4 Stocks To Buy As Suggested By ICICI Securities

In the face of mixed global indications, domestic equities markets opened Monday's trading session at new all-time highs. The S&P BSE Sensex surpassed 61,800, while the NSE Nifty 50 hovered around 18,500. Following are ICICI Securities' top four stock picks after these companies released their quarterly reports.

Buy HCL Technologies with upside potential of 18%

HCL Technologies (HCLT) serves the BFSI, retail, health, telecommunications, manufacturing, media, and hi-tech industries with IT, ER&D, and products.

ICICI Direct sees a nearly 18% upside on the stock of HCL Technologies from the current market price Rs 1251. The firm has set a target price of Rs 1475 on the stock.

Q2FY22 Results of HCL

• HCLT reported good income from IT services.
• In CC terms, revenue climbed 3.5 percent over the previous quarter. Revenues from IT services and ER&D increased by 5% year over year, while P&P fell by 8%.
• EBIT margin fell 63 basis points quarter over quarter, including a 50 basis point impact from reduced P&P revenues.
• Revenues from P&P are likely to be unchanged this year, compared to previous projections of low single-digit increase.

HCL Technologies: Minimum 75% payout for FY22-26

Target And valuation

"HCLT share price has grown by ~3.5x over the past five years (from ~| 364 in October 2016 to ~| 1,259 levels in October 2021). We continue to remain positive and retain our BUY rating on the stock. Target Price and Valuation: We value HCLT at Rs 1475 i.e. 24x P/E on FY23E EPS," the brokerage has said.

Key triggers for future price performance:

• The company continues to secure multiyear contracts in Cloud transformation, cyber security, and other areas.
• In FY22E, the company expects solid double-digit revenue growth, primarily due to better growth in IT & business services and ER&D.
• We predict HCLT to grow at a 13.2 percent CAGR in FY21-23E as large deal wins increase, geographies expand, and sales and capabilities are invested.

Buy Wipro with upside potential of 15%

Wipro is a BFSI, health, consumer, energy & utility, technology, and communication IT, consulting, and BPO firm.

ICICI Direct sees a nearly 15% upside on the stock of Wipro from the current market price Rs 708. The firm has set a target price of Rs 815 on the stock.

Q2FY22 Results of Wipro:

• Wipro announced strong Q2FY22 performance.
• In dollar terms, revenues climbed 8.1 percent over the previous quarter, with organic growth accounting for 4.6 percent.
• In Q2, Wipro signed nine significant deals with a total value of $580 million. In Q3FY22E, Wipro expects to gain 2-4 percent QoQ.

Wipro: Strong Q2 numbers

Target and Valuation

"Wipro's share price has grown by ~4x over the past five years (from ~| 174 in October 2016 to ~| 708 levels in October 2021). We maintain BUY on strong deal momentum especially on large size deals. Target Price and Valuation: We value Wipro at Rs 815 i.e. 29x P/E on FY23E EPS, the brokerage has said.

Key triggers for future price-performance:

• Restructuring of the organisation, client mining, and the desire to win one significant transaction every quarter to fuel growth are all part of the new CEO's plan to turn around the company.
• Higher penetration in Europe, client mining, new logo acquisition, and traction digital sales will all help to boost revenue growth.

Buy HDFC Bank with upside potential of 19%

HDFC Bank is a leading private sector bank with a long history of continuous expansion and operational performance.

ICICI Direct sees a nearly 19% upside on the stock of HDFC Bank from the current market price Rs 1685. The firm has set a target price of Rs 2000 on the stock.

Q2FY22 Results of HDFC Bank

• Overall, the performance was in line with expectations.
• Advances increased by 15.5 percent year over year to  11.9 lakh crore, while deposits increased by 14.4 percent.
• NII is up 12.1 percent year over year, NIM is unchanged at 4.1 percent, and C/I is up QoQ to 37 percent.
• R/s increased 90 bps QoQ to 1.7 percent, while GNPA climbed 12 bps QoQ to 1.35 percent.
• HDB Financial's gross stage 3 assets are at 6.1 percent, down from 7.7 percent in the previous quarter.

Buy Mahindra CIE with upside potential of 31%

Mahindra CIE (MCI), a multi-technology, multi-product automotive component supplier established in Spain, is part of the CIE Automotive Group.

ICICI Direct sees a nearly 31% upside on the stock of Mahindra CIE from the current market price Rs 251. The firm has set a target price of Rs 331 on the stock.

Q3CY21 Results of Mahindra CIE

• MCI had a good Q3CY21 performance.
• Consolidated net sales increased by 2.4 percent on a quarterly basis to $ 2,091 crore.
• EBITDA margins were steady year over year at 12.8 percent.
• PAT increased by 22.2 percent year over year to Rs 166 crore, helped by a lower effective tax rate.

Mahindra CIE: Steady performance; investment thesis unchanged

Target and Valuation

"The stock price has grown at ~5% CAGR over the past five years (from ~| 190 levels in October 16), slightly outperforming Nifty Auto index. We retain BUY on expected margin improvement & inexpensive valuations. Target Price and Valuation: We introduce CY23E numbers; value MCI at 10x average CY22E-CY23E EV/EBITDA for the revised target of Rs 330," the brokerage has said.

Triggers for future pricing performance

• We anticipate a 16.7% net sales CAGR in CY20-23E, led by the India business.
• Higher utilisation and efficiency measures will help boost margins to 13.5 percent (CY23E)
• CY23E EPS expected to be | 18/share; RoCE expected to improve to 12% by CY22E.
• CFO and FCF yields in CY23E were 12 percent and 7%, respectively, with net debt free b/s.

Disclaimer

The above 4 stocks to buy are picked from the report of ICICI Securities. Please note investing in stocks is subject to market risks and one needs to be cautious at this point of time as markets have gone-up sharply. Neither the author, nor Greynium Information Technologies Pvt Ltd would be responsible for losses incurred based on a decision made.