Largcaps December 2023 Picks: 3 Banks, 2 Autos, Airtel, ITC, VBL Top Bets, 10-25% Upside Seen

The initial days of December led to a massive rally in the stock market taking Sensex and Nifty 50 to record-high levels. Sensex is now nearing its critical 77,000 mark and Nifty 50 has crossed 21,000 for the first time. In this already expensive market, there is a list of eight large-cap stocks who have the potential for upside in the range of 10% to 25%. Brokerage Axis Securities has selected these large-cap stocks on their strong fundamentals and healthy growth trajectory.

They are ICICI Bank, Maruti Suzuki, Varun Beverages, SBI, Bank of Baroda, ITC, Bharti Airtel and TVS Motor.

In its December picks note, Axis Securities highlighted that "our Axis Top Picks basket delivered impressive returns of 31% in the last year till 1st Dec'23, beating the benchmark Nifty 50 index (8% return over the same period) by a wide margin. In Nov'23, the basket inched up further by 6% (till 1st Dec 23). We are extremely happy to inform you that our Top Picks Basket has delivered an astounding return of 231% since its inception (May 20). This stands well above the 119% return delivered by NIFTY 50 over the same period. Given these results, we maintain our confidence in our thematic approach to Top Picks selection."

Here's what Axis Securities highlighted about these eight stocks and why it recommended buying them:

1. ICICI Bank:

The bank has been consistently outperforming its peers and has been firing on all cylinders. Brokerage's note said, "We continue to like ICICIB for its (1) Strong retail-focused liability franchise, (2) Buoyant growth prospects, (3) Stable asset quality along with healthy provision cover, (4) Adequate capitalization, and (5) Potential to deliver robust return ratios.

That being said, the brokerage has maintained a BUY rating on the stock with a target price of Rs 1,250/share (SOTP basis core book at 3x FY25E and Rs 157 Subsidiary value).

YTD, ICICI Bank shares rose by 12% on BSE. The stock is currently at Rs 1010.95 apiece. From the target price, the stock has the potential of nearly 24% upside ahead.

2. Maruti Suzuki:

MSIL has completely refreshed its portfolio and a higher share of premium MPV/SUVs in the sales mix will drive the Revenue/EBITDA/PAT growth in FY23-26E. Strong order book, higher share of premium SUVs, and CNG vehicles in the sales mix to improve ASP in FY24/25; further improved chip supplies and stable commodity prices to drive Revenue/EBITDA/PAT CAGR of 14%/20%/19% from FY23-26E.

The brokerage has maintained its BUY rating on the stock and valued it at 27xP/E of its Sep'25E EPS (from 28x) to arrive at our TP of Rs 11,800/share (unchanged). This indicates a potential upside of over 11% from the current market price.

On BSE, currently, Marui shares are at Rs 10,600.90 apiece. YTD, the auto giant's stock has zoomed by 26.5%.

3. State Bank of India (SBI):

The management is confident in maintaining margins at current levels, with CoF gradually stabilizing and healthy credit growth sustaining. The bank is looking at expanding physically (physical plus digital). In terms of physical branches, the bank has planned to add 300 branches in FY24. Opex ratios are expected to remain at elevated levels with the bank recording provision for wage revision. However, the focus remains on improving the C-I Ratio aided by improving productivity, digital sourcing, and increasing income. Thus, the brokerage believes, the bank is well-placed to deliver RoA of 1+% over FY24-25E,

Among PSU banks, the brokerage said, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy PCR, robust capitalization, strong liability franchise, and improved asset quality outlook.

It added, "We believe despite the margin pressures, SBIN remain well poised to deliver RoA/RoE of 1%/15-17% over FY24-25E supported by stable credit costs and steady cost ratios. We maintain our BUY rating on the stock with a target price of Rs 715/share (core book at 1.3x Sep'24E and subsidiaries at Rs 164/share)."

This indicates an upside of a whopping over 16.4% on BSE. Currently, the stock is at Rs 614 apiece on BSE.

4. Varun Beverages:

Axis Securities believes that VBL is expected to continue its strong growth momentum on account of 1) the Normalcy of operation and market share gains of newly acquired territories post-COVID-19 disruptions, 2) The management's continued focus on the efficient go-to-market execution in acquired and underpenetrated territories as reflected in its recently commissioned Bihar plant operations (it has started gaining market share), 3) Expansion in its distribution reach to 3.5 Mn outlets in CY23 from 3 Mn currently, 4) Focus on expanding high-margin Sting energy drink across outlets coupled with increased focus on expansion of Value Added Dairy, sports drink (Gatorade) and Juice segment and 5) Robust growth in the International geographies.

The brokerage has set a target price of Rs 1,200, hinting at a potential upside of over 12% on BSE. Currently, the stock is at Rs 1,067.95 apiece level. YTD, the stock has advanced by nearly 62%.

5. Bank of Baroda:

With strong advances growth, stable margins, healthy NII, asset quality under control and adequate capital, Axis Securities note said, "We believe the bank is well-positioned to deliver a sustainable RoA of 1% going forward. We believe current valuations of 0.9x FY25E ABV are attractive and believe BoB is ripe for re-rating, especially given its growth potential. We value BoB at 1.1x FY25E ABV to arrive at a target price of Rs255/share."

This PSU bank stock is well-placed for a potential upside of 20.2%. At present, the stock is at Rs 212.15 apiece. YTD, the stock jumped by nearly 14%.

6. ITC:

According to the brokerage, the narrative around the ITC is getting stronger as all its businesses are on the right track - 1) Stable cigarette volume growth led by market share gains and new product launches; 2) FMCG business reaching the inflexion point as its EBIT margins expected to inch up further and would be driven by - the ramp up in the outlet coverage, effective implementation of localisation strategy, driving premiumisation, leveraging technology on demand and supply side; and moderation of raw material input cost; 3) Strong and stable growth in hotels as travel, wedding, and corporate activities pick up; 4) Stedy and decent performance in paperboard and agribusiness witnessed in the last few quarters.

Moreover, the stock's reasonable valuation among the entire FMCG pack provides a huge margin of safety.

Brokerage has set a target price of Rs 540 on ITC, signalling a more than 20% gain ahead. Currently, the FMCG giant is at Rs 449.15 apiece. YTD, ITC has emerged as the star performer compared to its rivals HUL, Marico, and Nestle among others. So far, the stock climbed nearly 35%.

7. Bharti Airtel:

This telecom giant is the latest to enter the top picks of Axis Securities. The brokerage maintained a buy rating on Bharti Airtel on the backdrop of the company's superior margins, stronger subscriber growth, and higher 4G conversions.

A target price of Rs 1,155 has been set on the telco, which would be a potential upside of nearly 16% on BSE. Currently, the stock is at Rs 999.50 apiece. YTD, the stock gained by nearly 23%.

8. TVS Motor Company:

The brokerage continues to like TVSL considering its strong focus on the EV product pipeline ahead of incumbent 2W OEMs, product premiumisation in the ICE category, and growth in export markets.

Being well-placed among listed players, Axis Securities note said, "We expect the company's Revenue/EBITDA/PAT to grow by ~18%/24%/28% CAGR over FY23E26E. FY24/FY25 to be critical for the company as it executes its EV strategy for the domestic and export markets. Based on the above strong fundamental outlook, we expect the company to deliver a strong ROE ranging between 25%-29% over the next few years."

That being said, the brokerage said, "We reiterate our BUY rating on the stock with a revised TP at Rs 2,100/share, valuing it at a sustainable premium P/E multiple of 30X (earlier 25X) on Dec'25 core EPS (rollover from Jun'25 core EPS) and other investments at 1x P/BV and TVS Credit Services at 2X P/BV."

This would be a potential upside of over 10% in TVS Motor ahead. The stock is currently at Rs 1,902.70 apiece on BSE. YTD, the stock surged by over 77%.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.