Adani Enterprises, HAL, ONGC and more: Jefferies initiates coverage on 13 Indian stocks; check full list

Global brokerage house Jefferies has initiated coverage on 13 Indian stocks in 2024, expanding its total coverage to 188 stocks with a combined market cap of $3.4 trillion, representing 70 percent of India's listed market. Most of these newly covered stocks have significantly outperformed the benchmark index.

Indian benchmark Nifty has jumped over 6 percent in 2024 YTD and over 2 percent in May, extending gains for the fourth straight month. It was flat but in the red in just the first month of the current calendar year January, down 0.03 percent.

Certainty around Modi-led BJP winning the third term in the general elections in 2024, overall positive foreign investor inflows this year, robust domestic buying, rise in index heavyweights, hopes of a rate cut in FY24, and improving macros have all contributed to the market rally this year so far.

Read here: Expect low-teen upside for Nifty by March 2025; cautious on small, midcaps: UBS

Let's take a look at the 13 stocks Jefferies has initiated coverage on this year.

360 One WAM | Buy | Target Price: ₹900 | Upside: 9.4%

360 ONE is the largest Integrated Wealth Management (IWM) firm with a focus on Ultra High Net Worth Individuals (UHNI) and a leading asset manager in private markets. Over FY24-27E, Jefferies believes network expansion and growing client vintage should drive 25 percent CAGR in active assets under management (AUM) of wealth business.

"The asset management company (AMC) is entering a PE fundraising cycle as large maturities approach and should deliver a 20 percent AUM CAGR. Despite some pressure on fees, operational leverage will drive a consolidated C/I ratio improvement of >400bps over the next 3 years and deliver PBT CAGR of 22 percent," it said.

Adani Enterprises | Buy | Target Price: ₹3,800 | Upside: 12%

AEL is India's leading business incubator, having successfully scaled and demerged multiple industry-leading businesses. With new businesses of Airport and Green Hydrogen, Jefferies expects EBITDA to grow 3x over FY24-FY28. AEL is riding on the strong industry tailwinds in new energy/sustainability, airports, infra, digitalisation, and import substitution in India, it noted.

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Bharti Hexacom | Buy | Target Price: ₹1,080 | Upside: 6%

Bharti Hexacom offers a way to invest in those parts of Bharti Airtel's business that are growing faster, have higher ROCE, and have better FCF conversion. Over FY24-27, the brokerage expects Bharti Hexacom to deliver 16%/21% CAGR in revenue/EBITDA, which, coupled with moderation in capex, would result in 40 percent CAGR in free cash flow (FCF).

Data Patterns | Buy | Target Price: ₹3,545 | Upside: 16.6%

The company is a leading private sector player in defence and aerospace electronic solutions. Revenues should rise nearly 5x in FY24E-30E as indigenisation and export pipeline benefit the company. ROE improvement and reducing working capital intensity are the other drivers, stated Jefferies.

Entero Healthcare Solutions | Buy | Target Price: ₹1,510 | Upside: 48%

Entero is a fast-growing healthcare products distributor operating in a large and fragmented market. Its wide reach and product offering, coupled with a strong technology platform, should lead to 20 percent organic revenue CAGR for FY24-26E. In addition, it should gain from industry consolidation. Over FY24-26E, Jefferies estimates a 44 percent revenue CAGR and an 8x increase in adj. PAT as economies of scale kick in.

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HAL | Buy | Target Price: ₹3,900 | Target Crossed

55-70 percent of Hindustan Aeronautics (HAL) revenues are linked to service income to past product sales and recurring. Product business should rise faster as the government is encouraging domestic aircraft manufacturing. GE's tie-up shows the potential of moving up in the OEM status among global defence companies. Medium-term 22 percent EPS CAGR visibility in FY24E-30E is a key driver, said Jefferies.

IDFC First Bank | Buy | Target Price: ₹100 | Upside: 28.6%

IDFC First Bank has built a well-rounded platform, arguably among the most improved deposit franchises. Operational efficiencies will play out from 2HFY25, and over FY24-27 strong deposit growth will aid loan growth that should aid 28 percent EPS CAGR even as credit costs rise, forecasted the brokerage. Improving ROA (to 1.5%) and ROE (to 14%) will aid rerating. A fall in rates should help it more than peers. The ability to raise capital will be key, it added.

Indiamart Intermesh | Buy | Target Price: ₹3,400 | Upside: 33%

Indiamart is a dominant B2B classified in India, with a strong value proposition and key moats in place to insulate it from competition. An untapped market, with sub-3 percent paid conversion and rising digital awareness, offers opportunities for growth of 19 percent/25 percent in revenue/EPS over FY24-26E. A strong balance sheet and investments in SaaS could drive the next leg of growth, said the brokerage.

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Kaynes Technology | Hold | Target Price: ₹2,900 | Downside: 12%

Kaynes stands out among EMS players with the highest Operating Profit Margin (OPM), attributed to its component diversification and optimal mix. As of December 2023, its order book is estimated at ₹3,800 crore. However, the company faces stretched working capital at over 100 days compared to its peers. Kaynes is the only EMS player to foray into Outsourced Semiconductor Assembly and Test (OSAT) and Printed Circuit Board (PCB) manufacturing, a backward integration move. The company plans an estimated total capital expenditure of around ₹3,700 crore for OSAT in two phases. It is anticipated that the central government will fund approximately 50%, with the state government contributing about 25%.

However, whether Kaynes receives OSAT approvals remains uncertain. In Q3FY24, the company raised ₹14 billion through a Qualified Institutional Placement (QIP). The first phase of OSAT is projected to be operational by the second half of FY26, with the second phase expected by FY28, stated the brokerage. Over FY24-26e, Jefferies estimates sales/PAT CAGR at 46 percent/59 percent, with a 14-15 percent core OPM. We assign target P/E at 50x to Mar'26 EPS, broadly in line with the historical trading average. Even so, risk/reward seems punchy at PE of 70x on FY25e, it noted.

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Nuvama | Buy | Target Price: ₹6,000 | Upside: 26%

Wealth services form a significant portion of the company's revenue, contributing 60%. Within this, Ultra High Net Worth Individuals (UHNI) account for 25%, while High Net Worth Individuals (HNI) contribute 35%. Other revenue streams include investment banking (22%), custody services (18%), and an emerging Asset Management Company (AMC). Management is investing in wealth franchise build-out (RM network to double over FY23-27E) and Jefferies expects an AUM/PBT CAGR of 22%/20% over FY24-27E. Nuvama's valuation discount is driven by a lower mix of wealth/ARR, and the brokerage sees a steady improvement in business mix to drive re-rating for the stock over the medium term; however, near-term upside can be limited after the recent run-up, it cautioned.

ONGC | Buy | Target Price: ₹390 | Upside: 38%

Reforms in crude and gas pricing have improved ONGC's profitability above past decade averages. Augmented by profitable production growth over FY24-26E, Jefferies sees strong FCF generation and consolidated net debt reduction. Valuation doesn't capture this adequately with the stock trading at a steeper discount to Nifty compared to its LT avg.

PB Fintech | Buy | Target Price: 1,150 | Target Achieved

Digital brokers are gaining from rising insurance penetration and customer shift to online channels. PB Fintech, which operates India's largest online insurance platform (>90% market share), should witness 30% CAGR in premiums over FY25-27E, aided by strong operating leverage in its renewal book, deliver 5x EBITDA growth, forecasted Jefferies. Risks are from regulations and the emergence of strong competitors, it warned.

Read here: Cochin Shipyard shares climb 10% to hit new all-time high on strong Q4 earnings

Syrma SGS Technology | Buy | Target Price: 640 | Upside: 34%

Syrma boasts a well-diversified portfolio across multiple verticals including PCBA, RFID, and magnetics, serving a broad spectrum of end users. These include Industrial (28%), Consumer Electronics (37%), Automotive (23%), Medical (7%), and Railways along with other sectors (5%). “Its core Operating Profit Margin (OPM) of 7-8% is comparable to AMBER but double that of DIXON. By focusing on niche verticals, SYRMA aims to achieve a sales/PAT CAGR of 36%/57% over FY24-26, with OPM remaining at 7-8%,” estimated Jefferies.

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.