Whalesbook
Nuvama's Top Stock Picks: Growth Despite Rising Costs
Nuvama Wealth has selected five Indian stocks with projected upside from 15% to nearly 54%. The brokerage’s positive outlook is based on strong earnings visibility, improving operating margins, and steady demand. Nuvama’s strategy focuses on companies positioned to manage rising input costs and geopolitical risks by leveraging growth initiatives and sector tailwinds.
Margin Strength Amidst Cost Pressures
Maruti Suzuki India navigated commodity cost pressures affecting its Q4FY26 margins, yet reported strong revenue and EBITDA growth. It’s projected to achieve 10% revenue and 11% EBITDA compound annual growth from FY26 to FY28.
Motherson Sumi Wiring India's margins are also sensitive to commodity costs, but the company anticipates a 13% revenue CAGR for FY26-FY28. This growth is expected from industry expansion, premium products, and vehicle electrification.
Skipper Ltd, in engineering and infrastructure, reported improved operating margins due to strong execution in its engineering division. Management forecasts 15% year-over-year growth for FY27, with profit after tax (PAT) growing over 30%, supported by a solid contract pipeline. However, export challenges persist due to the West Asia conflict.
The conflict has impacted Indian trade, increasing freight costs and lengthening payment cycles for exporters. The automotive sector, in particular, could see production disruptions. Nuvama's analysis suggests that companies with large order books and effective cost management can still achieve margin expansion.
Key Growth Drivers for Recommended Stocks
Eternal, a player in food delivery and quick commerce, is expected to scale significantly. Management is confident in delivering a 60% CAGR over three years, driven by better contribution margins.
Sapphire Foods India’s performance is led by its KFC segment, showing strong customer growth and value propositions. Improving same-store sales growth offers a path to profitability recovery.
Maruti Suzuki India plans to boost earnings with new product launches, particularly in the SUV segment, alongside capacity increases and export growth. The broader Indian auto industry is projected to grow 6-8% in 2026, led by EVs and premium vehicles.
Motherson Sumi Wiring India is well-positioned to benefit from the automotive industry's shift towards electric vehicles and increased electronic content per vehicle, supporting its 13% revenue CAGR forecast. The Indian consumption sector is also projected for continued growth in 2026, emphasizing premiumization and value.
Skipper's growth is supported by its strong order book and expanding capacity in its power transmission structures and pipes & fittings businesses.
Risks to Consider: Geopolitics and Valuation
Several risks warrant attention. The West Asia conflict poses a significant threat to Skipper's export revenue, increasing shipping costs and reducing predictability.
For Maruti Suzuki and Motherson Sumi Wiring India, ongoing increases in commodity prices could continue to squeeze margins, even as sector growth benefits them.
The automotive industry may see slower growth in 2026-27 after a strong period, with ICRA projecting moderate volume growth for passenger vehicles and two-wheelers.
Sapphire Foods India shows a negative trailing twelve months (TTM) P/E ratio, indicating current unprofitability, and faces weakness in its Pizza Hut segment. Profitability recovery depends on stabilizing Pizza Hut and maintaining same-store sales growth.
Eternal, despite strong revenue growth, lacks detailed public P/E data, making comparative risk assessment difficult. Its strategy relies on scaling quick commerce and meeting specific margin targets.
A weaker Indian rupee could also raise costs for businesses reliant on imports.
Analyst Views and Future Outlook
Analysts generally view most of these companies positively. Maruti Suzuki India has a 'Buy' consensus from multiple brokerages, with target prices ranging from ₹14,600 to ₹17,255, suggesting potential upside of 7.85% to 30.53%. Motilal Oswal maintains a 'Buy' rating with a target of ₹15,529, citing Maruti's order backlog and new product pipeline.
Motherson Sumi Wiring India also has a 'Buy' consensus, with average 12-month price targets around ₹50-₹52, pointing to over 40% upside.
Sapphire Foods India holds a 'Moderate Buy' consensus, with targets around ₹230 (about 32% upside). Nuvama and Emkay Global have higher targets at ₹239 and ₹300 respectively.
Skipper Ltd has a 'Buy' rating from Nuvama. Its P/E ratio of 25-30 suggests growth is partly priced in, though competitors trade at similar or higher multiples.
The outlook for the auto and consumption sectors remains positive for 2026, driven by domestic demand and structural changes, providing a favorable backdrop for these stock recommendations.