in the country. Also, Bayer Crop’s acquisition of Monsanto India resulted into a bigger entity in agro-chemical and seed. This will unlock the growth potential of Indian agriculture as a global producer and exporter of food, feed and fiber. Further, the merger has resulted in cost efficiencies and revenue synergies and would result in incremental earnings growth for Bayer Crop. Moreover, the company enjoys a unique position in the domestic agrochemical space due to its ability to offer new innovative products.

Johnson Controls | Target: Rs 2,970

The government has taken several initiatives to promote domestic manufacturing of ACs and its components such as Phased manufacturing programme, review of FTA’s and Quality Control Order for component imports. These schemes will help in reducing import dependence and promote indigenization through backward integration. JCH-IN stands to gain due to its focus on backward integrated manufacturing units, India specific R&D, technology and product development capabilities. With the launch of new model ‘Kaze’ in split and window AC it entered mass premium segment to reach out to more customers.

Nestle India | Target: Rs 20,820

Nestle will be least impacted by disruption from Covid-19 as 90 per cent of its product portfolio falls under essential category. Moreover, Nestle enjoys superior pricing power. This is largely supported by R&D of parent company. The management has guided for Rs 26 billion capex over next 3-4 years to develop new factory in Sanand, Gujarat and enhance existing capacities.

IIFL Securities

Reliance Industries | Target price: Rs 2,054

The scale and complexity of its refinery enables it to maximize its margins by capitalizing on lightheavy differential and altering its product slate. High level of downstream integration and complex projects like ROGC provide an added advantage while also safeguard the business during volatile periods. Gradual recovery in middle distillates cracks (4QFY21 onwards) from decade low levels are likely to help O2C margins in FY22E.

The Retail and Jio businesses have enabled significant deleveraging and are turning in solid performance which is offsetting weakness in refining segment. Factors like entry in post paid & enterprise segments and collaboration with Google for entry-level smart phone would drive growth for Jio. Moreover, a market move towards 2-player configuration has accelerated with likely delay in tariff hikes. New store opening and scale up of JioMart along with inorganic opportunities are main drivers for R-Retail.

We expect Reliance to register 18% pa PAT growth over FY21-23E largely driven by B2C businesses.

Infosys | Target price: Rs 1,400

Underpinned by higher visibility, Infosys has guided for 2-3 per cent cc YoY growth in FY21, a year when most peers will likely witness revenue declines. With around 60 per cent of revenue coming from lesser impacted verticals including Communications and Hi-Tech, we forecast 3.5%/12% cc YoY revenue growth in FY21/22. With the investment phase now behind, margins should start to improve. We believe Infosys will outperform TCS on revenue growth by 500bps in FY21, for the first time in 15 years.

ICICI Bank | Target price: Rs 530

We believe that ICICI Bank is well placed in the current scenario to gain market share across loans, deposits and revenues on the back of its funding position and product offerings. We expect loan growth of 12 per cent CAGR over FY20-23 aided by higher growth in the retail loans. Gradual run-down of excess liquidity and increase in retail loan mix would aid NIMs going forward

Profitability of life insurance, general insurance, asset management and securities companies remains robust. Almost all group businesses will end up on a stronger footing versus peers in the medium term.

HCL Technologies | Target price: Rs 1,000

The company has been witnessing solid traction in deal wins and the pipe line remains robust which provides good revenue visibility. We believe that HCL’s portfolio is relatively insulated vs. peers as it has lower concentration to verticals like travel, energy, hospitality, etc. and higher exposure to low-impact verticals like BFSI, healthcare and technology. Moreover, it has around 37 per cent exposure to IMS (resilient service line) where it has strong partnerships and capabilities that can enable it to capitalize on opportunities in areas of cloud migration and network security. Aided by a healthy mix of recurring product revenue & managed services, we expect HCL Tech to post US revenue CAGR of 6 per cent over FY20-22 with earnings CAGR of 12 per cent.

Apollo Tyres | Target price: Rs 175

We believe that FY21 is likely to be a tough year due to continued fall in OE sales (more so in MHCVs). The situation is likely to improve sharply in FY22, with strong rebound in OE sales and normalization of replacement demand (already evident). As the new capacities start generating commensurate revenue there would be a multi-fold growth in earnings over FY21-23. We expect positive FCFF would assist in bringing down debt and resulting in lower interest outgo.

JB Chemicals | Target price: Rs 1,125

JB Chemicals has been outperforming the Indian pharma market and we expect this outperformance to sustain on account of new launches and strong growth in focused-products group (especially cardiac). We believe that KKR would also look to accelerate growth in various business segments of JBCP. We believe KKR can extract cost savings of 250-300bps which, along with improving India rep productivity and higher growth in the CMO business, can expand JBCP’s overall Ebitda margins from 22 per cent in FY20 to 27 per cent in FY23.

Dr Reddy's Laboratories | Target price: Rs 5,800

DRL has recently had a string of good new launches in the US market, and the momentum is likely to sustain, with anticipated launches for generic Nuvaring & Vascepa in FY22 and generic Revlimid in FY23. Additionally, DRL can drive improved growth in the acquired Wockhardt India portfolio through investments in branding and expanding doctor-reach, while the company’s API business would benefit from structural tailwinds owing to de-risking of China-linked manufacturing supply chains.

We expect DRL’s base business EPS (excluding gRevlimid) to register 21 per cent CAGR over FY20-23, led by 13 per cent revenue CAGR and 350bps margin expansion (new US launches, cost control) over the next 3 years.