Gains across IT and financial shares, amid choppy trade, pulled benchmark indices higher on Wednesday. Reversing initial losses, the BSE Sensex and the NSE Nifty 50 touched their respective 52-week highs.
Investors, especially those with conservative risk profiles usually invest in large-cap stocks to meet their long-term goals. These stocks are ideal for stable and less risky returns depending on an investor’s risk profile.
Here are a few large-cap stocks recommended by brokerages for an upside of up to 26 per cent:
HDFC Bank
HDFC Bank is a professionally managed banking company in India. It provides a range of banking and financial services including retail banking, wholesale banking and treasury operations. Its shares were trading at ₹ 1625.25 at 12:02 AM on Wednesday.
Macquarie has maintained an overweight rating on HDFC Bank with a target price of ₹ 2,005. This translates to an upside of 23.37 per cent as compared to its share price.
The brokerage said that changes in MSCI have removed major overhangs and MSCI has brought in new rules to handle corporate actions like mergers and acquisitions. Further, HDFC Bank will be considered as an extension of HDFC post-merger. Moreover, the merged entity’s weightage in MSCI may be double the weight of HDFC in MSCI at present. It expects the weight to double from 5.8 per cent to 13 per cent.
HDFC Bank is a large-cap company with a market capitalization of 9,02,467 crores. It has an ideal return on equity of 16.65 per cent and an ideal debt-to-equity ratio of 0.96. However, its shares are trading at a price-to-equity ratio (P/E) of 21.64, which is significantly higher than the industry P/E of 10.09. Therefore, the stock might be overvalued.
Hindustan Aeronautics Limited
Hindustan Aeronautics plays a strategic role in India’s defence program. It is the only Indian company that has specialisation in aircraft manufacturing and provides its maintenance and related services. Its shares were trading at ₹ 2609.00 apiece at 12:05 AM on Wednesday.
ICICI Securities has a buy call on the shares of the company with a target price of ₹ 3,170 apiece. This implies an upside of 21.50 per cent as compared to its share price.
Explaining the rationale, the brokerage said that the company’s gross margin had risen by 64 per cent in the latest quarter. They believe that revenue from repair and overhaul (RoH) and spares is likely to dominate. Further, the company is signing an MoU for opening an office in Malaysia, indicating that the order book is likely to remain stable.
Hindustan Aeronautics is a large-cap company with a market capitalization of ₹ 84,359 crores. It has an excellent return on equity of 29.26 per cent and is debt free with a debt to equity ratio of 0.00.
Further, its shares are trading at a price-to-equity ratio of 14.35, which is less than half the P/E ratio of 37.13. Therefore, its shares may be undervalued and its share price might increase in the future.
Written by Simran Bafna
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