SBI, Zomato, Ambuja, Amber: Jefferies 'Playing XI' for investors over next 5 years

Jefferies on Monday brought out  a list of eleven companies which it expects to give solid returns over the next five years. These companies are expected to deliver strong compound annual growth rate (CAGR) returns ranging from 15-25 per cent, according to the research firm.

India, with a consistent history of 10-12% USD CAGR over the past 10–20 years, is now the fifth largest equity and continued reforms should maintain its fastest-growing large economy status, Jefferies said. 

The firm sees India's GDP touching $5 trillion in the next four years, making it the third largest economy, as continued reforms lay the foundation for 7% long-term GDP growth. "Consistent and fast-growing flows will likely complement FPI inflows to sustain Indian market performance," it said in its March 18 note. 

These are the 11 stocks that Jefferies advises investors to bet on for the next five years:

Amber Enterprises
Jefferies termed Amber Enterprises a key beneficiary of India's manufacturing growth story. The brokerage's top pick in the small and midcap space, Amber's core competency in ACs and diversification into components, with support from the PLI scheme, will drive a Compound Annual Growth Rate of 36% over the financial years 2024 to 2030 in terms of earnings, the firm said. 

Ambuja Cements
Strong cement demand from capex upcycle is expected to drive 19% Ebitda CAGR as Ambuja nearly doubles capacity, cuts costs and invests in green power.

Axis Bank
Axis Bank is likely to deliver an Earnings Per Share (EPS) CAGR of 18% over 2024 to 2029. Jefferies sees this as an offshoot of improvement in deposit franchises, ramp-up of digital and lending platforms and subsidiaries. "Platforms for hyper-personalisation, SME and rural loans will aid growth in loans," Jefferies said, adding that valuations also have a scope to re-rate.

Bharti Airtel
The strong Ebitda growth—13% India CAGR, ad ARPUs rise faster than nominal GDP—along with moderating capex will drive a 21% CAGR in Bharti's free cash flow to equity over FY24-30 and will push up the company's ROCE to 25% and above.

JSW Energy
JSW Energy is likely to see three triggers at play in the next 12-24 months, according to Jefferies. One is improving visibility on Renewable Energy moving to 81% of its capacity from 52% currently, the commissioning of a 700 MW merchant capacity in peak power deficit times and progress on India's first green hydrogen plants and energy storage battery unit. "In the medium-term, the company's timely execution and prudent cash flow utilisation will keep multiples elevated and create further shareholder value," the note said.

Larsen & Toubro
The largest Indian contractor will be able to achieve 15% revenue CAGR over FY23-300, driven by recovery in capex cycle, market share gains and execution ramp up. Alongside, operating leverage to drive margin expansion and strong stock gains. There is also some room for re-rating.

Max Healthcare
Sustained growth momentum in the hospital business can make Max Healthcare a potentially 2.5x stock in five years, Jefferies says. The brokerage expects the stock to report a 20% EBITDA CAGR during the financial years 2024 to 2030 as new brownfield beds get added and most of them breakeven in less than 12-15 months. Construction delays, slower ramp-up and overpriced acquisitions are some key risk factors.

State Bank of India
Jefferies expects SBI to deliver a 13% loan CAGR over the next five years. The bank's ability to raise capital will be a key growth driver, according to Jefferies. SBI can also monetise its stake in its subsidiaries and valuations also have a scope to re-rate, the note said. Jefferies rates SBI among its top PSU picks.

Macrotech Developers

Strong housing cycle to drive 17.5% CAGR pre-sales growth. Alongside, Mumbai infra upgrade to drive more than 10% CAFR pricing uptick in large township land, driving significant rerating and over 150% stock gains.

TVS Motor
Jefferies sees TVS  as key beneficiary of revival in Indian two-wheeler demand from an abnormally cyclical trough. Rising investments in overseas entities, where the company has shared few details on strategy and outlook is a concern for Jefferies. 

Zomato
Jefferies called Zomato a "compelling food delivery play." "As the franchise generates strong free cash flows, capital allocation will be a key factor to watch," the note said.