Friday marked the begging of the new year 2021. After the turbulent journey that stock markets charted in 2020, equities are now expensive as Dalal Street reached fresh all-time highs. Domestic brokerage and research firm Axis Securities believes that the new year will see the revival of growth. In a recent note, Axis Securities said that the key themes for 2021 will be dominated by digital, healthcare and telecom plays while small and midcap stocks march higher and higher. Keeping such trends in mind, the brokerage firm has listed nine stocks that it believes could grow this year.
Target price – Rs 1,745
The firm has a strong market share of over 50% in the Indian toothpaste market. Colgate Palmolive runs an oral care segment and a personal care segment. The firm has said that it will not compromise on volume growth and still maintain competitive positioning in the market by a judicious balance between pricing and volumes, according to Axis Securities. “Colgate cashed in on the Natural’s tailwind momentum and increased reach of its Naturals portfolio by 2x outlets. Naturals portfolio’s household penetration increased by 70bps YTD,” the brokerage firm said. Shares of the firm closed on Friday at Rs 1,577 per share, translating 11% upside potential.
Target price – Rs 1,404
India’s second-largest IT services firm has a strong presence across geographies. The management of Infosys has revised its guidance upwards to 2%-3% from 0%-2% previously for revenue growth in CC terms for the current fiscal year. Deal wins remain strong for Infosys and so deal its deal pipeline. The IT major recently won a $3.2 million contract from Daimler which will see the latter transform its IT operating model and infrastructure landscape across workplace services, service desk, data centre, networks and SAP Basis together with Infosys. Currently, Infosys trades at Rs 1,260 which results in 12% upside for the target price.
Target price – Rs 676
The telecom major has seen a pickup in connections recently and even the stock has zoomed 29% in recent months after a long period of deterioration. “Airtel has launched various products for enterprise as it is trying to leverage growth from ‘Work from Home’. Its key launches include Airtel Blue Jeans, Airtel Secure, Airtel Cloud and Airtel IQ for B2B customers,” the report said. The telecom firm has continued to diversify its offerings and becoming a solution provider continues with its offering in Cloud, security, data centres and CPaaS solutions. Bharti Airtel’s shares closed at Rs 515 apiece on Friday. Upside potential for the target price is 31%.
Target price – Rs 925
The company’s products include rubber/EVA slippers, canvas shoes, sports shoes, sandals, school shoes and leather footwear, Axis Securities said. “Relaxo has maintained healthy operating cash flows, asset turns (~3x) and EBITDA Margins over the years making it a capital-efficient business,” they added. Growth fro Relaxo Footwear is to be driven by further capital expenditure. “Despite slowdown company is moving forward with its capex plan of adding additional capacity of one lakh pairs per day at its Bhiwadi plant with estimated capex of Rs 90 crore owing to the strong demand seen for Flite PU and Sparx brands.” The stock trades at Rs 800 per share, translating to a 16% upside.
Target price – Rs 2,800
Amber has a strong market share in the Air Conditioner market. The firm caters to 49% of client requirement for outdoor units, 78% for Indoor units and 60% for Window AC’s. The firm remains a key play on the PLI theme that, many believe, will provide India’s industrial sector with the required push. “Amber is well-positioned to quickly scale up its operations and capture the opportunity under any PLI scheme announced by the government, as currently a large proportion of AC components and ACs are being imported,” Axis Securities said. The brokerage firm sees 18% upside potential.
Ujjivan Small Finance Bank
Target price – Rs 47
The SFB transitioned from NBFC in 2017 and now cater to low and middle-income category individuals and businesses. “We believe that the fast-paced diversification from a micro financier to a small finance bank and the recent ramp up in the liability franchise after a slow start augur well for the bank,” the brokerage firm said. The target price of Rs 47, would result in 20% upside from current levels.
Target price – Rs 115
Located in the national capital region, Star Cement is the largest cement company in the region. The North-East region contributes 75% of total revenue with strong brand visibility which enables the company to enjoy premium pricing in the region, according to the report. Financially, Star Cement has a healthy position with low debt and strong return ratios. Analysts at Axis Securities expect the company to improve its EBITDA margins from 20.6% in FY20A to 23.9% in FY23E. An upside of 13% is being seen for the stock to reach its target price.
Solara Active Pharma Sciences
Target price – Rs 1,350
API was the theme for 2020 and it does not seem to be dying down any time soon. Solara Active Pharma is a global pure-play API player with 80+ commercial APIs. “Solara has the highest gross margins ~57% in the industry that reflects the company has pricing power and value-added products in the portfolio,” Axis Securities said. The API theme will also be a key thing to watch in 2021 as it aligns with the PLI theme. To reach the target price the stock could rally 14% from current levels.
Target price – Rs 176
NOCIL is a leader in the domestic rubber chemicals market with ~40% share and ~5% global market share. “ We note there has been a significant improvement in the overall business from H2FY21, volumes and pricing are seeing an improving trend which is expected to improve significantly in FY22 on the back of new capacity commercialization, rising new product contribution and low base,” Axis said. The brokerage firm sees 22% upside for the stock.
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