Manufacturing activity at pre-covid levels, Capex, PLI to augment growth; check top stock picks – The Financial Express


The Financial Express

India’s manufacturing sector has seen a healthy rise with its share in the Indian economy reaching pre-covid levels, ICICI Securities said in a note. The brokerage firm believes India’s manufacturing sector is poised to hit an all-time high in the medium term and analysts believe a number of stocks, linked to the sector, may rally higher owing to this boost. “Manufacturing activity reached pre-covid levels in FY22 and is poised to rise to an all-time high going ahead, on various triggers such as Capex revival, China+1, PLI, FDI, etc,” ICICI Securities said. 
“In nominal terms, the Gross Value Added (GVA) of India’s manufacturing sector grew 22% on year and stood at Rs 33.1 trillion in FY22 constituting 15.5% of GVA (18.2% of GVA in real terms),” said ICICI Direct. Analysts noted that the manufacturing sector’s GVA in real terms has stagnated in the 17-18% range over the past decade after rising rapidly during the 2002-2010 period driven by a strong Capex cycle. However, now a number of triggers are seen to be in place to enable high growth in the sector. 
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Among triggers for manufacturing are signs of Capex cycle recovery, government policy initiatives such as the PLI schemes, continued foreign fund inflows, and China+1 strategy-related export opportunities. “Also, the Russia-Ukraine conflict has increased the urgency to become self-sufficient in terms of energy and defence requirements, which are large opportunities for manufacturing in India,” the note said. Among verticals in the manufacturing domain which could see revival from the imminent capex recovery, are: machinery and equipment, electrical equipment and fabricated metal products, which contribute 6.6%, 3.4% and 2.8% respectively to GVA from manufacturing in the corporate sector, according to ICICI Securities. 
ICICI Securities also noted that manufacturing GVA as per the NAS 2022 indicates, the corporate sector’s share shot up to a decadal high of 89% in FY21 as covid is likely to have impacted manufacturing by the household sector. GVA from manufacturing in the household sector (unorganised sector) stood at Rs 2.9 trillion in FY21. Now with unorganised vertical losing steam, it could result in market share gain for the organised corporates.
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Among large-cap stocks, ICICI Securities is most optimistic about Tata Consumer, Havells India, Dabur India, Tata Motors, Eicher Motors, Torrent Pharmaceuticals, Maruti Suzuki India, L&T, HAL, Dr Reddy’s Labs, and GAIL. 
Mid-cap stocks on ICICI Securities radar include Grindwell Norton, Whirlpool India, Kajaria Ceramics, Gujarat Fluorochem, Crompton, Bharat Forge, TVS motors, Pfizer, among others. 
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