Largecap stock picks: Reliance Industries, Tata Motors, State Bank of India among top stock ideas

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Yes Securities estimates that the Nifty 50 will rally to 21,000 by December this year and to 32,000 by the year 2025.

Nifty 50 is expected to touch 21,000 by the end of this year, backed by increasing household consumption, strong earnings momentum, and only a gradual rise in the cost of capital, according to Yes Securities. The domestic brokerage and research firm has put out a bullish outlook note for Dalal Street estimating that the Nifty 50 will rally to 21,000 by December this year and to 32,000 by the year 2025. Analysts at Yes Securities have also narrowed down 16 stocks that they believe can help investors pocket strong returns in 2022. Of these stocks picked, 6 are large-cap stocks including Reliance Industries and State Bank of India.

Reliance Industries: Buy
Target: Rs 2860

Reliance Industries Limited (RIL) is India’s largest private sector company. Owned by India’s richest man Mukesh Ambani, RIL is a conglomerate operating in a number of sectors including oil and gas, retail, and telecom. Yes Securities has spotted positives in RIL’s potential to grow in the retail and digital commerce side along with its new venture of renewable energy. “Now a higher focus on B2C segments and technology is aiding the expansion of trading multiples from erstwhile commodity multiples. We value RIL on SOTP basis at Rs 2860/sh, implying a P/E multiple of 24x FY24, as against 20x stock is currently trading at,” analysts said. The target price suggests a 13% upside.

Tata Motors: Buy
Target: Rs 566

Tata Group’s auto unit has seen a strong run on Dalal Street since the second half of 2020. Tata Motors has improved its personal vehicle portfolio led by strong offerings and is already a beneficiary of the commercial vehicle play. Further, Tata Motors is also shaping up as an Electric Vehicle play. “We like TTMT, given its improving India franchise, early leadership in EVs in India, and JLR focus returning to the higher-margin Land Rover brand. Further, the recent TPG deal provides additional headroom on India EV capabilities,” Yes Securities noted. Tata Motors’ share price will have to gain 11% to reach the target price.

SBI Cards and Payment Services: Buy
Target: Rs 1400

The second-largest credit card issuer in India is expected to return to normal growth and profitability soon. With the strong backing of the parent State Bank of India, the company is expected to post strong earnings CAGR. “Notably, it is the only listed pure-play credit card issuer; thus, would continue to command a much higher valuation than Banks and other NBFCs,” the note said. The target price implies 56% upside potential.

ICICI Prudential Life: Buy
Target: Rs 836

Analysts at Yes Securities believe ICICI Prudential to be the best play on the retail protection opportunity. “In terms of channel mix, ICICI Pru is working hard to become more diversified and reduce its dependence on ICICI Bank,” they added. The insurer has become one of the largest pension and annuity providers with pension fund AUM having risen 74% on-year basis. 42% upside is suggested by Yes Securities.

State Bank of India: Buy
Target: Rs 660

The country’s largest public-sector lender is expected to deliver strong growth over the next few years. SBI’s stock price is believed to be aided by its subsidiaries that augment its value. Further, the end of the corporate NPL cycle is working in favor of SBI. The annualized slippage ratio of 0.66% for SBI in 2QFY22 was the lowest among large-cap banks. Stock may rally 29% to reach the target price.

Gland Pharma: Buy
Target: 4,500

Gland Pharma shares have doubled in value after listing in the second half of 2020. Any concerns around the company have been allayed by strong growth. “Over the next 3-4 years, reckon fixed asset turn can increase further as company starts commissioning additional lines (hormonal, lyophilized) as also pre-filled syringes in Pashamylaram. Hence company has adequate capacity to grow for the next 2 years,” Yes Securities noted. The target price implies an upside of 21%.

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