Sun Pharma share price: Siddhartha Khemka hand picks Sun Pharma, Axis Bank which could give 14-20% return in a year

The companies that have reported their earnings so far comprise a) 73% of the estimated PAT for the Nifty Universe, b) 53% of India’s market capitalisation, and c) 79% weightage in the Nifty.

Excluding metals and O&G, Nifty posted a solid 25% earnings growth vs. expectations of 20%, fuelled by BFSI and autos. Along with metals and O&G, the cement sector also dragged 2QFY23 earnings.

Profits of the 32 Nifty companies that declared results so far dipped 2% YoY (estimated. -2.5% YoY), led by global cyclical. Excluding these, profits would have grown 25% YoY (v/s estimated. 20% YoY).

Excluding BFSI, Nifty profits would have decreased 14% YoY (v/s est. -13%). Five companies in the Nifty reported profits below our expectations while 15 reported a beat in earnings. We now expect Nifty EPS for FY23E at Rs821 and for FY24E at Rs989.

The better-than-expected quarter was seen for IT companies despite the challenging macro environment and continued supply headwinds.

Growth momentum in banks has remained strong over 2QFY23 propelled by a pick-up in the corporate segment (primarily working capital loans), while growth in retail, business banking, and the SME segments continued to remain healthy.

The initial flush of results was encouraging from an OEM perspective, though Auto Ancillaries’ results were a mixed bag. OEMs’ performance was largely in line/above estimates, driven by strong volume growth, favourable commodity prices, and currency.

At a topline level from a consumer perspective, what is evident from the results so far is that urban and discretionary demand is holding up well but rural demand remains weak with no clear recovery in sight over the next few months.

Oil & gas sector so far has bagged mixed results with

and posting results below our estimates. performed in line with our estimate as better-than-anticipated performance in the retail segment was offset by relatively weak standalone performance.

Though this time results were largely led by BDSI and autos, as the benefits of the recent moderation in commodity costs start accruing in 2HFY23E, we expect other sectors to contribute too.

Markets have bounced back smartly in Oct’22 with Nifty-50 rising 5.4% MoM and almost wiping out the entire YTD’CY22 decline.

The Nifty-50 is now up ~4% YTD’CY22. We reckon the upside from here will be a function of stability in global and local macros and continued earnings delivery v/s expectations.

Axis Bank: Buy| LTP Rs 851| Target Rs 975| Upside 14%
Axis Bank delivered a stellar performance in 2QFY23, driven by margin expansion and a significant decline in provisions along with improving trends in cost metrics.

Retail business has strengthened, with its share improving to 58%, led by home loans. On the liability side, the share of CASA and retail term deposits stood at ~82%, ensuring relatively stable funding costs.

Asset quality continues to improve, aided by moderation in slippages and healthy recoveries, and upgrades. We expect PAT growth of 63%/16% in FY23E/24E respectively and RoA/RoE of 1.8%/18.1% in FY24E.

: Buy| LTP Rs 1,010| Target Rs 1,240| Upside 22%

We remain positive on the stock on the back of an increased prescription base for the specialty portfolio, robust franchise building in branded generics, niche ANDA pipeline awaiting approval, and controlled cost.

We expect a 16% earnings CAGR over FY22-24, led by 19%/16% sales CAGR in the US/emerging markets and RoW, aided by a 90bp margin expansion.

The author is Head – Retail Research, Limited


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