Top 10 Stocks on Brokerages' Radar with 10-70% Upside Potential

7 min read
Top 10 Stocks on Brokerages' Radar with 10-70% Upside Potential

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On Aug 09, 2020 I published an article Top 10 Stocks on Brokerages' Radar with 10-60% Upside Potential and most of the stocks have rallied as per expectation because all of them were well analysed, selected by experts, technically bullish as well as fundamentally strong.

Here are the another tranche where big brokerage houses like CLSA, Morgan Stanley, Citi etc have selected few stocks which have an expected upside potential of 10-70%.

1). JPMorgan On Bharti Airtel has given Overweight rating maintained Price target of Rs 735 (Current Price: Rs. 425, Upside Potential: 72%)

Brief about the company: Bharti Airtel Ltd is principally engaged in provision of telecommunication services in India.

Major Reasons:

  1. Risk-reward improves sharply post correction.
  2. Expect Bharti to continue to gain share at the premium end of the market.
  3. Jio's postpaid launches are unlikely to dent Bharti's profitability sharply.
  4. Likely to enjoy secular revenue and Ebitda recovery over the next three years.
  5. ARPU growth will be consumption-led.

2) BOB Caps On Shriram Transport Finance has Initiated coverage with Buy rating Price target of Rs 1,000  (Current Price: Rs. 637, Upside Potential: 57%)

Brief about the company: Shriram Transport Finance Company Limited (STFC) is the flagship company of Shriram Group a diversified group with interests in financial services viz. Commercial vehicle finance, Consumer Finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance products and units of mutual funds.

Major Reasons:

  1. Expect business to rebound in H2FY22 led by firming up of used CV prices.
  2. Bake in a 7% AUM AGR over FY20-23 with stable spreads of ~6%.
  3. Expect restructuring post-pandemic to be limited to less than 10% of AUM.
  4. See average credit cost of ~300 basis points through to FY23.
  5. RoA and RoE are forecast to recover in FY22 to 2.4% and 12.9% respectively.

3) Morgan Stanley On BPCL has given Overweight rating maintained Price target of Rs 517 (Current Price: Rs. 345, Upside Potential: 49%)

Brief about the company: Bharat Petroleum Corporation is engaged in the business of refining of crude oil and marketing of petroleum products.

Major Reasons:

  1. Divestment process chugging along & If executed well, the sale may lead to a re-rating of the multiple for the industry.
  2. Stocks are trading on a trough multiple on a trough earnings outlook.
  3. Valuations are extremely attractive.
  4. Divestment of NRL stake is to be completed prior to the closing of BPCL's divestment process.
  5. Risks To Upside: Range-bound oil prices leading to higher than expected marketing margins.
  6. Risks To Downside: Government controls fuel prices in case of a spike, weak gasoline and diesel demand in FY21 and delay in integrating Kochi refinery with petchem operations.

4) Investec On Aurobindo Pharma has given Buy rating maintained Price target raised to Rs 1,000 from Rs 755 (Current Price: Rs. 824, Upside Potential: 22%)

Brief about the company: Aurobindo Pharma is principally engaged in manufacturing and marketing of active pharmaceutical ingredients, generic pharmaceuticals and related services.

Major Reasons:

  1. Trades at a significant discount to the sector average.
  2. Street does not appreciate basic model, execution, and segments like injectables and branded injections along with OTC
  3. U.S. business execution has been robust on new launches.
  4. Branded injectables business delivering steady growth and will get a sales / profit kicker when biosimilars get launched.
  5. Best placed for a re-rating with no leverage concerns.

Know more:

5) CLSA On Hindustan Unilever Upgraded to buy from outperform with Price target of Rs 2,525 (Current Price: Rs. 2140, Upside Potential: 18%)

Brief about the company:  Hindustan Unilever is Indias largest fast-moving consumer goods (fmcg) company with a historical presence in India of over 80 years. Nine out of ten Indian households use one or more of its brands to feel good, look good and get more out of life, giving them a unique opportunity to contribute towards a brighter future for its customers and consumers.

Major Reasons:

  1. Supply chain transformation expected to gather pace.
  2. Partnership with SBI likely to address channel working capital needs.
  3. Retailer funding should help accelerate ramp-up of HUL's retailer digital ordering platform.
  4. Near-term hiccups likely, but long-term prospects remain bright.
  5. See valuations as attractive post recent correction

6) Morgan Stanley On HDFC, Overweight rating maintained Price target of Rs 2,280.  (Current Price: Rs. 1955, Upside Potential: 16%)

Brief about the company: HDFC is providing finance to individuals, corporates and developers for the purchase, construction, development and repair of houses, apartments and commercial properties in India.

Major Reasons:

  1. Update surprised on much stronger momentum in individual loan business
  2. See upside risks to our FY21 individual AUM growth forecast of 10%
  3. RoE likely to reach 15% in FY22
  4. Momentum can build further ahead of the festive season and more states undertaking cuts in stamp duty
  5. View risk-reward as very attractive

7) CLSA On Bharat Forge has given Buy rating maintained Price target raised to Rs 580 from Rs 535 (Current Price:  Rs. 471, Upside Potential: 14%)

Brief about the company:  Bharat Forge is engaged in the manufacturing and selling of forged and machined Compoundant for auto and industry sector.

Major Reasons:

  1. Demand outlook for domestic and export markets continues to improve.
  2. U.S. class 8 trucks should lead export growth recovery.
  3. U.S. oil & gas is showing signs of bottoming.
  4. Defence optionality can be large; order wins awaited.
  5. Domestic truck volumes improving.
  6. Recovery in Passenger Vehicles, tractors is positive

8) Emkay On JK Cement has Upgraded to buy from hold Price target raised to Rs 1,801 from Rs 1,642 (Current Price: Rs. 1609, Upside Potential: 12%)

Brief about the company: JK Cements is engaged in the manufacturing and selling of Cement and Cement related products.

Major Reasons:

  1. Channel checks indicate strong volume growth in Q2 due to benefits from new capacities.
  2. Expect 23-25% volume growth year-on-year for grey cement in Q2 and 8.5% / 14.6% and 5% year-on-year growth in FY21/FY22 and FY23E respectively.
  3. Recovery in white cement / wall putty segments has been better than expect; see 3.5% volume growth in Q2.
  4. Environment clearance for the proposed expansion at Panna in Madhya Pradesh likely to be received in Q3FY21.
  5. Raise volume estimates of grey cement by 4-5% and Ebitda estimates by 3-4% for FY21-23Cost saving strategies to help grey cement profits.

9) Macquarie On Maruti Suzuki India has given Outperform rating maintained Price target of Rs 7,800 (Current Price: Rs. 6965, Upside Potential: 11%)

Brief about the company: Maruti Suzuki India Ltd is principal activities of the Company are manufacturing, purchase and sale of motor vehicles, components and spare parts. The other activities of the Company comprise facilitation of pre-owned car sales, fleet management and car financing.

Major Reasons:

  1. Subscription program is NPV negative as compared to purchase, but offers lower upfront outgo, no resale risk and higher flexibility.
  2. Expect adoption to remain low in the near-term.
  3. Concerns over the ICE resale value and a change in mindset can drive penetration in the medium-term.
  4. Plans to roll out the subscription program to 40-60 cities over the next 2-3 years.
  5. Recovery in PV sales, strong new launches in UVs and margin recovery are key catalyst.
  6. Remain positive on PV recovery, further supported by strong replacement demand.

10) Morgan Stanley On Asian Paints Upgraded to overweight from equalweight with target price of 2300 (Current Price: Rs. 2112, Upside Potential: ~10%)

Brief about the company:  UPL is engaged in the business of agrochemicals, industrial chemicals, chemical intermediates, speciality chemicals and production and sale of field crops and vegetable seeds.

Major Reasons:

  1. Revenue miss offset by margin performance.
  2. Lower energy prices can impact consumption of agrochemicals in crops in Americas.
  3. Well placed amidst disruptions due to diverse geographical spread, expanding product portfolio and synergy benefits.
  4. Raise FY21/22E estimates by 2-4% to factor in higher margins.
  5. Valuations offer a favourable risk-reward.

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Akshay Seth
Research Analyst (SEBI Regd.)
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