Top 10 scrips for 2022: ICICI Direct picks realty, telecom to liquor stocks with upside of up to 60%

From realty to IT to liquor stocks, the domestic brokerage firm ICICI Direct picked the top 10 stocks for the calendar year 2022. The brokerage firm sees an upside of up to 60 per cent in these stocks.  

It said, “At the onset of CY22, a sea change is expected in the way business operates and transforms itself given the innovations in the Digital and Tech world, and are bullish on are IT, capital goods, auto ancillaries (EV exposure), retail and real estate.” 

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1.Orient Cement – Target Price: Rs 250 | Upside 58% 

This cement company is a mid-sized cost-efficient player in the cement space, has plants in Telangana, Karnataka, Maharashtra, and derives revenues largely from Maharashtra, Telangana, Karnataka and Madhya Pradesh markets. 

Given the strong management pedigree, structural cost advantage and presence in the rural-centric market with higher retail share, we expect revenue PAT to grow at CAGR of around 21 and 32 per cent, respectively, in FY21-23E.  

At the current market price, the stock is available at attractive valuations of 4.7x on FY23E EV/EBITDA. However, the key risks, are volatility in prices of key input materials and state lockdowns. 

2. Dwarikesh Sugar – Target Price: Rs 110 | Upside 53%  

A UP-based sugar company, Dwarikesh Sugar has a sugar crushing capacity of 21500 TCD, distillery capacity of 163 KLD & co-generation capacity of 91 MW. The company is undertaking a distillery capacity addition of 170 KLD with an investment of Rs 230 crore to be commissioned by July 2022.  

Considering higher sugar prices (domestic & global) & increasing distillery capacity (by 3x), we expect DSL to witness 39.5 per cent earning CAGR in FY21-24E. With increasing profitability and a reduction in sugar inventory, we expect Rs 530 crore free cash flows in the next three years. The key risks are expected to be extreme weather conditions in the future and Any delay in distillery expansion. 

3. Aster DM Healthcare – Target Price: Rs 250 | Upside 43%  

This is one of the largest integrated healthcare service providers in the Middle East and an emerging player in India. Aster’s integrated model covers the entire healthcare life cycle, from primary to quaternary care through its state-of-the-art hospitals, clinics and pharmacies.  

Aster is now looking to expand its network following the asset-light model in India but remains on firm footing due to FCF generation from GCC. The brokerage says it is positive on Aster’s integrated business model and expect gradual margins and RoCE improvement led by higher occupancy. The key risks involved are stretched capex cycle and another Covid wave. 

4. NRB Bearing – Target Price: Rs 220 | Upside 38%   

NRB was incorporated in 1965 as an Indo-French venture and pioneered the production of needle and roller bearings in India. NRB is India’s largest needle and cylindrical roller bearings producer.  

The company has recently announced a capex of Rs 200 crore, focusing on R&D of new products related to EV and bagged a deal with Ola to exclusively supply needle bearings. Upcoming e-markets and the company’s strategy to have an overseas business with the organisation having a strong presence in the EV segment is also a big positive. 

5. Minda Corporation – Target Price: Rs 220 | Upside 30%  

The company primarily serves domestic auto OEMs across two main verticals – mechatronics & aftermarket and information & connected systems. As on FY21, 2-Wheeler forms a large part of its sales at ~52% with CV, PV share of sales pegged at around 21 and 11 per cent, respectively. 

With robust order wins, CV cyclical upswing, growth focus in aftermarket space & consolidation of JV partners stake, we build 25.4 per cent sales CAGR in FY21-23E. Corresponding RoCE and margins trajectory is expected to improve to 16.8 per cent and 12.2 per cent, respectively, by FY23E.  

6. Bharti Airtel – Target Price: Rs 860 | Upside 27%  

Favourable industry structure of three players (two being strong), government relief – (moratorium on AGR/spectrum dues, lowering bank guarantee needs, rationalising AGR definition, increasing spectrum term, etc) along with tariff hike and fundraise puts Airtel in a sweet spot to maintain its relative strength among peers with a formidable digital ecosystem offering.  

Other triggers include relative market share gain from VIL, given its stressed balance sheet and long-term potential driven by growth opportunity from 5G. The key risks are the return of competitive intensity by any of peers, higher capex spending in 5G if there is no respite in spectrum pricing. 

7. Phoenix Mills – Target Price: Rs 1200 | Upside 21%  

Phoenix Mills remains a quasi-play on India’s consumption story, given the quality of assets, healthy balance sheet & strategic expansion plans. The QIP fundraise and investments by GIC/CPPIB have boosted the liquidity & growth ammunition.  

With only five to six major retail mall developers currently in India and given its USP of operating large format properties efficiently, PML remains a superior player in the medium to long term. The key risks are the extended tail of pandemic and sustained slowdown in commercial leasing. 

8. Clerx Services - Target Price: Rs 2900 | Upside 20%  

eClerx provides critical business operations services to over 50 global Fortune 500 league clients, including some of the world’s leading companies across financial services, cable & telecom, retail, fashion, media & entertainment, manufacturing, travel & leisure, software and high-tech.  

Overall revenue mix has been inching towards offshoring as in the last four quarters, onshore revenue mix has come down from 23 to 20 per cent, which is a tailwind to margin. The management does not expect a materially different mix, going forward; guided for a healthy EBITDA margin band of 28-32 per cent, the key risk is Higher roll-offs, and inability to sustain margins. 

9. Tech Mahindra – Target Price: Rs 2,150 | Upside 20%  

This IT heavyweight is one of the leading IT services companies with over 1.2 lakh employees across 90 countries serving 1000+ clients. The company has higher exposure to telecom, followed by BFSI and manufacturing.  

5G constitutes 20 per cent of communications, media & entertainment (CME) business while 50 per cent of all network services business is now 5G. The company’s CME vertical would focus on digital transformation; Network & 5G services; BPS and Telecom engineering services (TES). 

10. Radico Khaitan – Target Price: Rs 1450 | Upside 17%  

This is among the largest manufacturers of Indian-made foreign liquor (IMFL) in India. The company launched two super-premium brands in October 2021 in Uttar Pradesh and Maharashtra, in line with its premiumization strategy. Also, its super-premium brands Rampur single malt and Jaisalmer gin would soon be procured by the CSD from Q3FY22 onwards. 

Radico has the distinction of being among very few domestic players that have over the years entered and generated brand equity in the prestige and above liquor segment. The company is looking at expanding its whisky portfolio and is hopeful of getting a good hold in the premium whisky segment in two years.