This week we take a look at five analyst picks with high upside

1. Zomato: Motilal Oswal initiates a ‘Buy’ coverage on this internet software and services company with a target price of Rs 70. This indicates an upside of 20.8%. Analysts Mukul Garg, Raj Prakash Bhanushali and Pritesh Thakkar say, “The food delivery industry in India is all set to grow rapidly in the medium term, driven by intensifying internet penetration, rising consumption and growth in urbanization.” 

The analysts believe that the food delivery market has settled into a duopoly between Swiggy and Zomato, with Zomato having a market share of 55%. They expect the company to gain from the relatively nascent stage of the food delivery ecosystem in India. They also believe that Zomato’s loyalty program (Gold) will help the company  compete more equally with Swiggy. 

Garg, Bhanushali and Thakkar expect Zomato to turn profitable over FY25 despite the intensity of competition. With a dominant market share and strong growth in the food delivery business, the analysts expect Zomato to report a revenue CAGR of 29% over FY23-25. On Trendlyne, the overall consensus among analysts on the stock is ‘Buy’.

2. Mahindra Logistics: Sharekhan upgrades its rating to a ‘Buy’ on this logistic services provider with a target price of Rs 502, indicating an upside of 38.1%. Analysts at Sharekhan, who recently interacted with Mahindra Logistics’ management, say that it is upbeat about end-user demand in the medium term, with the exception of e-commerce. The company expects its third-party logistics business to grow at 15-16% CAGR, which the analysts believe would yield better margins.

The analysts say, “The company is focused on the turnaround of the B2B express business of Rivigo.” They believe this step will enable the company to benefit in terms of synergies, resource optimisation and enhanced customer services. 

Mahindra Logistics is currently downsizing the Bajaj Electricals’ account by 80% on mutually agreed terms. The analysts believe that it has derived key takeaways in the form of learning, processes and capabilities from the account. 

3. Reliance Industries: BoB Capital Markets maintains its ‘Buy’ rating on this refineries & petroleum products company but lowers its target price slightly to Rs 2,810 from Rs 2,840. This implies an upside of 18.2%. Analyst Kirtan Mehta expects the company’s EBITDA to witness healthy growth on a YoY basis in Q4FY23, led by the energy and consumer segments. He believes that the energy business will be supported “by a return to normal throughput, an uptick in the petrochemical margin, and potentially higher Russian crude usage that offsets the pullback in transportation cracks”. 

In the consumer business, Mehta sees growth from rising Jio subscribers, average revenue per user (ARPU) and steady footprint expansion. He anticipates market share gains and ARPU to rise after the firm launches its 5G services, affordable 5G smartphone and Jio AirFibre. The analyst expects the firm’s revenue to grow at a CAGR of 10.7% over FY22-24. 

4. HDFC Bank: IDBI Capital maintains its ‘Buy’ rating on this bank with a target price of Rs 2,070. This indicates an upside of 24%. Following the release of the firm’s Q4FY23 results, analysts Bunty Chawla and Debesh Agarwala remain upbeat about its growth prospects. They point out that the bank’s net interest margin (NIM) remains stable and deposit growth has overtaken credit growth. They add that credit growth has been bogged down by a slowdown in the corporate book. The analysts also highlight the improvement in asset quality, which is led by better recoveries and a reduction in write-offs, as a key positive. 

Chawla and Agarwala state that the bank’s (NIM) remains stable as the rise in the cost of funds is proportional to the increase in yields in Q4FY23. Overall, they are “positive on HDFC Bank given its superior credit underwriting, structurally better NIM and the ability to maintain higher RoA among its peers”. The analysts expect the company’s net profit to grow at a CAGR of 13.4% over FY23-25. 

5. Federal Bank: Keynote Capitals initiates coverage on this bank with a ‘Buy’ rating and a target price of Rs 164, implying an upside of 22.4%. Analyst Devin Joshi is optimistic about the bank given its expanding pan-India presence and strategic digital & fintech partnerships. He believes that “the bank's fintech strategy is yielding incremental benefits, including higher deposit growth, cost control, and improved fee income”. Joshi adds that the bank’s  loan book has seen strong growth during the first three-quarters of FY23, which contributed to a 56% YoY rise in net profit during the same period. 

The analyst notes that the bank’s cost-to-income ratio and asset quality have also improved. He expects the bank to maintain its healthy operational performance in the coming quarters and grow net profit at a CAGR of 41.1% over FY22-24. 

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)