SBI Cards, NMDC and more: ICICIdirect lists 7 stock picks for 2024
During the trading session on Monday, January 1, Sensex closed 32 points, or 0.04 per cent, higher at 72,271.94, while Nifty 50 settled at 21,741.90, up 11 points, or 0.05 per cent. The BSE Midcap index hit its fresh all-time high of 37,171.97 while the BSE smallcap index touched its all-time high of 43,094.79 during the session.
After the robust gains in the last two months on expectations of rate cuts in light of favourable macros, the market is expected to see some consolidation due to rich valuations.
The frontline indices rose around 20 per cent in 2023, their second-best year since 2017, and were among the top-performing stock indexes globally. The broader small- and mid-caps gained about 55.62 per cent and 46.57 per cent in 2023, far outperforming the blue-chip indexes despite valuation concerns.
The bull-run in Indian financial markets is likely to continue in 2024 as foreign interest remains robust, with heavy buying expected in both equity and debt markets, said several analysts and industry watchers.
Markets are eyeing a potential upside of 15 per cent from the current levels as Nifty 50 is likely to claim the 25,000-mark by the end of 2024 and the Sensex target is set at 83,250, according to domestic brokerage firm ICICIdirect.
In the current market scenario, ICICIdirect has released its top seven stock picks for 2024 with a potential upside of up to 30 per cent. The brokerage has selected quality stocks on technical as well as fundamental parameters.
Stock Picks for 2024 by ICICIdirect:
Let’s take a look at the top seven technical and fundamental stocks for 2024 by brokerage ICICIdirect:
1.Ugro Capital– Target Price: ₹350 (30 per cent upside)
Focus on cashflow based lending coupled with strong in-house collection infrastructure provides comfort on asset quality for the company. Utilizing proprietary tool (GRO score), to access repayment capabilities of customers through continuous monitoring enables early warning signals aiding collection efficiency.
‘’Expect stage 3 assets (at ~1.9 per cent) to remain in a broad range and credit cost at ~2 per cent ahead. Slippages from restructured bucket remains watchful, but given the size at ~0.6 per cent of advances remains manageable. Buy with TP of ₹350,” said ICICIdirect.
Key risks: Higher than expected increase in delinquencies amid exposure to MSME segment, External events including regulatory changes in co-lending arrangement.
2.SBI Cards– Target Price: ₹950 (25 per cent upside)
Margins for the credit card issuing company is to decline in FY24E at 11.3-11.4 per cent in FY24E. However, being a beneficiary of anticipated reversal in interest rate cycle, expect margins to recover to 11.5-11.6 per cent in FY25E.
Gradual decline in customer acquisition cost by improving digital channel productivity is seen to aid moderation in CI ratio ahead. ‘’Cautious sourcing of customer with risk calibrated approach to acquire customers with higher propensity to revolve is seen to keep credit cost steady at ~6 per cent in FY24-25E. Buy with TP of ₹950,” said the brokerage.
Key risks: Continued decline in proportion of revolver in receivables remains a concern, higher delinquencies could impact earnings momentum.
3.NMDC Ltd– Target Price: ₹250 (21 per cent upside)
The iron ore company production volume remained flat over the seven-year period over FY14-21 at ~30-35 MT but is on the path to achieve the production of ~46 MT in FY24 and likely to cross ~50 MT production volume by FY25.
‘’We have baked in volume CAGR of ~13 per cent to 55 MT by FY26E. This is amidst its ambitious target to expand its capacity to 67 MT by FY26 and further to 100 MT by FY30,” said ICICIdirect.
NMDC is also exploring opportunities in other minerals such as bauxite, gold, diamond, lithium, etc., both in India and overseas. With 20 critical mineral blocks, including 5.9 MT lithium reserves, set for auction, NMDC is well poised to tap this new opportunity.
‘’We have a positive view on NMDC Ltd and assign ‘buy’ rating with a target price of ₹250 wherein we have valued the company at 6x EV/EBITDA on FY26E basis,” said the brokerage.
Key risks: (i) Weak economic outlook in China putting pressure on global iron ore prices; (ii) meaningful change in duty structure (royalty, export) altering the profitability.
4.Uno Minda–Target Price: ₹810 (21 per cent upside)
The brokerage prefers Uno Minda amid its track record of industry leading growth, penchant for content/vehicle increase, robust electric vehicle (EV) orderbook (peak annual revenues pegged at ~ ₹3,000 crore). The history of successful joint ventures with foreign partners and minimal EV risk in its existing portfolio are structural positives
‘’We build 19 per cent sales CAGR over FY23-26E, with PAT CAGR placed at ~25 per cent riding on operating leverage gains in the aforesaid timeframe. Consequent return ratios are expected at ~20 per cent by FY26. We assign ‘buy’ rating to Uno Minda with a target price of ₹810 wherein we have valued the company at 36x PE on FY26E EPS of ₹22.5,” said the brokerage.
Key risks: (i) Slower than anticipated OEM volume growth going forward amid high base (ii) limited margin gains amid new plants commissioning.
5.Greenply Industries–Target Price: ₹295 (24 per cent upside)
The company expects 8-10 per cent plywood volume growth in FY24. We have baked plywood revenues CAGR of ~10 per cent over FY23-26 to ₹2,186 crore with margins of ~10 per cent, driven by value segment growth.
Given the higher margins of medium density fiberboard (MDF) in the mix, overall margins are likely to expand to 11.2 per cent in FY26 compared to 9.2 per cent, according to the brokerage.
‘’The bulk of the residential real estate in last two-three years will start hitting completion in CY24 onwards driving the building materials segment like woodpanel (ply, laminates and MDF). Greenply will be one of the key beneficiary of the same. We have valued the company at P/E of 26x FY25E with a TP of ₹295,” said ICICIdirect.
Key risks: Weaker ramp up in MDF and higher raw material cost.
6.Birla Corporation–Target Price: ₹1,755 (22 per cent upside)
On the account of new capacity addition, company’s volume growth picked-up in FY23 to 10.6 per cent year-on-year after muted growth witnessed in FY21-22. With further ramp-up, company’s capacity utilization and cement volumes to pick-up further in coming period, according to the brokerage.
‘’We estimate volume CAGR of 7.3 per cent (FY23-26E). Operational efficiency measures (raw material sourcing, usage of captive coal & power), govt incentives entitled to Muktaban facility, softening fuel prices, increasing share of premium products and further improvement in capacity utilization, we believe that company’s margins to improve significantly over FY24-26E,” said ICICIdirect
‘’We estimate blended EBITDA/ton to improve to ₹993/ton by FY26E from ₹491/ton in FY23. Valuation at 7.2x EV/EBITDA on FY26E basis looks attractive considering the multiple tailwinds. We value Birla Corp at ₹1755 i.e. 8.5x FY26E EV/EBITDA,” said the brokerage.
Key risks: (i) slowdown in cement demand from housing and infra (ii) correction in cement prices (iii) increase in fuel prices.
7.Grindwell Norton–Target Price: ₹2,700 (20 per cent upside)
The company has invested heavily in the last two-five years and did a capex of ₹424 crore in growth markets. Grindwell Norton average 10-year capex is at ₹54 crore. For FY24, the company expects a similar kind of capex like last year.
‘’We expect, abrasives and ceramics segment to grow at a CAGR of 12.3 per cent and 16.3 per cent over FY23-FY26E. Overall revenue and PAT are expected at 14 per cent and 16 per cent over FY23-FY26E. We value the company at 52x FY26E EPS to arrive at a fair price of ₹2,700 per share,” said the ICICIdirect.
Key risks: Chinese dumping in aftermarkets and slowdown in volume growth
Also Read: Nifty January series outlook: 4 stocks where investors can park their money; do you own?
Nifty earnings has grown more than 30 per cent in H1FY24 on absolute basis. In 2023, the domestic economy was resilient all across this time frame with revival in private capex cycle, robust infrastructure spending by government, record goods and services tax collection (GST) and most importantly margin expansion led healthy high double digit corporate earnings growth, said analysts.
Corporate earnings recovery has been healthy in the recent past with Nifty earnings growing at 22 per cent compound annual growth rate (CAGR) over FY20-23. ‘’Going forward, introducing FY26E, we expect Nifty earnings to grow at a CAGR of 16.3 per cent over FY23-26E,” said the brokerage.
‘’Our December 2024 target for Nifty is set at 25,000 wherein we have valued Nifty at 20x PE on FY26E EPS of ₹1,250/share with corresponding Sensex target set as 83,250; offering a potential upside of ~15 per cent from current index levels,” said Pankaj Pandey, Head Research, ICICIdirect.
‘’As we embark on CY24, there are greenshoots in the form of continued corporate earnings momentum domestically, healthy gross domestic product (GDP) growth, benign commodity prices outlook as well as likely rate cut globally. There seem to be more positive than negatives ahead. Amidst this setup, India is in a sweet spot vis-à-vis global peers with macroeconomic stability and corporate earnings in sight,” said the brokerage.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 01 Jan 2024, 07:15 PM IST
