From Reliance Industries to SBI: Here are 12 Diwali picks from JM Financial

JM Financial believes that concerns around Reliance's net debt are overdone. It expects the company could deliver a 14% - 15% Earnings per Share Compounded Annual Growth Rate (CAGR) over the next 3-5 years. JM Financial also expects Jio's ARPU to rise 10% CAGR over financial year 2023-2028. "Reliance Retail is India's largest retailer and aids well to the overall business mix," the note said. The company completing a major petrochemical expansion should also significantly increase its free cash flow potential. JM Financial has a price target of ₹2,700 on Reliance Industries.

India's largest lender's core fundamentals continue to remain stable with sustained margins and controlled credit costs. All these factors, according to JM Financial, should continue to drive momentum in SBI's shares. "SBI is one of the best PSU Bank franchises, with a strong CASA and digital banking platform," JM Financial said. It expects SBI to continue to see strong traction in retail and SME segments. Domestic loan growth has slowed a bit and SBI, in the interim, has increased its focus on the overseas loan book. The brokerage has a price target of ₹665 on SBI.

JM Financial believes that L&T is well positioned to benefit from sustained momentum in government funded domestic infrastructure projects and order inflow from the middle east, along with a pick-up in private capex, aided by the government's push on manufacturing. Additionally, potential sale / financing of non-core power, road and metro projects should aid balance sheet improvement and return ratios. "Order win prospects remain strong led by sustained push in infrastructure, renewed vigour in defence procurement and recovery in industrial capex," the brokerage wrote. It expects L&T to report an Earnings per Share CAGR of 27% over financial year 2023-2025. JM Financial has a target of ₹3,430 on the infrastructure and construction conglomerate.

Titan's management has guided for jewellery revenue to grow by 2.5 times in five years and consumer spends in watches and wearables crossing ₹10,000 crore in financial year 2026. JM Financial believes that the company will be able to meet both its targets. Additionally, the brokerage also expects Caratlane to emerge as a key value driver over time, comprising over 10% of the Jewellery segment. "We remain confident of high-teens earnings trajectory continuing for the Bengaluru-based company in the medium-term, given the strong execution," JM Financial said. Any slowdown in discretionary spending, demand due to high inflation are key risks. JM Financial has a price target of ₹3,650 on Titan.

Sun Pharma's domestic market leadership, specialty scale-up, strengthening balance sheet and improving margin and return profile clearly support a case for the stock to trade at a premium to its historical trading ranges, according to JM Financial. Despite the higher R&D costs, the brokerage expects Sun Pharma's margin to remain above 27%. Growth in the specialty business is likely to be led by Ilumya, Cequa and Levulan. Sun Pharma is JM Financial's top pick within the sector. Any change in the regulatory landscape, price erosion, delay in key launches are some key risks. JM Financial has a target of ₹1,300 on Sun Pharma.

Hindustan Aeronautics is in a sweet spot to benefit from a long-term demand opportunity courtesy of its monopoly-like position in the domestic defence aerospace sector, according to JM Financial. It expects the company to be a key beneficiary of changing structural trends in the Indian defence sector. "We believe HAL is well placed to tap growth with its focus on strengthening its R&D and its recent pact with GE Aerospace and France-based Safran Aircraft Engines augers well," the note said. Stiff competition, delay in order execution and slower pace of order intake are some key risks for the stock. Any delay in passing over costs due to higher input costs would add pressure to margins, according to JM Financial. The brokerage has a price target of ₹2,230 on the stock.

JM Financial expects Ashok Leyland to be a key beneficiary of the expected traction in the domestic Commercial Vehicle industry, driven by traction in the macro economy. The company is aiming for a higher share in MHCVs to nearly 35% led by network expansion in North and East India and by addressing product gaps. "Softening commodity cost, higher operating leverage and cost control initiatives will support profitability," the brokerage said. JM Financial has a price target of ₹200 on Ashok Leyland.

Coforge aims to double its annual revenue run-rate within the next five years and is becoming a credible challenger in its focus areas - Risk and compliance, card and payments in BFS. "This shows up in deal wins against larger incumbents," JM Financial said. However, the brokerage has moderated its financial year 2024-2025 EPS estimates by 14% and 6% due to higher ESOP expenses and expectations of a more gradual uptick in margins. Despite that, it sees Coforge's earnings visibility to be one of the highest in the sector. "We therefore shed our conservative stance that mid-caps should necessarily trade at a discount to their larger peers," JM Financial said. The brokerage has a price target of ₹5,920 on Coforge.

SJVN's total generation is set to triple in financial year 2026, according to JM Financial. It is also fast-expanding its footprint in the field of renewables and aims to add 1-1.5 GW capacity annually for its renewable endeavours. The company also has an ambitious target of achieving 19 GW Solar Capacity by 2040, which will constitute 39% of its total installed capacity. JM Financial has a price target of ₹80 for SJVN. The stock is up 102% so far in 2023, which is the first time that it has doubled in a calendar year as a public company.

Sapphire Foods operates in two key QSR sub-segments through its KFC and Pizza Hut stores. The company has taken several initiatives over financial year 2019-2022to right-price its menu, right-size its stores, higher menu innovations and scale-up the omni-channel to improve the price-value equation and better the store economics. "The fruits of these measures are now visible with a decisive turnaround in Pizza Hut profitability and an even stronger KFC business," JM Financial wrote. For the medium-term, the management is confident of Same-Store-Sales Growth between 5% and 7%. JM Financial sees a potential upside of 21% in Sapphire Foods.

JM Financial believes that Go Fashion is way ahead of the pack in the bottom-wear space and its overall revenue trajectory is likely to remain ahead of its peers. "We believe near-term issues are transient in nature and the company's capabilities remain strong, which will ensure it stays ahead of the pack," the brokerage wrote. The company is also on track to achieve its financial year 2024 guidance with pace of store expansion remaining healthy. Favourable product mix and better channel mix will continue to drive gross margins, according to the brokerage. JM Financial expects a 23% upside in Go Fashion India.

JM Financial expects the global decorative laminate market to grow from $45.55 billion in 2022 to $71 billion by 2030 with India gaining market share in exports. Stylam Industries has surpassed industry growth in a significant way by increasing the value-added products in its mix, particularly the hot coating products. "Stylam is gaining market share in both domestic and export markets and we expect this trend to continue," the brokerage said in its note. It sees scope for the company to expand its geographic reach, deepen its market penetration in the existing domestic and export markets, which will offer good revenue growth visibility. Valuations are inexpensive, according to JM Financial, who has a price target of ₹2,070 on the stock.