Budget 2023 stock picks: L&T, Dabur, M&M, HAL, PNC Infratech, Finolex Cables, Gati, Mahindra Logistics

Brokerage Sharekhan has come out with a list of stocks it believes may gain from likely Budget announcements. The brokerage has picked these stocks based on hopes that the government may maintain its focus on development of infrastructure including roads, energy, water and affordable housing, which would give the economy a much-needed  earnings stimulus.

It said a much-needed increased support to the rural economy may result in higher incomes and improved consumption, which should aid sectors like automobile, cement  and consumer.

BFSI, infrastructure, Real estate, construction, and energy (especially green energy) are  some sectors, which may be in focus in the upcoming Budget 2023-24, it said, adding that the government can  announce incremental incentives for EV infrastructure and incentives to promote the circular economy.

Sharekhan's Budget picks include Axis Bank, State Bank of India (SBI), Punjab National Bank (PNB), L&T, Dabur, M&M and HAL among largecaps. Its Budget picks from the midcap and smallcap spaces include PNC Infratech, Finolex Cables, APL Apollo, Hi-tech Pipes, Gati, Mahindra Logistics and Macrotech Developers.

Automobile

Sharekhan said a GST rate of 5 per cent for EVs  and average 18 per cent for EV  components is charged. The auto industry wants the applicable GST rate on EV  components should also be 5 per cent. If it demand is met, it would be positive for OEMs and ancillary  players. The inverted duty structure is resulting in high working capital  burden for EV players and a reduction in  GST rates on EV components would  reduce the overall cost of EVs.  Key beneficiary, as per Sharekhan, would be Bosch,

Greaves Cotton, TVS Motor, Tata  Motors, Gabriel industries.

If the FM announces PLI support for manufacturing of  components for batteries, it would be positive for Exide Industries and Amara Raja Batteries. Any reduction in cess on hybrid  vehicles would be positive for Maruti Suzuki. At present, hybrid vehicles are  attracting GST rate  (including cess) at 43 per cent, Sharekhan noted.

Banks

Sharekhan noted that the government had announced  privatisation of two PSBs other than IDBI Bank in Budget 2022. This coming Budget could provide  more clarity on the planned privatisation of two PSBs.

Sharekhan said any such announcement would be positive for Central Bank of India and  Indian Overseas Bank as both are  the likely expected names to get  privatised.

Capital goods

There are hopes, Sharekhan said, of increase in capital outlay for  railways by 15 per cent this Budget. The funds  could be utilised for laying of  new lines (at least 2,000 km),  gauge conversion, electrification  and signalling, apart from improvement in rolling stock. Any such announcement would be positive for L&T, KEC International and Kalpataru Power Transmission. Any budgetary announcements  regarding capital allocation for  300-400 new Vande Bharat trains would be positive for Siemens India, KEC International, BHEL and Titagarh  Wagons, Sharekhan said.

Incentives or increase in capital  allocation for renewable  energy projects and a likely increase in tax benefits/subsidies for  companies installing solar  panel manufacturing plants would be positive for capital goods companies  that are focusing on alternate  energy solutions. They include Thermax, Triveni  Turbine, Cummins India and L&T, Sharekhan said.

Budgetary support or incentives for inland waterways, shipping and shipbuilding to increase global trade and modernise domestic shipbuilding sector.

Defence

Amid ongoing military stand[1]off with China and also  for promoting indigenous  manufacturing of defence  equipments as well as  increasing export targets, there  is an expectation of a higher

allocation (15 per cent YoY increase)  for defence capex in Budget  FY2023-24 over Rs 5,25,166 crore for FY23. It would be positive for the entire defence sector  particularly for companies like

Bharat Electronics,  Hindustan Aeronautics, Bharat Dynamics, Mazagaon Dock Shipbuilders, L&T and Astra Microwave Products, among others.

Shipping

Sharekhan noted that Sagarmala Program and Maritime Vision 2030 (MIV 2030) focused on developing India’s  maritime sector including  ports, shipping and inland  waterways. It said budgetary support or incentives  for inland waterways, shipping  and shipbuilding to increase  global trade and modernise  domestic shipbuilding sector Positive for companies like Cochin  Shipyard, Container Corporation of India (CONCOR), Garden Reach  Shipbuilders & Engineers (GRSE)  and MDL (non-defence business).

Chemicals & fertilisers

Sharekhan said there are hopes of increase fertiliser subsidy to Rs 2,25,000 crore against Rs 1,05,222 crore for FY2023. Sharekhan said such an announcement could be positive for Gujarat Narmada Valley Fertilizers & Chemicals, Rashtriya Chemical and Fertilizers, National Fertilisers Limited, Madras Fertilisers, Chambal Fertilisers and Deepak Fertilisers.

Hotels

Sharekhan noted that there are hopes that hotels with capital expenditure above Rs 25 lakh should be  granted infrastructure status. Also, CII has proposed registration fees of 1 per cent of the  overall lease amount payable annually from the existing 10 per cent  and one-time relaxation of any  penalty or arrears to the hotels  or restaurants whose lease agreement is unregistered till  date.

"If the hotel industry is granted infrastructure status, it can avail loans at lower rates for greenfield  projects. It will also help hotel companies get water and electricity  at industrial rates. If industrial  status is granted it will be positive  for Indian Hotels Company, Chalet Hotels, Lemon Tree Hotels,  Jubilant FoodWorks and Speciality Restaurants," Sharekhan said.

Infrastructure, cement

Sharekhan noted that there are hopes of an increase in budgetary support to Rs 2.1-Rs. 2.5 lakh crore for FY2024. Sharekhan said an improvement in project awards in the road sector would be positive for  companies like KNR Constructions,  PNC Infratech, JMC Projects, Ashoka Buildcon.

Incremental demand will be positive for cement sector companies such as Ultratech, Shree Cement,  Dalmia Bharat, The Ramco Cements and JK Lakshmi Cement, Sharekhan said.

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