Adani Ports, Delhivery To L&T: Jefferies' Top Bets In Industrial And Power Sectors
Of 22 major industrial and power companies, Jefferies has rated 17 as ‘buy’, four ‘underperform’, and one as ‘hold’.
Adani Ports and Special Economic Zone Ltd., Delhivery Ltd., and Larsen & Toubro Ltd. are among the 17 industrial and power companies that Jefferies is betting on, given their earnings growth, improving margins, and limited impact from global factors.
Out of 22 major industrial and power companies, Jefferies has rated 17 with ‘buy’, four with ‘underperform’, and one with a ‘hold’.
"Earnings growth and margin traction are supporting interest in Indian industrials. Utilities have limited interest, and logistics is finally creeping back on the radar," it said.
Power transmission, railroads, data centres, logistics, production-linked incentives, and metals should get the most traction, as these have domestic drivers and limited impact from global factors, the brokerage said.
There are talks about raising funds in Asia outside of Japan and China, which could mean larger investments for India, the brokerage said.
"Investors were surprised that solar power generation awards are slowing down, and SECI awarded only six gigawatts in FY23 versus 12-15 gigawatts annually in FY21-22," Jefferies said.
Here is the full list of Jefferies' top "buy" stock bets:
Views on Indian Industrial and Power Sector Companies
Larsen & Toubro Ltd.
Margin disappointment can be a driver of underperformance, especially after the strong share price returns of the last 6–12 months.
First quarter of FY24 should see order flow traction.
As new projects are executed in an environment of inflated commodity prices, a margin recovery is anticipated.
Older projects reaching completion stages and operating leverage will also help.
Power Grid Corporation of India Ltd.
PGCIL is the market leader in tariff-based competitive bidding, with a 45% market share.
With a 6% dividend yield and guaranteed earnings due to controlled ROE, the company stands out as a defensive choice.
Upside will be driven forward by project wins and upgraded capex guidance.
Siemens Ltd.
Siemens' sale of its LV motors segment to the parent was at a reduced valuation. Although, this is not a significant segment for Siemens' growth prospects in transmission and railways, this will have a negative impact of Rs 189 apiece.
Given the smaller division and the continued double-digit growth in order flow and profits, this might only have a short-term effect on stock prices.
Order flow to see 20% CAGR over FY2023E-25E.
Employee costs should give operating leverage ahead, as revenues rise faster.
Thermax Ltd.
The company signed an MoU with Australia's Fortescue Future Industries to explore green hydrogen opportunities in India.
The 75%+ green energy portfolio and operating leverage-linked earnings surprise scope makes Thermax attractive.
Revenue will see 18% CAGR in FY23-25E, driven by corporate India ESG spend.
Better capital allocation should see the return ratios improve.
Delhivery Ltd.
Current price factors less than 10% express parcel growth in the next 3-5 years, compared to 30%+ in the past.
B2B growth, operating leverage, and limited e-commerce penetration are also underestimated.
Revenue to see 25% CAGR over FY23-26E.
‘Express parcel’ and ‘part truck load’ segments should see Delhivery steadily gain market share.
KEI Industries Ltd.
The company is a play on housing, industrial capex, power T&D and exports, with valuations still on its side in context of 27% EPS CAGR in FY23-25E.
RoE is expected to increase from 17% in FY21 to 21% in FY25E.
The company is net-debt free.
Container Corporation of India Ltd. (Concor)
DFC impact should be seen FY24E onwards.
Ebitda/TEU to remain above Rs 4,000.
Company’s PAT/TEU to gradually normalise and move higher.
TCI Express Ltd.
Company to continue dealing in profitable business in PTL segment.
Revenue to see CAGR of 21% over FY23-25E.
PAT to see 31% CAGR over FY23-25E as operational efficiency kicks in.
Return ratios to improve going ahead.
Stocks Rated As 'Underperform'
Jefferies has given an 'underperform' rating to Cummins India Ltd., Bharat Heavy Electricals Ltd., Tata Power Ltd. and Indian Energy Exchange Ltd.
The brokerage recommended a 'hold' on Gujarat Pipavav Port Ltd.
