Stocks to buy in July 2023: ITC, SBI among largecap stocks that may offer up to 25% returns

Ahead of the June quarter earnings season, domestic brokerage house Axis Securities have picked up select largecap stocks across the sectors which may have the potential to deliver solid returns going ahead. Based on the recommendations, here are the five stocks, which may rise up to 25 percent in the near future.

: The bank has been outperforming its peers and has been firing on all cylinders. ICICI Bank has ticked most boxes on growth, margins, and asset quality, said analysts at Axis Securities. "We continue to like ICICI Bank for its strong retail-focused liability franchise, buoyant growth prospects, stable asset quality along with healthy provision cover, adequate capitalization, and potential to deliver robust return ratios," it said.

On the valuation front, the brokerage believes the bank continues to be on a comfortable footing. Axis Securities maintains a 'Buy' rating on the counter with a target price of Rs 1,150 per share, implying a futher upside of 23 percent from the current market levels.

Key risks, as per the brokerage, include deterioration in the retail asset quality, slowdown in credit growth momentum.

Maruti Suzuki India: The company expects to outpace the industry growth rate led by good order book and new launches — Jimy and Fronx. "Strong order book, higher share of premium SUVs, CNG vehicles in the sales mix to improve ASP in FY24/25; further improved chip supplies and stable commodity prices to drive EBITDA CAGR of 28% from FY23- 26E," the brokerage said.

Analysts have maintained a 'Buy' rating on the stock with a target price of Rs 10,790, suggesting a upside potential of 10 percent.

Key risks include multiple launches from competitors will make the UV space more cluttered and competitive in future. Chip shortage and inability to convert the order book into sales. Lower demand scenario, which may hamper the off-take of vehicles, impacting our sales volumes growth forecasts, which would impact the company’s gross margins negatively.

SBI: Among PSU banks, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy PCR, robust capitalisation, strong liability franchise, and improved asset quality outlook.

"We believe normalisation in the credit costs and the ability to deliver healthy growth should enable the bank to deliver RoA/RoE of 1 percent/15-17 percent over FY24-25E. We maintain our Buy rating on the stock with a target price of Rs 715 per share. Key risks, as per the brokerage, include significant slowdown in credit growth.

Varun Beverages: The brokerage believes VBL is well-placed under the current market situation as a strong summer season is expected to drive overall beverage sales across regions. Furthermore, the initial report on possible El-Nino (deficit rainfall) could delay the rural recovery which would lead the entire FMCG pack (ex-ITC) under wait-and-watch mode, said Axis Securities.

Hence, in this current volatile market situation, the brokerage believes that VBL provides better earning visibility than other FMCG peers in the near term. It has a target price of Rs 930 on the counter, suggesting an upside potential of 16 percent from the current market levels.

ITC: The brokerage believes the narrative around the ITC is getting stronger as all its businesses are on the right track – stable cigarette volume growth led by market share gains and new product launches; FMCG business reaching the inflexion point as its EBIT margins expected to inch up further and would be driven by – the ramp up in the outlet coverage, effective implementation of localisation strategy, driving premiumisation, leveraging technology on demand and supply side; and moderation of raw material input cost; Strong and stable growth in hotels as travel, wedding, and corporate activities pick up; Stedy and decent performance in paperboard and agribusiness witnessed in the last few quarters.

Moreover, reasonable valuation among the entire FMCG pack provides a huge margin of safety, believes Axis Securities.

The brokerage has a target price of Rs 495 on the stock, implying a further upside of 10 percent from the current market levels.

Key risks, as per the brokerage, include increase in cigaratte taxation, increase competition and economy slowdown.

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