Maintain bullish stance on equities with upgraded target of 18300 for Nifty in September 2022

Nifty

Maintain bullish stance on equities with upgraded target of 18300 for Nifty in September 2022. Strong support at 16800-17000 zone.

Strong outperformance in broader market space ahead

Expect relative outperformance of BFSI, Auto, Capital goods, PSU and consumption

FIIs’ aggressive buying in Indian equities with net figures for the month were over Rs 45000 crore so far, which is the highest monthly inflows seen since December 2020

Reliance AGM

Updates on RIL Green hydrogen and Solar power initiatives

Timeline for bidding of 12 mmscmd gas from its MJ field in Krishna Godavari block (to be commercialised in Q3FY23)

Indication regarding timeline for Reliance Retail IPO could be the key announcements

Textile Sector:

· International cotton prices in the recent days have been on an uptrend with prices rising ~ 18% in the last 20 days.
· On the other hand, domestic cotton prices in India during the same period (last 20 days) have marginally increased by ~ 5% to | 235/kg.
· The disparity between international and domestic prices have narrowed down and if such scenario prevails for a longer duration with elevated global cotton prices, the tide for Indian cotton textile value chain can turn favourable.
· Preferred stocks: KPR Mill and Gokaldas Exports.

Auto

SUV share in the total passenger vehicle sales volume has risen to 49% as of FY22 vs. 28% pre-Covid (FY19)

We remain positive and have a BUY rating on all the three listed players in PV segment namely Maruti Suzuki (target price: ₹ 10,000), Tata Motors (target price: ₹ 530) and M&M (target price: ₹ 1550)

Metal

Recently China further stepped up its economic stimulus with a further 1 trillion yuan (US$ 146 billion) of funding largely focused on infrastructure spending

Chinese push to revive its economy coupled with supply constraints from Europe due to higher energy costs has kept the metal prices firm auguring well for metal stocks.

Banks

Mid sized private sector banks and PSU banks witnessed valuation catch up in last week and Outperformed larger banks

Prefer SBI, BoB, Indian Bank among PSB packs and Federal Bank, City Union Bank in mid-size private banks

Defense

The share of imports, which is about 35-36% of the total defence procurement budget, is likely to come down

We see a strong revenue visibility for the defence PSUs looking at the strong order book (at 3-4x TTM revenues for HAL, BEL & BDL)

Attractive Mid/Small Cap

1. City Union Bank (TP – Rs 215)

Best among smaller banks, Growth recover is good, asset quality slated to improve. Recovery in MSME sector (especially tourism and hotels) to lead to reversal in NPA trajectory (GNPA – 5%, R/s – 5%).

2. Action Construction Equipment (TP 285)

Strong double digit growth guidance for FY23 across Segment. We continue to remain positive and retain our BUY rating on the stock and value ACE at | 285 i.e. 18x PE (FY24E)

3. Bharat Dynamics (TP: 1070; Potential Upside: 30%)

Bharat Dynamics is expected to deliver strong earnings growth of ~25% CAGR over FY22-24E led by execution of existing strong order backlog. Valuations seem attractive at 19x on FY24E earnings.

4. Ratnamani (CMP – Rs 1840, Target – Rs 2000, Rating – Buy)

Ratnamani’s order book has reached ~ Rs 3500 crore, which is also highest ever order book position for the company. Ratnamani has guided for a topline growth of ~15-20% range over the next couple of

5. Aditya Birla Fashion & Retail: (TP: 350, upside: 16%)

ABFRL has charted out growth strategies to become a ~US$2.8 billion entity (| 21000 crore) by FY26E, translating to 15% CAGR in FY20-26E. ABFRL has strengthened its balance sheet through recent equity infusion with net debt declining sharply from | 2500 crore (in FY20) to ~| 649 crore.

6. Siyaram Silk Mills (TP: 610, upside: 22%)

Siyaram Silk Mills, has created a strong brand portfolio largely catering to Tier II & III towns and is expected to benefit from demand revival. The stock trades at reasonable valuation of ~ 9x FY24E earning and we value it at | 610 i.e. 11x FY24E EPS.

7. Indian Hotels (TP 330)

Q1FY23 performance remained the best ever so far. H2FY23 is also looking more promising as it will have an advantage of influx of foreign tourists who generally visit India for long haul vacation.

Under AHVAAN 2025, the company plans to have 300+ hotel room portfolio with zero net debt status. IHCL also aims to achieve 33%+ margins.

8. Easy Trip Planners (TP 490)

EMT is the key player in the online travel. With full resumption of air traffic, we expect its gross booking revenue to grow at 39% CAGR during FY22-24E.

9. Phoenix Mills (TP 1630)

PML remains a quasi-play on India’s consumption story, given the quality of assets, healthy balance sheet and strategic expansion plans. Addition of malls of ~6 million sq ft (msf) under development over next four to five years to aid growth.

10 . Mahindra CIE (CMP: ₹ 280, target Price: ₹ 325 upside: 16%)

Mahindra CIE is a beneficiary of increasing share of high margin Indian business and is a proxy play on domestic auto sector revival and demand recovery in Europe. It is primarily a play on demand recovery in passenger vehicle as well as commercial vehicle space.

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