The brokerage company ICICI Securities has selected 10 stocks as its 'Budget Top Picks' ahead of the Union Budget 2022. The brokerage has chosen a time period of 3 to 6 months for all of the stocks and has a technical outlook on all of them, which is briefly detailed below.
Budget Top Picks of ICICI Securities
|Stocks||Target Price||Current Market Price As of 28 Jan, 3:30 pm IST|
|Larsen & Toubro||Rs 2,168||Rs 1,897.85|
|Axis Bank||Rs 870||Rs 764|
|Tata Motors||Rs 555||Rs 497.30|
|United Spirits||Rs 970||Rs 855|
|Bank of Baroda||Rs 116||Rs 103.15|
|Container Corporation of India||Rs 698||Rs 637|
|KPR Mills||Rs 765||Rs 663|
|National Aluminium||Rs 125||Rs 108.75|
|Bharat Dynamics||Rs 548||Rs 482|
|KNR Construction||Rs 358||Rs 301.05|
Larsen & Toubro
The brokerage has stated "The capital goods sector has been outperforming after a decade-long consolidation breakout. Within the capital goods space, we remain constructive on Larsen & Toubro as elevated buying demand emerges from the lower band of the rising channel, thereby confirming secular uptrend is intact and offers fresh entry opportunity."
According to the brokerage "We expect the stock to regain upward momentum, challenge all-time high and gradually head towards Rs 2168 as it is the upper band of the rising channel. L&T's strong order book of Rs 330541 crore suggests good revenue visibility in the coming years. Low to mid teen revenue and order inflow growth in FY22E amid challenges, networking capital to sale expected to remain stable at ~22.3% for FY22E. L&T's focus on asset monetisation to further strengthen the balance sheet and improve return ratios."
The budget report of the brokerage has stated that "The Bank Nifty has been going upward momentum after forming a higher base above 5 months average. Within the Banking space, we remain positive on Axis Bank as the stock is resolving out of higher base formation above 52 weeks EMA coincided with a lower band of upward slanting channel, indicating rejuvenation of upward momentum. Thereby offering fresh entry opportunity with favourable risk-reward setup."
"We expect the stock to resolve higher and head towards Rs 870, which is near all-time high recorded during Oct-21. Axis Bank has a well-diversified loan book having strengths in the both retail and corporate segments. The bank's liability profile has improved significantly, which would be helpful in sustaining margins at a healthy level. Recent quarter performance was healthy and the bank has multiple levers to improve return ratios ahead" ICICI Securities further added.
The brokerage has highlighted that "The stock remains key outperformer within auto space post-pandemic era and remained resilient during recent correction exhibiting strength and expected to resolve out of Bullish Flag continuance pattern. The stock has undergone a shallow correction of its September-October rally (Rs 268-535) wherein 12 week gain has been retraced by only 38.2% over the past 11 weeks. Shallow price retracement indicates lack of selling pressure and continued demand for stock around 50day EMA, which has been held over past 22 months."
According to ICICI Securities "We expect the stock to head towards Rs 555 over medium term which is 123.6% retracement of recent correction (Rs 536-443). The company stays committed to its long-term vision of healthy profitability at (Jaguar Land Rover, JLR), positive free cash flow generation and consequent de-leveraging of balance sheet starting FY23E. This we believe should substantially improve the return ratios matrix (RoCE >15% in FY23E) and drive re-rating at Tata Motors. Recent price appreciation post securing equity investment in its domestic passenger vehicle EV business is a testimony to our positive stance."
United Spirits (USL)
ICICI Securities has said in a report that "The liquor stocks posted a strong recovery in CY21 leading their way to new highs scripting turnaround on long term charts. United Spirits price has resolved out of its six-year consolidation phase (Rs 800-Rs 450) signaling structural turnaround and a new bull cycle ahead. The stock in the last quarter formed a higher base above the long-term breakout area signaling strength."
According to the brokerage "We expect the stock price to head towards Rs 970 levels as it is 80% retracement of the recent breather (Rs 1020-832). Quarterly MACD is in an uptrend and is seen diverging from its nine periods average thus validating positive bias. USL aims to grow its revenues in double digits and expects its operating margin to remain in mid to high-teen levels in the medium term. With its broad portfolio and focus on placing existing brands in the upper prestige segment, along with the introduction of its several iconic brands from Diageo stable, USL is well placed to capitalise on the rapidly growing premiumisation trend in the sector."
Bank of Baroda
The brokerage said "The PSU banking index is resuming uptrend after two months breather. Within the PSU banking space, we expect the Bank of Baroda to outshine its peers as it has formed a higher base above the multi-year falling trend line breakout area and is now forming a higher high-low, indicating resumption of the primary uptrend. Hence, it offers favourable risk-reward. We expect the stock to extend ongoing up move and head towards Rs 116 as it is 123.6% external retracement of Nov-Dec decline (Rs 108-77)."
According to ICICI Securities "On the oscillator front, monthly RSI bounced from its nine-period average that validates positive bias. BoB's subsidiaries are engaged in businesses including capital markets, asset management and joint ventures for life insurance with India First Life Insurance. We believe improving business outlook along with containment of slippages could help overall operational performance and earnings trajectory to improve ahead. The comfortable capital position would enable the bank to propel growth especially in the retail segment while some signs of revival in corporate credit are also visible."
Container Corporation of India (CONCOR)
The brokerage claims that "The stock. after five quarter of strong up move has witnessed shallow retracement in the last two quarters and is currently seen rebounding taking support at the rising 12 months EMA (currently at Rs 611) and the previous major breakout area joining highs since CY2015 thus offers fresh entry opportunity with a favourable risk-reward set up. We expect the stock to resume up move and head towards Rs 698 levels in coming months being 61.8% retracement of the recent breather (Rs 754-582)."
According to ICICI Securities "With timely price hikes, commissioning of CPFS Swaroopganj and expected launch of three new terminals, Concor is expected to capitalise on the increasing volumes, by strengthening its infra and improving its EBIT per TeU (currently at ~Rs 3400 per TeU)."
KPR Mills (KPRMIL)
ICICI Securities has noted that "The textile stocks have been in focus as many companies are witnessing structural turnaround. KPR Mills has been an outperformer within the textile space-maintaining higher peaks and higher troughs in all time frames and we expect it to continue with its outperformance. The uptrend is well defined by stronger rallies and shallow retracements, key ingredients of the major bull phase. During this phase, incremental buying demand is getting attracted at 5-month average, held since May 2020 and even in the recent correction."
As per ICICI Securities "We expect it to continue with its positive momentum and retest its all-time high Rs 765 in coming months. With robust demand for athleisure wear, the company expects new capacity to be fully ramped up in the next eight to 12 months. Subsequently, high asset turnover and a capital-efficient business model are expected to translate to enhanced RoCE for KPR (~29%). We like KPR as a structural long-term story to play the apparel export space."
National Aluminium (NATALU)
ICICI Securities has claimed that "The share price of National Aluminium is in a steady uptrend and earlier during the year in October 2021 has generated a breakout above its four-year range signaling a structural turnaround. The entire up move since October 2020 is well channeled signaling sustained demand and incremental buying opportunity at the lower band of the rising channel. The stock has recently rebounded taking support at the lower band of the rising channel thus offering fresh entry opportunity."
The brokerage has further stated "We expect the stock to continue with its positive momentum and head higher towards the 52 weeks high of Rs 125 levels in the coming months. Recently, NALCO has formally operationalized the 960th pot in its smelter plant at Angul. With this NALCO has successfully put into operation all the 960 pots at its existing smelter plant located at Angul, Odisha and hence thereby achieved 100% operationalization of all the pots."
Bharat Dynamics Ltd (BDL)
In its 'Budget Top Picks' report, the brokerage has said that "Bharat Dynamic is a perfect proxy to PSU theme ahead of Budget. The stock has generated a multi-year breakout on the back of the rising volume, indicating the start of a new bull phase. Thus, it offers a fresh entry opportunity to ride the next leg of secular up move. We expect the stock to challenge all-time highs of Rs 482 and gradually head towards Rs 548 in the coming months as it is a 138.2% external retracement of Aug-Sep 2020 decline (482-280)."
According to ICICI Securities, "The stock has regained upward momentum after forming a higher base above five month's EMA that has offered an incremental buying opportunity on multiple occasions since May 2020, highlighting robust price structure. BDL's current order book is at Rs 8,500 crore and has a significant opportunity in expanding its order book to Rs 23,000-25,000 crores over the next two to three years. In FY21 BDL did revenue of Rs 1,914 crore with the same run rate. There is revenue visibility of ~four years. Order-book accretion is highly visible, as platforms already approved by DAC include SAM (Akash) and ATGM (Astra). Also, BDL is the manufacturer of Agni V (ballistic and nuclear) in India."
The brokerage has claimed that "The stock has witnessed a Change of Polarity as a major long term supply line resistance joining highs since CY 2017 has reversed its role post a breakout in July 2021 and is acting as support signaling positive bias. The stock has already taken 20 weeks to retrace just 61.8% of the previous 19 weeks up move (Rs 188- 343), a shallow retracement signals a higher base formation."
According to ICICI Securities "It has recently rebounded taking support at the 52 weeks EMA (currently at Rs 260) and is expected to continue with its up move towards Rs 358 levels being the 123.6% external retracement of the recent breather (Rs 343-242). Strong order book position (Rs 11,594 crore at Q2 FY22-end; including L1 projects), receipt of appointed date in most of its projects, and healthy execution pick-up to translate into 18.8% topline CAGR over FY21-23E. Price escalation clause in roads agreement and higher margins at irrigation projects to keep operating margin at an elevated level. Asset-light approach via monetization to bring-in incremental cash flows. Networking capital (45 days at Q2 FY22-end) to improve with receipt of irrigation segment' dues."
The stocks have been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.