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

Axis Securities Report

Here are our top picks for September 2024:

SBI – ROA Delivery Of 1+% To Continue (potential upside: Upside 26%)

Amongst PSU banks, State Bank of India is the best play on the growth trajectory of India’s economic growth supported by its-

1. Comfortable footing on the credit-deposit ratio,

2. Healthy provision coverage ratio,

3. Adequate capitalization and

4. improved asset quality outlook.

Key risks: a) Significant slowdown in credit growth.

Lupin – Niche Approvals, Low Input Costs, Positive Outlook (potential upside 12%)

Lupin Ltd.'s new launches in the U.S. market like Darunavir and Spiriva have gained market shares of up to 30% and 25% respectively. The recent launch approval of gMegabran has the potential to add yearly incremental sales of $50 million. Recent approvals for Tolvaptan (market size $287 million) and Xyway (market size $958 million with 180 days exclusivity, could add business in the second half.

The compnay has a strong pipeline of products including Cynocobalamin, Diazepam Gel, Vereniciline, Bromfenac, Glucagen, and Risperidone, among others. Double-digit growth in the India business is expected as the company has already increased MR (Medical Representative) numbers to 1,000.

An uptick in the active pharmaceutical ingredient business, as the API industry is witnessing a demand revival. Lupin’s margins, currently at 18%, are still below the industry levels of 22%, which implies a significant scope for margin improvement in the upcoming quarters.

This improvement will also be supported by the macro environment, which is currently favorable for the industry, such as falling raw material prices, low logistic costs, and fuel costs.

Federal Bank – Best Placed Amongst Mid-Sized Peers; ROA Of 1.4% By FY27E. (Potential Upside- 18%)

While we believe Federal Bank Ltd. remains well positioned to deliver a sustainable RoA of 1.3%, improving net interest margins backed by shifting portfolio mix towards higher-yielding products would be a key enabler for the bank to deliver RoA of 1.4% and would drive the next leg of stock re-rating.

We expect Federal Bank to deliver RoA/RoE of 1.3-1.4%/14-16% over FY25-27E supported by steady NIMs, gradually improving the Opex ratio and stable credit costs (~30-35bps).

Key risks:

1. Loan growth moderation,

2. Asset quality challenges in the higher-yielding segment.

Sansera Engineering - Strong Order Books; Capex, Diversified Product Segment To Drive Growth (Potential Upside- 25%)

In light of attributes such as -

1. Higher sales mix in Non-Auto ICE components,

2. Higher International business (exports),

3. Focused approach on improving margin trends,

4. Sansera Engineering Ltd.’s capability to generate strong operating cash flows, and

5. Capacity expansion plans, we expect revenue, Ebitda, and PAT to grow at CAGRs of 17%, 20% and 22% respectively over FY24-26E

Key risks:

1. Macro Economic Uncertainty,

2. Business skewed towards ICE vehicles.

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