Buy Axis Bank, Nestle India For Up To 13% Return


by Sandip Das on 29 April 2024,  5 min read


The domestic equity market rose during last week, with the Nifty50 breaching the 22,400 mark. PSU banks and realty stocks emerged as the frontrunners, brushing aside worries about high US bond yields and Middle East tensions. This resilience is despite the ongoing selloff by foreign investors (FPIs). However, aggressive buying by domestic institutional investors (DIIs) is neutralising the FPI outflow, fueling the current rally. However, worries about persistently high inflation and a hawkish US Federal Reserve is keeping a lid on investor enthusiasm.

The barometer index, the S&P BSE Sensex, was up 641.83 points or 0.87 percent to 73,730.16. The Nifty 50 index added 272.95 points or 1.23 percent to 22,419.95. The broader market outperformed the frontline indices. On the economic data front India’s Direct Tax collections in the Financial Year (FY) 2023-24 reveal that net collections stand at Rs 19.58 lakh crore, marking a considerable rise from the Rs 16.64 lakh crore recorded in the preceding Financial Year (FY) 2022-23, representing an increase of 17.7 percent.

The Budget estimates for direct tax revenue in the Union Budget for FY 2023-24 were initially set at Rs 18.23 lakh crore. India’s foreign exchange (forex) reserves decreased by USD 5.401 billion to USD 643.162 billion during the week ended April 12, as per the latest RBI data.

The headline HSBC Flash India Composite PMI Output Index– rose to 62.2 in April from 61.8 in March. This indicates the fastest rate of increase in aggregate business activity since mid-2010. The week gone by witnessed the expiry of the April F&O contract with April rollovers for the Nifty Index futures lower at 65.12 percent, significantly lower than the previous month’s 69.77 percent and the three-month average of 76.79 percent. The most likely reason for the lower rollovers/positioning could be the expectations of volatility ahead of the ongoing general elections.

Going ahead into the May series, the ongoing Q4 earnings season is expected to weigh on the market sentiment in the initial few days. Thereafter, the markets will seek direction from the US, posting the Federal Reserve rate decision on May 1. Towards the end of the month, the focus will shift to anticipation of the general election result.

Here are the top 2 stocks which can give up to 13% return:

Axis Bank | CMP: Rs 1133 | Target: Rs 1285 | Upside: 13.4%

Axis Bank’s Q4 FY24 numbers came ahead of consensus estimates. The Bank’s Net Interest Income was recorded at Rs. 13,089 crore for Q4 FY24, up by 4.4 percent QoQ and 11.5 percent compared with Q4 FY23. For FY24 the net interest income was Rs 4,9894.48 crore, up by 28.4 percent YoY while net interest margin came in at 4.07 percent up 5 bps YoY.

The net profit of the Bank for Q4 FY24 and FY24 stood at Rs 7129.67 crore, up by 224.3 percent YoY and Rs 24,861.43 crore, up by 159.5 percent YoY respectively. GNPA stood at 1.43 percent which declined by 59 bps YOY and 15 bps QoQ, whereas net NPA was at 0.31 percent which declined by 8 bps YoY and 5 bps QoQ. The CASA ratio also grew by 8 percent bringing it up to 43 percent.

As the bank focuses on granularisation of deposits, contain rising opex, and manage NIM, the loan growth will remain moderate in the near term. Hence, improvement in risk-adjusted return and granularisation of the balance sheet would be key for multiple expansions. The Bank delivered on all these parameters during the quarter, translating into an improvement in RoA by 21bps QoQ to 2 percent.

Nestle India | CMP: Rs 2495 | Target: Rs 2800 | Upside: 12.2%

Nestle India’s 4Q FY24 numbers beat the consensus expectations. Revenue during the quarter grew by 9.1 percent YoY at Rs 5,268 crore, while EBITDA grew by 21.8 percent YoY at Rs 1,337 crore. EBITDA margin during the quarter improved by 270 bps YoY. Led by higher revenue and EBITDA growth, net profit during the quarter grew by 27 percent YoY at Rs 934 crore.

According to the management, Nestle has delivered double-digit growth, despite challenges posed by rising food inflation and volatile commodity prices.

The company has witnessed a strong growth momentum across the product portfolio led by a combination of pricing and mix. The domestic sales crossed Rs 5,000 crore this quarter, a notable milestone for the company. NESCAFÉ has introduced its coffee to over 30 million households in India in the last seven years. Milk Products and Nutrition witnessed strong growth despite inflationary pressures. Prepared Dishes and Cooking Aids registered strong growth across portfolios led by MAGGI Noodles and MAGGI Masala-ae-Magic.

The Out-of-Home business reported strong growth and e-commerce sustained its upward trajectory, contributing to 6.8 percent of sales.

Research Analyst: Krishna Kumar Agarwal
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Disclaimer: The information provided in this blog post is for informational purposes only and should not be construed as investment or trading advice. The author is not a financial advisor and does not have any professional qualifications in this area. The author does not guarantee the accuracy or completeness of the information provided. Any action you take based on the information in this blog post is done at your own risk. Please consult with a financial advisor before making any investment decisions.

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