HDFC Securities picks these 'Super 10' for 2021

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HDFC Securities picks these 'Super 10' for 2021



The year 2020 was among the worst years for the global economy in more than 70 years. HDFC Securities expect 2021 to be a year of restoration as some segments have reached near-normalcy, while others will attain so in the coming months. It brings 10 stocks from different sectors that are likely to benefit from the rebound in economic activities. These companies are likely to witness superior earnings growth and outperform the benchmark indices.

Bandhan Bank | The bank has consistently demonstrated a strong track record in growing its balance sheet/earnings (AUM grew by CAGR 44% FY10-20) and maintained a robust market share/cost leadership with superior return ratios, pristine asset quality and low-cost DSC (door-step service centres) network. HDFC Securities expect the bank to deliver RoA in the range of 3.3-3.5% and RoE of ~ 19-20%. At CMP of Rs 410, the bank trades at 3.2x FY22E ABV. It believes the bank will continue to trade at premium valuations given the huge opportunity in the MFI business.

Birla Corporation | The company has 4.2% market share in the Indian cement industry. It has a 15.58 MTPA of cement capacity, 52,631 metric tons of jute and 3,750 metric tons of iron & steel casting installed capacity. Its 34% cement capacity is located in Madhya Pradesh followed by 26% in Rajasthan and remaining in other regions. Its debt-funded expansion and ownership fight can create pressure on valuation and performance. HDFC Securities expect the company to benefit from the regionally diversified position with upcoming capacity. It likes Birla Corp due to its extensive retail presence in the lucrative north and central regions, substantial ongoing cost reduction and a healthy balance sheet despite significant expansion plans.

GAIL (India) | HDFC Securities expects GAIL's ongoing pipeline projects to enhance its dominant market position over the medium term. GAIL owns 70% of India's gas transmission network, which is its stable, non-cyclical and regulated business. This is likely to remain the key operating income contributor over the medium term, generating stable cash flows. Cost-effective operations, experienced management, attractive valuations and sound financials are key advantages offered by the stock apart from a decent dividend yield. The stock trades at 10.2x FY22E EPS.

Hindustan Petroleum Corporation | Hindustan Petroleum Corporation Ltd (HPCL) is one of India's top-three oil marketing companies. HPCL's marketing business is the strongest among peers, with consistent market share gains in the auto fuel segment despite rising private competition. HPCL is targeting the completion of the Mumbai and Vizag expansions in 2021, followed by upgradation at Vizag in 2022 and Rajasthan (Barmer) refinery in 2023. The company expects all pipeline projects to be completed in time. The stock is trading at 5.3x FY22E EPS.

Nippon Life India Asset Management | A complete exit of ADAG and promoter backing of global giant Nippon gives HDFC Securities confidence in the company's future. Extensive expansion to newer locations and industry-leading B30 AUM augurs well for NAM India. Given the massive under-penetration of financial products and inclusion in India, there is enough scope for AMCs like NAM India to continue to expand profitably.

Oil and Natural Gas Corporation | ONGC enjoys a dominant market position in the domestic crude oil and natural gas production business with large proven reserves, globally competitive cost structure and stable performance of its subsidiary ONGC Videsh Ltd. (OVL). The government is looking to provide a package of measures to help domestic oil producers pull through the price crash and the uncertainty in the global oil market. Any relief in this regard could be positive for ONGC to add to its profitability. Acquisition of a majority stake in HPCL fits well into the group's integrated energy strategy.

State Bank of India | SBI is almost immune to any liability-side risks at this juncture, given its expansive, granular deposit base and government's majority holding. It is better placed to curtail asset-quality worries than many other large banks because of the quality of its loan book. Moreover, ample provision coverage will curtail incremental loan loss provisions. SBI has one of the strongest deposit franchises along with inexpensive valuations.

Source : https://www.moneycontrol.com/news/photos/business/stocks/hdfc-securities-picks-these-super-10-for-2021-6325101.html/amp