TVS Motor, ITC among stocks with sustained growth at reasonable value: ICICI Securities

ICICI Securities has identified financial, industrials, discretionary consumption and IT services as pockets of ‘growth at reasonable value’ (GARP). In a report titled 'iLens Screener', the domestic brokerage firm selected those companies under its coverage universe which it claimed have exhibited sustained growth in earnings and have high optimism embedded in their market price.

“Sustainable growth continues to be expensive despite correction – companies under our coverage universe that exhibit sustained growth in earnings continue to have high optimism embedded in their market price as indicated by our proprietary ‘market implied long term growth value’ framework (MILTGV). These companies are largely asset light and from consumption space,” the report said.

GARP stocks with Buy and Add ratings include TVS Motor Company, Eicher Motors, Larsen & Toubro, Akzo Nobel, Tata Consultancy Services, ITC, Bharat Electronics, Mahindra & Mahindra, HDFC Bank, Aditya Birla Cap, State Bank of India and Federal Bank and others.



MILTGV or 'Market implied long term growth value' is a reverse engineering framework where the market is attributing less than 70% of the current market value to growth in earnings beyond FY25E or in other words stocks with MILTGV < 70%. Also, the extremely high optimism growth and quality stocks derive most of their valuations (MILTGV > 70%) from growth beyond the explicit period (beyond FY25E)." the report further said.

The high optimism growth stocks include Avenue Supermart, Siemens, Pidilite Industries, Nestle India, Page Industries, Tata Consumer Products, Hindustan Unilever, Britannia Industries, Thermax and Kotak Mahindra Bank.


A few stocks in capital goods and engineering space exhibiting sustainable growth attributes have outperformed in the recent past and moved up into the high optimism zone along with consumption as incremental growth emanates from the investment cycle, the report said.

Cyclical growth stocks with leveraged balance sheet come from financials and industrials (infrastructure, capital goods), the report highlighted.

"Financials are at the cusp of a bottom in the NPA cycle with overall credit growth remaining robust and industry credit recovering from a decadal down trend. On the other hand, a recovery in the capex cycle is augmenting the medium-term growth outlook of industrials involved in capital goods and infrastructure sectors," the report said.

Defensive stocks with moderate growth or mean-reversion in profitability are from tobacco and IT space, the report said.

Key risk
Downgrade in growth expectations due to the ongoing global banking crisis and rapid quantitative tightening cycle last year especially for stocks exposed to global demand.

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