SBI To Zomato: Jefferies Picks 11 Stocks For The Next Five Years
'Consistent and fast growing flows, will likely complement FPI inflows to sustain Indian market performance,' it said in March 18 note.
Amber Enterprises India Ltd., Ambuja Cement Ltd., and Axis Bank Ltd., State Bank of India, are among the top 11 picks by Jefferies for the next five years, as they are expected to deliver 15-20% compound annual growth rate or CAGR returns.
India, with a consistent history of 10-12% USD CAGR over the past 10–20 years, is now the fifth largest equity and continued reforms should maintain India's 'fastest-growing large economy' status, the research firm said.
Moreover, over the next four years, India's GDP is expected to touch $5 trillion, making it the third largest economy, as continued reforms lay the foundation for 7% long-term GDP growth.
"Consistent and fast-growing flows will likely complement FPI inflows to sustain Indian market performance," Jefferies said in itsMarch 18 note.
Long Term Themes To Play
India's capital expenditure or capex cycle has turned around from its FY20 bottom and should last another five years or more, as the housing and corporate capex cycle play out.
This capex cycle theme drives several of Jefferies top picks. Other themes to play include government manufacturing push, state-owned enterprises reforms, penetration stories, financialisation of saving and key consumer bottom-of pyramid ideas.
Jefferies Top-11 Picks
Amber Enterprises: Core competency in ACs and diversification into components, with support from the PLI scheme, to dive more than 36% earnings CAR over FY24–30. A key beneficiary of India's manufacturing growth story.
Ambuja Cement: Strong cement demand from capex upcycle is expected to drive 19% Ebitda CAGR as Ambuja nearly doubles capacity, cuts costs and invests in green power.
Axis Bank: The 17% loan and 18% EPS CAGR over FY24–29 is expected as the lender leverages improvements in deposit franchises, ramp-up of digital and lending platforms, and ramp-up of its subsidiaries.
Bharti Airtel: The strong Ebitda growth—13% India CAGR, ad ARPUs rise faster than nominal GDP—along with moderating capex will drive a 21% CAGR in Bharti's free cash flow to equity over FY24-30 and will push up the company's ROCE to 25% and above.
JSW Energy: Three-times jump in power capacity to 200W by FY30, with renewable share rising to 80% from 50% to drive significant upsides over 5 years.
Larsen & Toubro: The largest Indian contractor will be able to achieve 15% revenue CAGR over FY23-300, driven by broad recovery in India capex cycle, market share gains and execution ramp up. Alongside, operating leverage to drive margin expansion and strong stock gains. There is also some room for re-rating.
Macrotech Developers: Strong housing cycle to drive 17.5% CAGR pre-sales growth. Alongside, Mumbai infra upgrade to drive more than 10% CAFR pricing uptick in large township land, driving significant rerating and over 150% stock gains.
Max Healthcare: Underpentration in quality healthcare and doubling of Max's bed capacity by FY30 to drive 17% revenue and 20% Ebitda over the next five years.
State Bank Of India: 13% loan growth driven by retail, SME & corporate, alongside ROA expansion beyond 1% as cost-to-income ratio declines to drive 18% earnings growth, improving investor perception can drive some re-rating
TVS Motors: Key beneficiary of revival in Indian two-wheeler demand and transition to e2W should drive 125 volume and 265 EPS CAGR triggering stock stock return,
Zomato: Low penetration level in core segments offer a long runway to growth with both food delivery and quick commerce expected to jump. Profits to rise 20 times over FY24-30, driving price target of Rs 400, offering 150%+ returns
