Top Investment Picks on Diwali 2012:

Motilal Oswal has picked up five stocks that it feels will create value for investors in Samvat 2069.

ICICI Bank (Target Price Rs 1,225):

ICICI Bank continues its focus on 5Cs (Credit growth, CASA, Cost efficiency, Credit quality and Capital conservation). Improving domestic loan growth with focus on CASA, stable margins and containment of credit cost would help the bank to further enhance its return ratios.

Sharp improvement in liability profile and asset quality, and better asset liability management has helped ICICI Bank improve its NIM from 2.6-2.7 per cent to 3 per cent. We expect gradual improvement in NIM to continue.

RoA is likely to remain strong at ~1.6 per cent over FY13-14. Core RoE should increase from 11 per cent over FY08-12 to ~16% in FY14, led by increasing leverage and strong RoA.

Tata Motors/ DVR (Target Price Rs 349/210):

JLR product action, market expansion expected to drive 13.4% CAGR (FY12-15). Expect domestic M&HCV segment which has been facing downtrend could witness revival in FY14.

Tata Motor/DVR stock is currently trading at 8.5x/5x FY13E and 5.1x/4.2x FY14E consolidated EPS. Buy with target price of Rs 349 (FY14 SOTP based) for ordinary share and Rs 210 for DVR (40 per cent discount to ordinary).

Dr Reddy's Laboratories (Target Price Rs 2,080):

Dr Reddy's has guided for $2.7 billion revenue and 25% RoCE for FY13, the management expects to achieve this guidance (implies topline growth of 30% YoY) without any major inorganic growth initiatives.

The company continues to focus on its five key markets - US, India, Russia, Germany and UK. The US market will be a key contributor led by the commercialization of its pipeline of 80 ANDAs (pending approval) and the contribution from FTF/ low-competition opportunities.

We expect core EPS CAGR of 18% for FY12-14. DRRD stock trades at 19.8x FY13E and 17x FY14E core earnings.

LIC Housing Finance (Target Price Rs 300):

LICHF has delivered strong performance, both on growth as well as on asset quality front. However, it consistently disappointed on spreads (one of the key RoA drivers) leading to underperformance vs sector.

We believe the spreads have bottomed out and should likely improve from current levels as the benefits on the cost of funds start accruing.

LICHF continues to deliver well on growth and asset quality fronts. It remains well positioned to make the most of the strong growth opportunities in the housing finance industry.

We model in 24% loan CAGR, 20bp decline in margin assumption, average adjusted RoA of ~1.5% and RoE's of ~18% over FY12/14E. The stock trades at 2x FY13E BV and 1.7x FY14E BV.