SBI, Tech Mahindra, Zee, Gail shares among HDFC Securities top stock picks for 2022

Analysts at HDFC Securities have handpicked 10 stocks that they believe have the potential to rally in the coming year.

Top stock picks (Image: REUTERS)

Sensex and Nifty have rallied more than 21% so far in 2021, with valuations now a concern. Heading into 2022, domestic brokerage firm HDFC Securities expects only tepid returns from the benchmark indices. Analysts at the brokerage firm have pinned a target of 62,000 on Sensex and 18500-19000 on the broader Nifty 50 index. However, they have handpicked 10 stocks that they believe have the potential to rally in the coming year. The list includes the State Bank of India, Zee Entertainment Enterprises, and Tech Mahindra among others.

Aditya Birla Capital

Aditya Birla Capital is the holding company of all the financial services businesses of the Aditya Birla group. In 2021, the stock has surged more than 31% to now trade at Rs 117 per share. The company has seen sales grow 15.3% on-year basis while net profit has soared 21.6% on-year. “AB Finance remains focused on building granularity across segments while reducing ticket size across the board. ABHFL continued its focus on affordable housing, which has doubled its AUM in the last 2 years and comprises 33% of the total housing finance AUM,” HDFC Securities said. Stiff competition from peers and new entrants and worsening of asset quality in the lending book due to the third wave of Covid pandemic are some of the concerns around the stock.

GAIL 

GAIL is India’s leading gas transmission and distribution company in India and is engaged in various activities ranging from gas transmission and distribution to processing. HDFC Securities highlighted that GAIL is planning to expand in petrochemicals, speciality chemicals and renewables to supplement growth in its core business. “Volatility in oil and gas prices, higher tariff reduction in existing pipelines and regulatory changes could impact its growth story in the near future,” the report said. GAIL has gained 6% in 2021 to trade at Rs 131 per share. 

Hindustan Zinc

The stock has zoomed 32% so far this year and now trades at Rs 315 per share. The company is one of the world’s largest and India’s only integrated manufacturers of zinc-lead and silver. “The Supreme Court allowed disinvestment of the Centre’s residuary 29.5% share in the open market in November. Post divestment, it is expected to command better valuation,” HDFC Securities said. 

Ipca Labs

Ipca Labs has seen a dismal 2021 in terms of stock market performance, falling 6% so far. HDFC Securities said they are positive on Ipca Labs on the back of strong volume growth in domestic formulation, cost-competitive and consistent quality driving better business prospects in API segment, robust debt-free B/S and strong return ratios, and better traction in the international markets such as Europe and Asia. The stock trades at Rs 2,048 per share.

Mahindra & Mahindra

The auto giant is set to end the year with around 12% returns. Mahindra & Mahindra has strong product pipeline ranging from tractors to passenger cars. “It is planning to launch 13 new products across LCVs, SUVs, and 3Ws to drive growth in the medium term – of this, 20% will be EVs,” HDFC Securities said. M&M trades at Rs 824 per share. 

Max Financial

Max Financial is the fourth largest private life insurance player in India. “Given the strong brand, leadership and tailwinds on the back of financialisation of savings, we remain optimistic on the future growth of the company,” said HDFC Securities. Max’s strategic partnership with Axis Bank provides long term distribution capability, ending uncertainty and market anxiety over the future of Max Life (MAXL) and Axis Bank’s distribution arrangement, they added. The stock trades at Rs 966 apiece, up 40% in 2021.

Max Healthcare

Max Health is a hospital chain with 17 facilities and nearly 3,400 beds. “Strong revenue growth is driven by increasing health insurance penetration, better patient mix, increasing ARPOB, growth in medical tourism and focus on specialities. Optimisation of payor mix offers scope for margin expansion,” the note said. The stock is up 184% this year to now trade at Rs 404.9 per share.

State Bank of India

SBI is the largest public lender in the country. “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 its quality of loan books,” HDFC Securities noted. SBI share price has zoomed 66% this year to now trade at Rs 464 per share.

Tech Mahindra

The IT major has gained 71.88% so far this year and now trades at Rs 1,680 per share. HDFC Securities said that Tech Mahindra is well-positioned to expand a fair share of 5G network services and the company is experiencing a large deal strategy and customer-led approach.

Zee Entertainment Enterprises

Apart from Zee’s strong recognition in the media and entertainment industry, analysts have taken note of the merger with Sony, augmenting their bullish bias for the stock. “The merged entity will become the market leader with ~25% of market share led by wide offerings, robust financials, and strong digital businesses and sports rights,” they said. Zee stock price has risen 54% in 2021, to now trade at Rs 347 per share. 

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