Stocks to Buy: ICICI Bank, Axis Bank, State Bank of India, Shriram Finance, Aavas Financiers, Eicher motors, TVS Motor, Mahindra and Mahindra, Hindalco Industries, Larsen & Toubro, NTPC, JSW Energy, Hindustan Aeronautics Ltd, Oil and Natural Gas Corporation (ONGC), Godrej Properties, Macrotech Developers (Lodha), Bharti Airtel, Honasa Consumer, Godrej Consumer Products Ltd , Nykaa ( FSN E-Commerce Ventures Ltd, Mankind Pharma , Apollo Hospitals Enterprises Ltd, Ambuja Cements, Amber Enterprises Ltd, V-Guard Industries and PI Industries.
Top 6 Underperform ideas of Jefferies on the other hand include Tech Mahindra, Asian Paints, Gujarat Gas, Hindustan Petroleum Corporation Ltd, Dr Reddy's Laboratories that has replaced Laurus labs and Biocon
New additions -The new additions in the list of top 26 picks include stocks as Aavas Financiers, Mahindra & Mahindra, Godrej Consumer Products Ltd. Hindustan Aeronautics Ltd has replaced Thermax , Nykaa or FSN E-Commerce Ventures Ltd that has replaced Zomato, Mankind Pharma that has replaced Piramal Pharma, while V-Guard Industries has replaced Kajaria Ceramics Ltd & Supreme industries
Also Read- Stock in focus: Rajesh Palviya of Axis Securities recommends Manappuram Finance, Century Plyboards, and RIL today
Banks and Financials-Among Bank while Jefferies analysts feel that Axis Bank Valuation at 1.7x adjusted Price to Book Value based on FY26 estimates is attractive and they are 20% discount to ICICI Bank, hence Axis offers a good entry point.
However for ICICI Bank they say that bank sustaining ROE (Return on Equity) of 18% and mid-teen CAGR (Compound annual growth rate) in profit over FY24-27 aided by healthy loan growth, operating efficiencies and manageable credit costs, will support premium valuations.
For SBI Jefferies maintain Buy with a price target of Rs980.
Among other Financials Shriram Finance is pegged to deliver 17% Earnings CAGR and 16% Return on Equity over FY24-27. For Aavas Financials a pick-up in growth and fall in operating expenses intensity are potential catalysts as Jefferies has given target price of Rs2,000
Automobiles: TVS Motors, Eicher Motors and Mahindra & Mahindra are top picks in the space
For TVS Motors while Jefferies says that premium multiples will sustain on strong growth outlook and improving franchise, for Eicher Motors they expect a strong 17% EPS CAGR over FY24-27 (Jefferies FY25-26 EPS are 6-9% above Street estimates for Eicher).
For Mahindra & Mahindra, Jefferies analysts say that M&M core FY25 estimated price to earnings at 28 times is higher than its historical average of 14 times, but still 10% below blended peer average of Maruti Suzuki (autos) and Escorts (tractors) despite its dominant tractor franchise and rising market share in Passenger Vehicles.
Metals- Hindalco Industries remains among top picks of Jefferies
For Hindalco Jefferies analysts feel that it is trading at a 5% discount to the blended average Enterprise Value by Ebitda of its peers versus long-term average of 8% premium, which Jefferies believe should reverse. Ebitda stands for Earnings before interest Tax depreciation and amortisation
Capital Goods & Logistics- L&T , HAL, NTPC are among their picks
For L&T, Jefferies analysts believe that the peak of noncore investments is behind the company and that L&T has potential to surprise on execution and order flow expectations.
For HAL, Jefferies says that it has technology access and should see 3 times rise in absolute profits over 6 years on a debt free balance sheet with 23% plus ROE.
Jefferies target price for NTPC of Rs445 values the company at 2.3 times consolidated Price to Book Value (September 26 estimates), in line with the average of the past upcycle.
Energy & Chemicals-
ONGC in oil and Gas is among Jefferies top picks. ONGC Valuation are favorable on multiple parameters- relative to its own trading average, relative valuation compared to global upstream peers and steeper discount to Nifty compared to the Long Term average as per Jefferies.
For PI Industries in the chemicals space, Jefferies feels that valuation is 10% below Long term average forward Price to Earnings offering attractive risk-reward.
Godrej Properties remains a key pick of Jefferies. Jefferies believes that consistently strong pre-sales performance and improvement in profitability and cash flows will drive a re-rating in the stock. At 20x embedded net profit (FY25 pre-sale), Godrej Properties stock is not too expensive.
Macrotech Developers (LODHA) is another key pick and Jefferies says that the completion of several large infrastructure projects near its land bank, alongside planned launches of premium priced products, could drive a re-rating of its land values.
Consumer-
Honasa Consumer remains key pick of Jefferies expects Honasa to reach double-digit Ebitda margins by FY26 estimates versus 7% in FY24.
Godrej Consumer on the other hand is is likely to deliver 19% EPS CAGR over FY24-27, , which should be one of the best in Jefferies coverage. It is top pick of Jefferies in staples.
Nyka (FSN E-commerce Ventures) is likely to deliver ~19% EPS CAGR over FY24-27, which should be one of the best in our coverage, says Jefferies. It is our top pick in staples.
Pharma & Healthcare
Apollo Hospitals - Jefferies expects Apollo to clock 25% Ebitda CAGR during FY24-26, highest in its hospital coverage universe.
Mankind Pharma- Jefferies expect Mankind to clock revenue and Ebitda CAGR of 12.5% and 17.5% during FY24-26 and value the company at 35 times FY26 EPS with target price of ₹2,430
Jefferies expects Ambuja Cements profitability for FY24 to FY26 to improve, driven by: 1) industry-wide cost easing; 2) low base benefit as FY23 profitability was negatively impacted by management transition phase and 3) series of efficiency initiatives and adding of new capacities.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
