Jefferies Identifies Three Indian Stocks with Up to 22% Upside Potential

Jefferies, a renowned brokerage firm, has identified three Indian stocks poised for significant growth, assigning them 'Buy' recommendations. These picks span across sectors like financials, utilities, chemicals, and consumer names, all supported by robust earnings visibility and enhancing return metrics. The brokerage anticipates up to a 22% upside potential in these selected stocks, underscoring a persistent belief in India's domestic economic expansion amidst global market uncertainties.

Specifically, Jefferies maintains a 'Buy' rating on Aditya Birla Capital with a revised target price of ₹380, suggesting a 22% potential increase from its current trading price. The firm noted that the company's September quarter consolidated profit met expectations, with its lending book growing 22% year-on-year, boosted by strong demand for personal and business loans. Gross Non-Performing Assets (NPAs) reduced by 60 basis points sequentially to 1.7%, attributed to recoveries and an asset sale. Jefferies projects earnings per share (EPS) to grow 21% annually through FY28, with Return on Equity (ROE) reaching 16%.

For Bandhan Bank, Jefferies reiterates a constructive stance with a price target of ₹200, implying a 17% upside. Despite a significant year-on-year drop in net profit to ₹100 crore in the recent quarter, the brokerage anticipates a gradual recovery. While slippages were at 5% of loans, the SMA-1 and SMA-2 categories saw a 9% sequential decline, indicating stabilization in asset quality. Jefferies forecasts ROA to rebound to 1.4% and ROE to 12% by FY27, supported by a better loan mix and normalized credit costs.

Nippon Life India Asset Management also continues to earn Jefferies' confidence, receiving a 'Buy' call and an upgraded price target of ₹1,020, up from ₹930, signaling a 17% upside. The brokerage forecasts a 23% Compound Annual Growth Rate (CAGR) in Assets Under Management (AUM) and a 20% CAGR in operating profit through FY28, valuing the company at 32 times its December 2027 earnings. Estimates were slightly adjusted due to lower other income and slower yield decay.

Impact: This news can positively impact the sentiment for Indian equities, particularly for the mentioned companies. Investors might consider these 'Buy' recommendations, potentially leading to increased trading volumes and stock price appreciation for Aditya Birla Capital, Bandhan Bank, and Nippon Life India Asset Management. It reinforces confidence in the Indian growth narrative. Impact Rating: 7/10

Difficult Terms: * EPS (Earnings Per Share): A company's net profit divided by the number of its outstanding shares. It indicates how much profit is generated per share. * ROE (Return on Equity): A measure of profitability that calculates how much profit a company generates with the money shareholders have invested. It is calculated by dividing net income by shareholders' equity. * NPAs (Non-Performing Assets): Loans or advances that are in default or close to default, meaning payments of interest or principal are overdue for a significant period. * Basis Points: A unit of measure used in finance to describe small changes in interest rates or other percentages. 100 basis points equal 1 percent. * ARC (Asset Reconstruction Company): A specialized financial institution that buys assets (like bad loans) from banks or financial institutions at a discount and then tries to recover them. * Slippages: Refers to loans that have moved from a standard category to a substandard or doubtful category due to deterioration in asset quality. * SMA-1 and SMA-2 (Special Mention Accounts): Categories of loans that are showing signs of stress but are not yet classified as NPAs. SMA-1 loans are overdue between 31-60 days, and SMA-2 loans are overdue between 61-90 days. * ROA (Return on Assets): A profitability ratio that measures how efficiently a company is using its assets to generate profit. It is calculated by dividing net income by total assets. * AUM (Assets Under Management): The total market value of all financial assets that a financial institution manages on behalf of its clients. This is a common metric for asset management companies. * CAGR (Compound Annual Growth Rate): The mean annual growth rate of an investment over a specified period of time longer than one year. It smooths out volatility and provides a representative growth rate.