5 Large Cap Stocks to BUY

5 best large cap stocks to buy

Stock Recommendations
by Nikita Bhoota Last Updated: 2022-04-04T11:24:33+05:30

Historically, Recommended Large Cap Stocks Portfolio Performance

For FY21 we had built and recommended 5 Large cap Stocks to BUY Portfolio for investors. We are glad to announce that our recommended Portfolio has performed well wherein almost all the stocks in the portfolio have achieved the desired targets and have given strong returns throughout the last year. Below is the stock-wise performance of 5 Large cap Stocks to BUY Portfolio between the period 26 August 2020- 05 July 2021. Sensex jumped 35% in the same period.
 

Company

26-Aug-20

05-Jul-21

Gain

Infosys

951

1,579

66.0%

Power Grid

185

230

24.5%

ICICI Lombard

1,264

1,565

23.8%

SBI Life Insurance

839

1,010

20.4%

Bharti Airtel

515

524

1.7%

Source: BSE

Therefore, we recommend investors to consider booking profit in the stocks that have generated healthy returns and invest in our new large cap stocks portfolio.

Here, are out 5 large cap stocks picks based on financial performance, management, business outlook and historical trend to earn healthy returns in the long run.
 

Company

CMP (Rs)*

Target (Rs)

Upside

HDFC Bank

1,495

1,780

19.1%

ITC

204

240

17.6%

Power Grid

230

280

21.7%

Bharti Airtel

524

753

43.7%

HCL Technologies

980

1,200

22.4%

Source: BSE,5paisa Research, *CMP as on 5th July 2021.

HDFC Bank (HDFCB):

About the Company:
HDFC Bank is the largest private sector bank in India with a market share of ~9.5% in system loans as of FY20. It has a unique franchise in the banking sector with a loan portfolio of ~Rs 9.9tn (as on March 2020), strong national network of 5,416 branches spread across urban and rural markets.

Investment Rationale:
HDFCB reported a strong performance in the quarter. Healthy loan growth, strong growth in fee income, and stable margins were the key operating highlights. Asset quality improved QoQ, with GNPL ratio at 1.32% and restructured loans at 0.57%. The Bank also made further contingent provisions of Rs13bn, on a prudent basis. Total additional provisions now stand at Rs231bn or 2.0% of loans. Going forward, profitability would be supported by improving margins, higher cost efficiencies and lower credit costs. Asset quality for the Bank has held-up well, despite the COVID-impact and it still carries a high provision buffer, which keeps it well-positioned going forward. We project PAT CAGR of 24.7% over FY21-23E.

Year

Net profit (Rs Cr)

BVPS(Rs)

P/BV(x)

ROE

FY21

31,120

369.5

4.0

16.6%

FY22E

39,040

440.3

3.4

17.5%

FY23E

48,410

515.2

2.9

18.4%

Source: 5paisa Research

ITC

About the Company:
ITC has a diversified presence in FMCG, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, and Information Technology. While ITC is a market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent business of FMCG. ITC has a market share of 80% in Cigarettes and has iconic brands like Gold Flake and Kings Classic in the space. It operates hotels under the Welcome and Fortune brands. ITC has a high level of expertise in developing FMCG brands from scratch: e.g. Sunfeast (biscuits), Bingo (chips), Yippee (noodles), and Aashirvaad (flour).

Investment Rationale:
Cigarette volumes recovered to nearly pre-Covid levels towards the close of the year. Hotels business turned EBITDA-positive in 2HFY21 (Ebitda margin of 8.7% in 4QFY21). However, continued closure of educational institutions impacted stationery sales in FMCG business.  The company has recommended a final dividend of Rs5.75, taking the total dividend for the year to Rs10.75, which translates into a dividend pay-out of ~100% in FY21. While constraints in increasing the number of operating outlets and the limited hours of operations are posing challenges at the frontend, there are no material supply bottle-necks. The company remains well geared to swiftly respond to the changing situation on the ground. We expect revenue, EBITDA and PAT CAGR of 9.2%, 11.9% and 13.3% respectively over FY21-FY23E.
 

Year

Net Sales (Rs Cr)

OPM (%)

APAT (Rs Cr)

EPS(Rs)

PE (x)

FY21

49,273

34.5

13,383

10.9

18.8

FY22E

54,545

36.6

16,092

13.1

15.6

FY23E

58,760

36.3

17,175

14.0

14.6

Source: 5paisa Research

Power Grid

About the Company:
PGCIL is India’s Central Transmission Utility (CTU) owned by the Government of India (57.9% stake). PGCIL owns and operates one of the largest transmission networks spanning 125,000 circuit kilometres, second only to the Grid Corporation of China. As at end FY16, PGCIL had an inter-state power transmission capacity of 59GW. Currently, it carries >40% of India’s total generated electricity. Further, PGCIL has two other operating businesses − telecom and consulting − which contribute less than 5% to its revenue and profit.

Investment Rationale:
PGCIL’s 4QFY21 standalone PAT was up 10% YoY, as it completed Rs70bn worth of projects. The management says 1) the aggregate projects pipeline is now Rs410bn and would be completed in the next 2-3 years; 2) Company expects the project pipeline to improve, as several large projects, such as Leh-Ladakh, are likely to be awarded on nomination basis; also, lines required to evacuate RE power from Gujarat and Rajasthan, etc are likely to be shortly tendered out; 3) standalone capitalisation for FY22 is likely to be ~Rs100bn,of which ~Rs60bn entails TBCB projects; 4) Rs50bn worth of TBCB projects are likely to get transferred to InvIT, in the next 12-18 months; 5) debtor days at >45 have significantly come off QoQ (Rs18bn vs. Rs60bn), as states have availed loans under the Atmanirbhar scheme. We expect revenue, EBITDA and PAT CAGR of 5.6%, 4.5% and 8.2% respectively over FY21-FY23E. Valuations are cheap, in the context of improving growth outlook + dividend yield. Thus, we have a buy rating on the stock.
 

Year

Net Sales (Rs Cr)

OPM (%)

Attributable PAT (Rs Cr)

EPS (Rs)

PE (x)

FY21

38,064

87.9

11,935

22.8

10.1

FY22E

40,799

86.4

13,522

25.8

8.9

FY23E

42,454

86.0

13,965

26.7

8.6

Source: 5paisa Research

Bharti Airtel:

About the Company:
Bharti Airtel is a diversified telecom service provider offering wireless, fixed line, enterprise and DTH services. It is India's largest mobile operator with 34% revenue market share as of 3QFY21. It owns 41.7% stake in Indus Tower, one of the largest towercos in India.

Investment Rationale:
On the earnings call, Bharti management stated that 4Q mobile RMS climbed to an all-time high, although April and May have seen some lockdown-related weakness. Bharti seeks extracting a higher share of wallet from India’s 50m high-income households through its bundled plans offering post-paid, DTH and home BB services. On the enterprise front, Bharti increased its RMS to 31% from 23% in 2 years. Consumption spending weakness, a more aggressive JIO, and likely absence of significant price hikes in the next few months are near-term headwinds, but Bharti would benefit from improved industry structure in the medium term.
 

Year

Net Sales (Rs Cr)

OPM (%)

PAT (Rs Cr)

EV/EBITA (x)

FY21

1,00,615

45.1

-15,100

10.8

FY22E

1,12,900

48.8

3,700

9.0

FY23E

1,34,300

50.9

11,700

7.3

Source: 5paisa Research

HCL Technologies

About the Company:
HCL Technologies Limited is engaged in providing a range of software development services, business process outsourcing services and information technology (IT) infrastructure services. The Company's segments include software services, infrastructure management services and business process outsourcing services.

Investment Rationale:
HCLT reported 4QFY21 USD revenue growth of 2.5% cc QoQ, within its guidance range, due to seasonal decline in Products (-4.9% QoQ), though IT services was strong (+4.4% QoQ). For FY22, HCLT has guided to minimum double-digit revenue growth. Robust net new-deal wins of USD3.1bn in 4Q (49% YoY) and USD7.3bn in FY21 (18% YoY) along with an all-time high pipeline provide comfort on growth visibility. It has guided for FY22 margins in the 19-21% range, incl. ~100bps investments, normal wage hike cycle, and recovery in travel and SG&A costs. It declared dividend of Rs16/sh in 4Q and has raised its quarterly pay-out to Rs6/sh (from Rs4). We expect revenue, EBITDA and PAT CAGR of 11.7%, 8.2% and 13.8% respectively over FY21-FY23E.
 

Year

Net Sales (Rs Cr)

OPM (%)

PAT (Rs Cr)

EPS (Rs)

PE (x)

FY21

75,371

26.6

12,532

46.2

21.2

FY22E

85,436

25.1

14,048

51.8

18.9

FY23E

94,042

25.0

16,219

59.8

16.4

Source: 5paisa Research

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