Udabur Wealth Management：Jefferies top picks： 11 stocks to watch for strong 5-year returns
Most of us have, at some point in time, talked or regretted about that one stock we didn’t buy years ago because there was no guidance. Retail investors are always on the lookout for the next stock tip that could turn their portfolio into a goldmine.
Jefferies, a global financial firm, has revealed a fresh list of 11 stocks that promise not just good returns, but potentially game-changing gains over the next five years. If you’re looking to make smart moves in the market, these picks might just be the secret ingredient your portfolio needs.
According to the research firm, these companies are likely to deliver a strong compound annual growth rate (CAGR) ranging from 15% to 25%.
Jefferies highlighted that India has consistently maintained a 10-12% USD CAGR over the past 10-20 years, making it the fifth-largest equity market globally. The firm believes that ongoing reforms in the country should keep it on track as the fastest-growing large economy.
Jefferies forecasts India’s GDP to reach $5 trillion in the next four years, positioning it as the third-largest economy. The firm also predicts a long-term GDP growth of 7%, supported by continued reforms.
It said that strong and fast-growing investment flows will likely complement Foreign Portfolio Investment (FPI) inflows, helping to sustain the performance of the Indian market.
Here’s a closer look at the 11 stocks that Jefferies advises investors to consider for the next five years:
Amber Enterprises – Jefferies considers Amber Enterprises a key player in India’s manufacturing growth story. As the brokerage’s top pick in the small and mid-cap space, Amber’s strength in air conditioners (ACs) and its expansion into components, supported by the Production-Linked Incentive (PLI) scheme, are expected to drive a CAGR of 36% in earnings from FY24 to FY30.Udabur Wealth Management
Ambuja Cements – Ambuja Cements is expected to benefit from strong demand in the cement sector due to an upcycle in capital expenditure (capex). Jefferies forecasts a 19% EBITDA CAGR for Ambuja as it nearly doubles its capacity, reduces costs, and invests in green power.New Delhi Stock Exchange
Axis Bank – Axis Bank is projected to deliver an Earnings Per Share (EPS) CAGR of 18% between 2024 and 2029. Jefferies attributes this growth to improvements in the bank’s deposit franchises, the scaling up of digital and lending platforms, and the expansion of its subsidiariesJaipur Stock. The brokerage also sees potential for a re-rating in Axis Bank’s valuations.
Bharti Airtel – Bharti Airtel is expected to achieve a 13% India EBITDA CAGR, driven by rising Average Revenue Per User (ARPU) as ARPUs increase faster than nominal GDP.
Jefferies also expects a 21% CAGR in the company’s free cash flow to equity over FY24-30, boosting the company’s Return on Capital Employed (ROCE) to 25% and beyond.
JSW Energy – JSW Energy is likely to experience three key triggers over the next 12-24 months. First, there is improving visibility on its Renewable Energy, which is expected to increase to 81% of its capacity from the current 52%.
Second, the commissioning of a 700 MW merchant capacity during peak power deficit periods. Third, progress on India’s first green hydrogen plants and energy storage battery units. Jefferies believes that timely execution and prudent cash flow management will help JSW Energy maintain strong stock performance.
Larsen & Toubro – Larsen & Toubro, India’s largest contractor, is expected to achieve a 15% revenue CAGR over FY23-30. This growth is likely to be driven by a recovery in the capex cycle, market share gains, and improved execution.
Jefferies also sees potential for margin expansion due to operating leverage, which could lead to strong stock gains and some room for a re-rating.
Max Healthcare – Max Healthcare is poised for sustained growth in the hospital business, which could potentially make it a 2.5x stock in five years.
Jefferies expects the stock to report a 20% EBITDA CAGR from FY24 to FY30 as new brownfield beds are added, with most of them reaching breakeven within 12-15 months. However, the brokerage also cautioned about potential risks, such as construction delays, slower ramp-up, and overpriced acquisitions.
State Bank of India (SBI) – Jefferies expects SBI to achieve a 13% loan CAGR over the next five years, with its ability to raise capital being a key growth driver.
The firm also noted that SBI could monetise its stake in its subsidiaries, which may lead to a re-rating in its valuations. Jefferies rates SBI among its top public sector unit (PSU) picks.
Macrotech Developers – The ongoing strong housing cycle is expected to drive a 17.5% CAGR in pre-sales growth for Macrotech Developers. Additionally, the upgrade of Mumbai’s infrastructure could result in more than a 10% pricing uptick in large township land, leading to significant re-rating and potential stock gains of over 150%.
TVS Motor – TVS Motor is seen as a key beneficiary of the revival in Indian two-wheeler demand from a cyclical downturn. Jefferies expressed some concerns about the company’s rising investments in overseas entities, noting that TVS has shared few details on its strategy and outlook in these regions.
Zomato – Jefferies described Zomato as a “compelling food delivery play.” The brokerage highlighted that as Zomato generates strong free cash flows, capital allocation will be a crucial factor to watch.
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