L&T, Biocon & other stocks that can be good bets on Budget 2022

NEW DELHI: Dalal Street analysts are largely expecting Finance Minister Nirmala Sitharaman's forthcoming Budget to offer further boost to China+1 strategy and focus on capex revival and green energy. In this regard, they see a slew of sops for manufacturing of electric vehicles, solar power and semiconductors. The FM may have some announcements on healthcare and housing sectors and that reviving of the rural economy could be among the FM's top agendas this Budget, analysts said.

A couple of broking firms, among a dozen ETMarkets.com surveyed, offered their top stock picks to bet on this Budget. They are:

Vinod Nair, Head of Research at Geojit Financial Services
Biocon: The analyst remains positive on the stock with hopes of increased allocation for vaccination drives and lower GST on clinical trials and research activities. The company’s recent agreement with the Serum Institute of India to market Covid-19 vaccines has bolstered its business prospects. As the country looks forward for booster vaccination, Nair expects the government allocation to go up from the current investment of Rs 35,000 crore. Research activities account for 30 per cent of total revenues for Biocon and investment in building new capabilities in R&D will enhance profitability, Nair said.

L&T: Nair sees multi-year revenue visibility on the back of a large and diversified order book and expects it to pick up steam in the coming months owing to strong pipeline in place for H2FY22.

"We expect the government to increase road infrastructure spending from the current Rs 1.18 lakh crore and further to award the extension of New National Highways. L&T’s execution capabilities remain robust and coupled with steady order inflows, effective capital utilisation and reduction in borrowing costs augur well for long-term performance," Nair said.

Tata Power: The stock is well placed to capture the opportunities across the green portfolio where electricity demand is surging and supply is short. Given the government’s plan to achieve the renewable energy (RE) installation target of 175GW by 2022 and 500 GW by 2030, the company has reiterated that it is planning to increase its production to 15GW in RE with current 40 per cent utilisation to 80 per cent utilisation by FY2025. In addition, the government has imposed a duty to support Atmanirbhar, Nair said, adding that any incentives in the RE space will benefit the company.

HUL: An increase in disposable income at the hands of people will result in more demand for consumption and FMCG stocks will directly benefit from this. HUL, considering its product innovation initiatives, distribution expansion, pricing power and strong rural presence, is likely to benefit from this increase in consumption demand. Given its strong presence in the personal care segment, higher discretionary spending will improve product mix and margins for HUL. Nair has a buy rating on the stock.

ABB India: The company witnessed an uptick in order inflows and improvement in Ebitda margin in the recent quarter. This was on account of consolidation and gradual deleveraging of the balance sheet of large domestic corporates coupled with higher capacity utilisation, which seems to indicate a fresh capex cycle. The emergence of high-growth areas such as data centres, emission control, water, and logistics will boost orders. Overall, Nair expects ordering momentum to continue, driven by increased spending by the "core" sectors and a move towards green focus.

Vinit Bolinjkar, Head of Research, Ventura Securities
Adani Ports & SEZ: India’s EXIM volume, which has been growing at a CAGR of 4.3 per cent over the last decade, is expected to grow at 6 per cent in the current decade due to policy initiatives in the form of Sagarmala Pariyojana, dedicated freight corridors, direct-port-delivery/direct-port-entry and expressway network. "Adani Ports & SEZ, with its portfolio of 13 ports and its ability to provide end-to-end logistics solutions to its clients, is well positioned to benefit from the surge in India’s EXIM trade," Bolinjkar said.

Vardhman Special Steel: Collaboration with Aichi Steel (a subsidiary of Toyota) will open significant export opportunities for the company, while the technology transfer from Aichi Steel will improve Vardhman’s operating yield which is expected to improve its Ebitda per tonne from current Rs 8,000 to more than Rs 10,000 in the next 3-4 years. This operating cash flow will be utilised to repay the debt and make the company debt free by FY25, Bolinjkar said.

Salzer Electronics: This stock is a proxy play on the burgeoning demand given the strong outlook for electricity generation and related infrastructure development. The demand for electrical components and switchgears is bound to rise due to the replacement of low KVA transmission lines with high KVA lines, electrification of railways, development of industrial corridors, Metro Rail projects and SMART City development.

Ajit Mishra, VP- Research, Religare Broking
Ashok Leyland: Increasing spending on infrastructure would lead to a pick up in volumes for M&HCV. Ashok Leyland, being one of the strong players, would benefit from the same.

Coromandel International: Government measures and increasing spending on the agriculture and fertiliser sector will boost growth and benefit companies in this sector.

M&M: The government's focus on agriculture and boosting rural income would help revival in the tractor industry. M&M, being the market leader, would benefit from the same.

Ramco Cement: The government's on going plan for housing-for-all and investment in infrastructure and construction sector will help grow and benefit cement companies as well.

L&T: Increased thrust on infrastructure and reviving private capex would bode well for L&T.

Gaurav Garg, Head of Research at CapitalVia Global Research

L&T, Godrej Properties and Chambal Fertilisers: Garg said L&T is likely going to be the winner in this Budget due to higher infrastructure spending.

"Real estate sector might be another beneficiary and investors should stick to quality stocks which include Godrej Properties, Sobha and Prestige Estate. The government might take some decisions over subsidies and Chambal Fertilisers is one of my favourite pick in this space," Garg said.