Brokerage firm JM Financial has released the list of shares for the coming year, which has been named Diwali Picks. The brokerage believes that these stocks can brighten investors’ portfolios in the coming days. These stocks include heavy weight players from PSU companies to Nifty 50. Let’s take a look at this list.
NALCO
The PSU company’s EBITDA is likely to grow three-fold to ₹1,200 crore this current quarter, driven by rising prices, lower costs and focus on benefits of captive coal mining. FY2027 EBITDA estimates of ₹6,000 crore and net cash balance of ₹3,500 crore with 7.5x Enterprise Value to EBITDA give NALCO an equity value of ₹48,500 crore, based on which JM Financial has set a price target on the stock at ₹264. Is. At current values, the brokerage rates NALCO’s valuations as attractive, with a 3% dividend yield. Sharp fall in international prices, delay in alumina refinery expansion and cost savings from captive coal mines are the major risks for the company.
Power Grid
JM Financial finds Power Grid’s valuations better and hence has a price target of ₹383 on the stock and a buy recommendation. The brokerage believes that Power Grid also offers a healthy dividend yield of around 4%. It expects a sharp recovery in the transmission capex cycle and Power Grid is expected to maintain a return on equity (RoE) of 18% between financial years 2024-2026. Slower than expected capitalization of projects, increased competition for tariff based bids are some of the key risks.
Reliance Industries
RIL shares have fallen more than 15% from recent highs and lagged the Nifty 50 benchmark index. JM Financial is confident of a turnaround driven by faster-than-expected tariff hikes by telcos, recovery in retail business and positive announcements on new energy businesses. The brokerage expects the earnings growth momentum to remain strong across sectors and the company’s net profit to grow at a compound annual growth rate (CAGR) of 15% between financial years 2024 to 2027. JM Financial has given Reliance Industries a “buy” rating, with a price target of ₹3,500.
Bajaj Finance
JM Financial has set a price target of ₹8,552 on Bajaj Finance. This has described the asset quality of the company as the best. Valuations are also slightly below its long-term average. JM Financial considers it a possibility for re-valuation given the upside potential with healthy Return on Equity (RoE) and Return on Assets (RoE). Higher than expected slippage and credit costs and lower AUM growth are some of the key risks.
ICICI Lombard
The stock is trading at premium valuations, but JM Financial expects it to grow by more than 17% with consistent earnings growth and RoE of more than 17%. Although ICICI Lombard has seen a slowdown in growth after a strong start to the financial year, JM Financial advises that any seasonal weakness should be used as a ‘buying opportunity’. The brokerage has kept a price target of ₹2,450 on ICICI Lombard.