Jefferies bets on Zomato, SBI, 17 other stocks to play India growth story

With Indian equities scaling all-time highs and seen sustaining the momentum in December as well, brokerage Jefferies India has shortlisted 19 stocks for investors to add to their portfolios.
Banks are on the top of this list, with the brokerage’s bets being ICICI Bank, State Bank of India, and IndusInd Bank.

“ICICI Bank is among our top picks across Indian financials as we believe that the bank offers among the best risk-reward across peers with superior growth, improved asset quality and higher RoEs,” the brokerage said in its report.

Its target price for shares of ICICI Bank is Rs 1,150, implying an upside of 24% from current levels. The stock was up 0.3% at Rs 933.80 on the National Stock Exchange.

According to the brokerage, SBI is well-positioned to deliver healthy growth in earnings with an uptick in the topline and low credit costs. Further, valuations are quite attractive, with a healthy return on equity (RoE). Jefferies’ target price of Rs 760 for the stock implies a 25% upside from current levels. The stock was trading 0.4% higher at Rs 610.05.

In the automobile pack, Tata Motors, Maruti Suzuki India, and TVS Motor Co are the stocks Jefferies is betting on.

“Tata (Motors) is in the early phase of a multi-year turnaround, led by a confluence of improved strategy and cyclical recovery,” it said.

The brokerage likes Tata Motors given the cyclical recovery and improving franchise in India, leadership in the electric vehicle (EV) space, and JLR's focus on returning to higher margin Land Rover models.

Jefferies has a price target of Rs 540 for Tata Motors stock, implying an upside of 24%.

The next set of bets is in the capital goods and infrastructure sectors for Jefferies.

Larsen & Toubro, Thermax, and Container Corp of India are the top picks for the brokerage.

“We believe the peak of non-core investments is behind, and L&T has the potential to surprise on execution and order flow expectations,” Jefferies said and has a target of Rs 2,455 for the stock. This indicates a potential upside of about 15% from current levels.

Real Estate is another sector that Jefferies is bullish on, given the strong demand outlook for residential properties across various markets despite a high interest-rate environment.

Godrej Properties and Macrotech Developers are the top picks in this sector.

Zomato, a stock that witnessed heavy selling amid the rout in the new-age technology sector, has made it to the “buy” list of Jefferies.

Despite a 60% correction from the peak, Zomato shares trade at 3.5 times its enterprise value-to-revenue ratio on a one-year forward basis.

This, according to Jefferies, is justified in the context of a long growth runway. It sees consistent improvement in profitability in food delivery. The brokerage has a target of Rs 100 for the stock, implying a
50% upside to the current market price.

Cholamandalam Finance, Godrej Consumer, Sun Pharmaceutical Industries, Indian Hotels, Crompton Greaves Consumer Electricals, and Supreme Industries are the other bets of the brokerage.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)