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Axis Securities Report
Here are our top picks for October 2024:
Varun Beverages – Geared for growth (Potential upside: 18%)
We believe Varun Beverages Ltd. is expected to continue its strong growth momentum on account of-
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successful strategic acquisition of the Beverage Company, thereby consolidating its presence in South Africa and DRC,
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Continued focus on expansion in its distribution reach, mainly in rural areas and
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Commissioning of multiple green field and brownfield facilities across geographies, strengthening manufacturing capabilities and extending market reach, thus saving significant transportation costs.
We believe these investments are poised to support the company’s long-term growth objectives and profitability.
Aurobindo Pharma – Several growth levers to drive topline (Potential upside: 18%)
Injectable represents $500 million in revenues, constituting 30% of U.S. sales and boasts of having the highest gross margins. However, the issuance of official action indicated for injectable segments may negatively impact new launches.
Moreover, price erosion within the injectable portfolio poses a risk to gross margins in the upcoming quarters. Aurobindo has already invested Rs 7,000 crore in capex over the last two years, primarily in segments like Biosimilars and Pen-G (API).
Aurobindo’ valuations in the coming years will be influenced by the return on invested capital generated from this capex. Despite these challenges, considering the favorable industry trends and investments in new growing sectors.
J Kumar – Robust order book, efficient execution to drive growth (Potential upside: 20%)
The government has made a commitment to allocate Rs 11.1 lakh crore in the Interim union budget 2024-25 for the infrastructure sector, taking into consideration its vital contribution to economic growth. The allocation for roads and railways has been raised to Rs 2.78 lakh crore and 2.55 lakh crore in the budget 2024-25.
To increase the ambit of the metro rail system across the country, the government had also earmarked Rs 19,518 crore for Metro Projects in last year’s budget.
This higher allocation demonstrates the government's commitment to achieving inclusive and sustainable urban development as well as to modernising and improving the efficiency of Indian Railways, which stands as one of the most extensive railway networks in the world.
The company reported good operating performance in Q1 FY25 with Revenue/Ebitda/PAT growth of 13%/14%/19% which were in line with estimates.
Considering strong and diversified order book position, healthy bidding pipeline, new order inflows, emerging opportunities in the construction space, the company’s efficient and timely execution and strong financial credence, we expect J Kumar Infraprojects Ltd. to report Revenue/Ebitda/adjusted profit after tax CAGR of 16%/18%/22% respectively over FY24-FY26E.
Click on the attachment to read the full report:
Here Are The Top Idea Picks For October 2024 By DRChoksey
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