Zomato, Polycab India, and more among SBI Securities’ top 8 stock picks after Q1 earnings

Following a mixed Q1 earnings season, SBI Securities released its list of 'rockstars of June 2024.' The brokerage projects Nifty50 EPS to grow at a 12.5 percent CAGR from FY24 to FY26, a slight moderation due to the subdued performance in 1QFY25, where aggregate EBITDA growth for Nifty 50 companies was in single digits for the first time since 2QFY21, with BFSI and Auto sectors leading earnings growth. 

SBI Securities highlighted eight stocks with strong management and corporate governance, a favourable industry outlook with solid growth prospects, attractive margins and returns, and a strong historical track record.

Let's take a look

Zomato: The brokerage has a target price of ₹300 for the stock, indicating an upside potential of almost 20 percent.

SBI Securities supports Zomato due to its diverse business model, strong brand, and solid financial performance. Zomato’s key segments—food delivery (63 percent of sales), quick commerce (24 percent), B2B supplies through Hyperpure, and others like dining out and ticketing—are driving growth. The acquisition of Blinkit in 2022 has expanded its B2C reach. 

Its Going-out segment, still in its early stages, is expected to perform strongly, offering additional services such as ticketing for movies and live events. Strong Q1 FY25 results showed a 74.1 percent YoY revenue increase to ₹4,206 crore, with net profit rising to ₹253 crore. The management is optimistic about future growth, projecting GOV to grow over 20 percent in FY25 and planning to increase Blinkit’s store count significantly by FY25E/FY26E.

Polycab India: The brokerage has a target price of ₹7,979.6 for the stock, indicating an upside potential of 17 percent.

SBI Securities likes Polycab due to its diversified product range and strong infrastructure. Polycab manufactures a wide variety of wires and cables, accounting for 88 percent of FY24 sales, and has expanded into the EPC business and FMEG segment, which contributed 5.3 percent of FY24 sales. 

It noted that the company boasts 28 manufacturing facilities and a vast distribution network across India. Moreover, Polycab's revenue guidance of ₹20,000 crore by FY26 may be revised upward, given its strong performance with over ₹18,000 crore in FY24. The company expects growth, despite a mixed Q1 FY25, with plans for significant capex to expand capacity and boost revenue, stated SBI Securities.

Nuvama Wealth Management: The brokerage's target price for the stock is ₹7,790.7, indicating an upside potential of 21 percent.

SBI Securities favours Nuvama for its robust financial performance in Q1 FY25, where revenue surged 60 percent YoY to ₹668 crore, and PAT jumped 133 percent YoY to ₹221 crore. The Capital Markets segment led this growth with a 153 percent revenue increase. Nuvama also saw healthy AUM growth across its verticals, with private AUM up 31 percent YoY and wealth management AUM up 50 percent YoY, it highlighted. 

The company plans to expand into tier 2 and tier 3 cities and expects the wealth and asset management businesses to contribute significantly to future earnings. Cost rationalisation and a focus on a multi-product, multi-customer approach are expected to drive further growth. The brokerage added that valuations appear to be reasonable and offer favourable risk-reward for medium to long-term investors.

Samhi Hotels: The brokerage has a target price of ₹245.7 for the stock, indicating an upside potential of 19 percent.

SBI is bullish on Samhi Hotels for its diversified hotel portfolio across key Indian consumption centres, with a strong presence in upper upscale, upscale, upper mid-scale, and mid-scale segments. The company's strategy of acquiring and turning around hotels has expanded its room inventory significantly, growing from 252 keys in FY14 to 4,801 keys by June 2024, noted the brokerage. 

It further pointed out that in Q1 FY25, Samhi delivered a robust performance with a 31.2 percent YoY increase in revenue and an 81.2 percent rise in EBITDA, leading to a net profit of ₹4 crore. With a healthy pipeline of new rooms and strategic partnerships, Samhi is poised for long-term growth, making its current valuation attractive, said SBI Securities.

Fiem Industries: The brokerage has a target price of ₹1,874.4 for the stock, indicating an upside potential of 23 percent.

SBI is positive on Fiem Industries due to its strong position as a key supplier to major two-wheeler OEMs in India, including Honda, TVS, and Yamaha, which contribute significantly to its revenue. With the domestic two-wheeler industry expected to grow in double digits in FY25, driven by improved rural demand, Fiem is well-positioned to benefit, said the brokerage. 

The company's portfolio is powertrain agnostic, catering to both ICE and EV models, and its focus on premium models with higher content per vehicle boosts margins, it further emphasised. Fiem is also expanding into the passenger vehicle segment, adding diversification to its revenue streams. Trading at 18.8x FY25E P/E, the stock looks attractive with strong growth prospects ahead, added SBI Sec.

Sky Gold: The brokerage has a target price of ₹3,172.3 for the stock, indicating an upside potential of over 21 percent.

SBI Securities prefers Sky Gold (SGL) for its strong B2B model, serving leading jewellery retailers like Malabar Gold and Diamonds, Kalyan Jewellers, and more, with products available in over 2,000 showrooms across India. SGL offers a diverse range of jewellery, including plain gold, studded gold, diamond-studded, and Turkish jewellery, catering to mid-market and value segments. 

The recent acquisition of Starmangalsutra and Sparkling Chains enhances SGL’s market presence, particularly in fast-moving jewellery segments. SGL posted strong 1QFY25 results, with revenue and profit nearly doubling YoY, and has guided for robust growth through FY27. At 33.4x FY25E P/E, the stock offers decent value given its growth trajectory and positive industry outlook.

Capacite Infraprojects: The brokerage has a target price of ₹485.6 for the stock, indicating an upside potential of almost 28 percent.

SBI is bullish on Capacite due to its strong execution track record and presence in high-growth regions like Mumbai, Bengaluru, and Hyderabad, where it has completed over 60 projects covering 64 million sqft. The company’s integrated operations and modern technology capabilities allow it to handle large-scale projects, working with top public and private clients like MHADA, Oberoi, and DLF, said the brokerage. 

Moreover, with an order book of ₹8,828 crore, offering 3.9x revenue visibility, Capacite has guided for a 25% CAGR in revenue over the next four years. The robust housing sector outlook, driven by urbanisation and government initiatives, further supports its growth potential, highlighted the brokerage. Additionally, the company’s balance sheet remains strong with a low debt-to-equity ratio, and it started FY25 on a positive note, achieving significant revenue and profit growth in 1QFY25, it said.

Epack Durable: The brokerage has a target price of ₹315.7 for the stock, indicating an upside potential of almost 25 percent.

SBI is positive on Epack due to strong tailwinds in the AC industry, which saw 41 percent YoY volume growth in 1HCY24, driving Epack’s capacity utilisation above 90 percent in 1QFY25. The company, with a diverse client base including Voltas, Daikin, and Panasonic, is expanding into new product categories like washing machines and air coolers to reduce revenue seasonality. 

Epack benefits from backward integration and the PLI scheme for AC components, further boosting margins, said the brokerage. With a strong 1QFY25 showing 77 percent YoY revenue and EBITDA growth and an expected over 45 percent revenue growth in FY25, the stock trades at a favorable P/E of 34.9x compared to peers, it stated.

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.