Here Are The Top Stock Picks For January 2024 By Axis Securities

Axis Securities Report

Here are our top picks for January 2024:

Maruti Suzuki India Ltd. – Improved margins on richer sales mix

(Current market price: 10,302, target price: 11,800, Upside: 15%)

Marut Suzuki has completely refreshed its portfolio and higher share of premium multi-purpose vehicle/SUVs in the sales mix will drive the revenue/Ebitda/profit after tax growth in FY23-26E.

Strong order book, higher share of premium SUVs, CNG vehicles in the sales mix to improve average selling price in FY24/25; further improved chip supplies and stable commodity prices to drive revenue/Ebitda/PAT CAGR of 14%/20%/19% from FY23-26E.

We maintain our 'Buy' rating on the stock and value it at 27 times price/earning of its Sep-25E EPS (unchanged) to arrive at our target price of Rs 11,800/share which implies an upside of 14.6% from the current market price.

Key risks:

1. Multiple launches from competitors will make the utility vehicle space more cluttered and competitive in future.

2. Lower demand scenario which may hamper the off-take of vehicles, impacting our sales volumes growth forecasts, which would impact the company’s gross margins negatively.

State Bank of India – RoA Delivery of 1% to continue

(CMP: 642, Target price: 800, Upside: 25%)

Among PSU banks, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy provision coverage ratio, robust capitalisation, strong liability franchise, and improved asset quality outlook.

We believe despite the margin pressures, SBI remain well poised to deliver return on asset/return on equity of 1%/15-17% over FY24-25E supported by stable credit costs and steady cost ratios.

We maintain our 'Buy' rating on the stock with a target price of Rs 800/share (core book at 1.2 times Sep-25E and subsidiaries at Rs 192/share).

Key risks:

1. significant slowdown in credit growth

TVS Motor Company Ltd. – Exports boost to drive growth

(CMP: 2,026, Target price: 2,350, Upside: 16%)

We continue to like TVS Motor considering its strong focus on the EV product pipeline ahead of incumbent two-wheeler original equipment manufacturers, product premiumisation in the ICE category, and growth in export markets.

Being well-placed among listed players, we expect the company’s revenue/Ebitda/profit after tax to grow by ~18%/24%/28% CAGR over FY23E26E.

FY24/FY25 to be critical for the company as it executes its EV strategy for the domestic and export markets. Based on the above strong fundamental outlook, we expect the company to deliver a strong ROE ranging between 25%-29% over the next few years.

We reiterate our 'Buy' rating on the stock with a revised target price at Rs 2,350/share, valuing it at a sustainable premium price/earning multiple of 34 times (earlier 30 times) on Dec-25 core EPS and other investments at one time price/book value and TVS Credit Services at two times P/BV. The target price implies an upside of 16% from the CMP.

Key risks:

1. Higher Interest rate,

2. Macro Economic risks, and

3. higher fuel prices.

CIE Automotive India Ltd. - Buoyant Indian operations and recovery n EU expected

(CMP: 471, Target price: 585, Upside 24%)

We continue to like CIE Automotive’s growth story driven by-

1. operational performance and focus on building an EV product portfolio,

2. healthy order book position and steady growth in Indian operations,

3. Strong free cash flow generations and negligible debt on the balance sheet,

4. capacity building to meet demand from India OEM’s.

The growth trajectory in EU operations is expected to gradually recover in H2 CY24 by the management. Keeping these factors in view, we forecast the company to post a revenue/Ebitda/PAT CAGR of 9%/17%/19% over CY22-25E.

We like CIE Automotive and reiterate our 'Buy' rating on the company at a one-year Forward PE multiple of 24 times on Indian operations (aided by overall industry growth and demand-backed capacity expansions) and 10 times (unchanged) on moderate European operational earnings for CY25 EPS.

Based on this, we arrive at our SOTP-based target price of Rs 585/share, implying an upside of 24% from the CMP.

Key risks:

1. higher Interest rate,

2. slower-than-expected two-wheeler demand recovery, and

3. business skewed towards ICE vehicles.

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