These 10 NSE 200 Stocks Expected to Surge 20-40% in One Year, from HUL to HDFC Bank and ITC

Synopsis: The article discusses bullish sentiments on the Indian equity market despite global tensions and local demand challenges. Brokerages foresee Nifty 50 index growth and favor BFSI stocks. Specific companies like Dabur India and ITC are noted for potential growth. Caution is advised, and thorough research is recommended before investing.

Despite recent global geopolitical tensions and a domestic slowdown in consumer demand, brokerages maintain a positive outlook on the Indian equity market.

They anticipate the Nifty 50, a key benchmark index, to surge by 11% over the next year, reaching an estimated level of 24,597.40 by April next year, as per Bloomberg estimates.

Comparatively, the index has witnessed a 22.6% increase since April 2023, with a 5.63% rally between April 2022 and April 2023, primarily attributed to a continuous uptick in corporate earnings.

Projections indicate a 14.3% increase in the Nifty 50's earnings per share (EPS) to Rs 1,070.7 from the current Rs 936.5. This signifies a moderation in the index valuation ratio over the next year.

Moreover, the Nifty 50 trailing price-to-earnings (P/E) multiple is expected to decrease to 23x by April next year from the current 23.6x. This contrasts with a 13.3% increase in the index P/E multiple over the past year.

Expectations are high for top-performing stocks across sectors, projected to surge by 20-40% driven by earnings growth and optimism in the market.

Among the favored stocks are those from banking, financial services, insurance (BFSI), fast-moving consumer goods (FMCG), and consumer goods sectors. Notably, despite recent underperformance, these sectors are poised for a potential turnaround.

The list of bullish stocks from the NSE 200 index, excluding loss-making companies, reflects the market's confidence and diversity in its investment choices.

Vedant Fashions, for instance, despite facing challenges in sales growth, maintains a robust competitive position and business model. Although experiencing a stock price decline, its strong fundamentals and market positioning remain intact.

Dalmia Bharat, a cement manufacturer, has faced challenges over the past year due to pricing concerns in its primary markets in Southern and Eastern regions.

HDFC Securities reports a 4% sequential correction in cement prices during Q4FY24, contrary to the initial expectations of a marginal increase.

Despite this, prices in these pivotal markets appear to have stabilized. With Dalmia Bharat's strong foothold in the East and South regions, alongside continuous capacity expansion, its market position is expected to strengthen.

Anticipated growth includes a 20% increase in clinker capacity by FY26 across its operational sites, contributing to robust business expansion.

HDFC Bank experienced a downturn in the past year, with its stock declining by 10.6 percent since April 2023, significantly underperforming benchmark indices like the Sensex, which surged by 19.5 percent during the same period.

   

The stock's lackluster performance can be attributed to subdued earnings growth following its merger with Housing Development Finance Corporation in July last year.

In Q2FY24, the bank's net profit rose by 6.1 percent year-on-year (Y-o-Y), marking the first quarter post-merger. However, earnings growth further declined to 2.6 percent Y-o-Y in Q3FY24. Similarly, the Y-o-Y growth in the bank's gross interest income decelerated to 21.8 percent in Q3FY24 from 26.3 percent in Q2FY24.

Despite these challenges, brokerages have turned bullish on the stock due to anticipated faster growth in incremental deposits, improvement in the credit-to-deposit ratio, and its relatively low valuation.

Dabur India anticipates sluggish demand in the short term, despite the boost from price reductions in rural staple products. However, the company foresees an uptick in consumption driven by favorable crop harvest and normal monsoon predictions.

Expectations include an expansion in gross margins due to reduced raw material costs and cost-saving measures.

Centrum Research notes that Dabur effectively managed inflationary pressures through disciplined cost control, operational efficiencies, and strategic price adjustments.

BP Equities recommends buying the stock, citing its significant terminal value, appealing valuation, high return on capital employed, and Dabur's enhanced focus on new product innovation and launches.

Coforge has been consistently reporting a total contract value of over $300 million for eight consecutive quarters, and analysts anticipate this trend to persist in the March quarter. Operating profit margins are expected to improve during this period due to the complete reversal of furloughs and increased deal ramp-ups.

Analysts also highlight various margin levers available to the company, such as sales optimization, moderation of administrative expenses, reduced attrition, increased offshoring, and enhanced utilization.

Despite a recent share price correction of 24% from its 52-week high, Sharekhan Research views this as a favorable investment opportunity for medium to long-term investors.

Additionally, PhillipCapital Research predicts continued robust earnings growth and margin expansion for Coforge in the medium term.

Axis Bank has emerged as one of the top-performing banks on the bourses in the past year. Its stock price has surged by 22.6% since the end of April 2023, outpacing the approximately 20% rally seen in leading benchmark indices during the same period. This remarkable performance is attributed to the bank's robust credit growth and its ability to gain market share in advances and deposits.

Investors are optimistic about Axis Bank's prospects, especially following its acquisition of Citibank's high-margin retail business in India in March last year. This strategic move is expected to further bolster the bank's position in the market and contribute to its growth momentum.

Brokerages anticipate that Axis Bank will sustain its growth trajectory going forward. Religare Broking, for instance, estimates that the bank will achieve a growth rate of 500-600 basis points higher than the industry average. Consequently, Axis Bank is projected to achieve a net profit growth of 21% on a compounded annual basis from FY23 to FY26.

Bajaj Finance, a prominent retail non-bank lender, experienced a shift in performance during the second half of FY24, following its earlier outperformance in the first half of 2023-24.

Despite a modest increase of 10.9% in its share price since the end of April 2023, compared to a 19.5% rise in the BSE Sensex during the same period, Bajaj Finance's performance has lagged.

Investor concerns primarily revolve around a sustained decrease in net interest margin amid a rising interest rate environment and robust credit expansion.

In Q3FY24, Bajaj Finance witnessed a slowdown in net profit growth to 21.1% year-on-year, down from 25.6% in Q1FY24 and a remarkable 62% in FY23.

Conversely, its gross interest income displayed relatively stronger growth, increasing by 32.4% year-on-year in Q3FY24, though slightly lower than the growth rates seen in Q1FY24 and FY23.

Brokerages are now anticipating a resurgence in Bajaj Finance's earnings growth, driven by accelerated growth in its loan book and a moderation in borrowing costs.

Hindustan Unilever is anticipated to witness a gradual recovery in volume growth, having potentially reached its lowest point. Despite an anticipated subdued revenue in the near term due to sluggish demand patterns, gross margins are expected to receive some bolstering from reduced raw material costs.

Nuvama Research suggests that with normal monsoon predictions for the upcoming year and the impending general elections likely leading to increased expenditure and incentives, consumer demand could see a resurgence from the second quarter of FY25 onwards.

The market will closely monitor the execution in segments like beauty and personal care, as well as the scaling up in food and refreshment categories under the leadership of the new CEO.

Motilal Oswal Research considers the valuation of Hindustan Unilever at 45 times FY26 earnings per share estimates to be reasonable, especially in light of its historical performance, with the last five-year average P/E standing at 65 times on one-year forward earnings.

ITC anticipates a rebound in volume growth and an enhanced product mix within its cigarette business, driven by innovations in both regular filter and king-size segments. A stable tax environment is expected to further support growth and facilitate market share gains.

The contribution of ITC's non-cigarette business has seen a notable rise, increasing from 17 per cent to 27 per cent since FY13. This diversification has been primarily led by the FMCG sector, which has expanded nearly fivefold during the same period. Notably, the FMCG business has consistently improved its operating profit margin, reaching low double digits.

In the challenging environment of 9MFY24, the FMCG segment demonstrated resilience, achieving industry-leading growth in both revenue and segment profit. Antique Stock Broking highlights an 8 per cent rise in revenue and a remarkable 36 per cent year-on-year increase in segment profit during this period.

Additionally, other sectors within ITC, such as hotels, are experiencing robust demand and increased capacity, further strengthening the company's overall performance.

Over the past year, the performance of health insurer Star Health and Allied Insurance has trailed behind on the stock market.

Since the end of April 2023, the company's share price has declined by 5.5 per cent, contrasting sharply with the nearly 20 per cent surge seen in leading indices during the same period.

Analysts attribute this underperformance to concerns surrounding a slowdown in premium income during the March quarter of FY24. This deceleration is primarily attributed to the high base of March 2023 and a general moderation in premium income within the health segment.

Despite these challenges, the insurer managed to achieve a significant year-on-year increase in net profit, up by 36 per cent in the first nine months of FY24. Similarly, its operating income also exhibited growth, rising by 14.3 per cent year-on-year during this period.

Over the past year, the performance of health insurer Star Health and Allied Insurance has trailed behind on the stock market.

Since the end of April 2023, the company's share price has declined by 5.5 per cent, contrasting sharply with the nearly 20 per cent surge seen in leading indices during the same period.

Analysts attribute this underperformance to concerns surrounding a slowdown in premium income during the March quarter of FY24. This deceleration is primarily attributed to the high base of March 2023 and a general moderation in premium income within the health segment.

Despite these challenges, the insurer managed to achieve a significant year-on-year increase in net profit, up by 36 per cent in the first nine months of FY24. Similarly, its operating income also exhibited growth, rising by 14.3 per cent year-on-year during this period.

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