ICICI Bank, Ashok Leyland, Bajaj Finance, Praj Industries & More- Top Stock Picks For April By Axis Securities

Axis Securities Report

Here are our top picks for April 2023:

ICICI Bank - Outperformance continues (Potential Upside: 31%)

ICICI Bank Ltd. has been outperforming its peers and has been firing on all cylinders. The bank has ticked most boxes on growth, margins, and asset quality. Higher loan growth, improving operating profits, and a strong provision buffer coupled with a strong deposit franchise will help the bank achieve return on average equity/return on average asset expansion over FY23-25E. On the valuation front, we believe the bank continues to be on a comfortable footing.

Key risks:

• Deterioration in the retail asset quality.

• Slowdown in credit growth momentum.

Ashok Leyland – Market share gain and profitability to sustain growth (Potential Upside: 26%)

Ashok Leyland Ltd.'s broad strategy is focusing not only on the medium and heavy commercial vehicle segment but also expanding its market share/revenue in ljght commercial vehicle, buses, tractor-trailer, electric vehicles, defence equipment/vehicles, exports, spares and aftermarket; thereby hedging its dependence on the cyclical truck business.

Ashok Leyland is targeting market share gains in its LCV and intermediate commercial vehicle business with the launch of superior products and expected foray into the electric LCV segment by June 2023. With improved profitability (raw material softening), market share gains (increased demand), new and superior product offerings in the pipeline to cater to growing IC and EV demand; and a focus on better services, Ashok Leyland remains well-positioned to benefit from the CV upcycle.

Key risks:

• Higher Interest rate,

• Competitive pressures, and

• Higher discounting.

Bajaj Finance – Long range strategy to ensure sustainable growth (Potential Upside: 32%)

Bajaj Finance Ltd.’s digital initiatives and business transformation are key positives and are currently progressing well with sequential improvement visible across metrics. With the digital transformation journey likely to be completed by FY23, we believe it should contribute meaningfully to the overall growth.

We believe the marginal compression in net interest margins will be offset by improved fee income, improving opex ratios, and stable credit costs, thereby enabling Bajaj Finance to deliver superior return ratios moving forward.

Key risks:

• Moderation in growth momentum,

• Higher-thanexpected margin compression.

Praj Industries – Well placed to grow, less impact of global geo-political volatility on business (Potential Upside: 61%)

Bioenergy in domestic business, the overall demand-supply gap of Ethanol, increased interest in grain-based distilleries and decarbonization impetus is auguring well for Praj Industries Ltd. along with development in other key verticals such as CPS, ZLD and high purity gaining traction. Praj is a key beneficiary of multiple tailwinds provided by the bio-economic revolution, giving strong growth and revenue visibility for the next three-five years.

Key risks:

• Raw material cost pressure in steel;

• Volatile raw material weighing on operating profitability in the near term;

• Russia-Ukraine crisis to dampen business in the Euro region.

Click on the attachment for full list of Axis Securities' Top Stock Picks for April 2023

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