The full-service stock broker Anand Rathi is all set for Diwali 2024. The brokerage has selected a pack of stocks to invest in Samvat 2081. The brokerage firm has picked five stocks to lighten up Samvat 2081. Here are the top picks of Anand Rathi:
Interglobe Aviation
InterGlobe Aviation, known as IndiGo, is India’s leading airline, functioning as a budget carrier. IndiGo had a market share of 62% as of FY24 with 18% of the market share in the international passenger segment. It served 28 million customers in Q1 FY25 and has become the seventh-largest airline in terms of daily departure. IndiGo continues to focus on expansion with 30 new routes added YoY, flying to more than 540 routes. In Q1 FY25, the company operated 382 aircraft as compared to 316 aircraft in Q1 FY24. IndiGo recently announced ‘IndiGoStretch’ – a tailor-made business product on the busiest business routes of the country, redefining business travel in India and also launched its much-awaited loyalty program, ‘IndiGo BluChip’, designed to reward its unwavering loyal customers with BluChips on IndiGo flights. Management also guided double-digit growth in FY25.
The Indian government is investing Rs 1 trillion to develop greenfield and brownfield airports, boosting their capacity and enhancing the passenger experience. The number of airports is set to grow from 140 in CY19 to 220 in the coming years with tier-2 and -3 cities providing the opportunities. The introduction of projects like UDAN and the ongoing construction of greenfield airports in India (construction to be completed in 10-15 years) is expected to increase the potential opportunity for the aviation industry. The aviation industry has emerged as one of the fastest-growing industries and IndiGo being the largest airline company in India has the highest market share and expects this trend to continue going forward. We assign a “Buy” rating on the stock with a target price of Rs 5,300 per share.
Power Grid Corporation of India
Power Grid Corporation of India is a leading transmission company, recognized globally, with the Government of India holding a 51.3% stake. Established in 1989, PowerGrid develops extra-high voltage AC and high-voltage DC transmission lines, transferring electricity from central generating units and surplus regions to load centres across various areas. The company will be a huge beneficiary of India’s ambition to grow its renewable energy capacity to 500 GW by 2030. In this Q1 FY25, POWERGRID has emerged as L1 bidders in three ISTS TBCB projects up to June 2024 with a levelized tariff of Rs 4,172 crore. These include Rajasthan RE Power projects in Jaisalmer and Barmer area, Phase IV, Part B and Phase IV, Part D. This is another project. Then Fatehpur-Badla HVDC project Phase III, Part I. As of July 2024, Power Grid has won three projects: Dynamic Reactive Power Compensation at KPS 1 and KPS 3 (Rs 5,010 mn, tariff Rs 1,070 mn), a transmission system for renewable energy parks in Rajasthan (Rs 13,820 mn, tariff Rs 970 mn), and renewable energy evacuation in Gujarat’s Khavda area, including a 765 kV/400 kV substation at South Olpad and transmission lines connecting to Ahmedabad, Baroda, and GETCO’s Gandhar line.
An MoU was signed with ISRO to develop a spatial decision support system for managing transmission towers, particularly in challenging areas such as hilly terrains, riverbanks prone to landslides or changes in river courses, and regions with dense forest growth. This system, utilizing satellite technology, will be instrumental in monitoring our transmission infrastructure. The project is expected to significantly enhance our ability to manage these transmission lines effectively. For this financial year, the company’s capex plan has been revised to Rs 1,80,000 mn, up from the Rs 1,50,000 mn discussed previously. For FY25, the updated capex plan allocates Rs 50,000 mn for RTM and Rs 1,30,000 mn for other projects. The company has consistently maintained transmission system availability above 99.75%. In Q1 FY25, it reached 99.80%. Over the past five years, availability has been 99.85%, 99.82%, 99.83%, and 99.82%, reflecting strong performance. We assign a “Buy” rating on the stock with a target price of Rs 370 per share.
Mahindra & Mahindra
Mahindra & Mahindra (M&M) is the most diversified automobile company in India with a presence across two-wheelers, three-wheelers, PVs, CVs, tractors and farm equipment. M&M has a strong position in the domestic large UV and tractor markets, with a market share of ~42% in the tractor segment as of March 2024. In terms of volumes, M&M is the world’s largest tractor manufacturer and among the top four PV manufacturers in India. Through its subsidiaries and Group companies, M&M is present in financial services, auto components, hospitality, infrastructure, retail, logistics, steel trading and processing, IT businesses, agribusinesses, aerospace, consulting services, defence, energy and industrial equipment, etc. M&M continues to dominate the SUV revenue market share and remains the largest player in the domestic LCV market. M&M launched Veero in the LCV segment and ZEO in the ELCV segment. Going ahead, M&M is set to launch nine ICE models of which recently the company launched the XUV 3XO in the SUV segment, seven models in the EV segment and the LCV segment each by 2030. With new models and unique positioning, it is targeting a 10% market share in the Truck & Bus (T&B) market, with the potential to grow up to Rs 10,000 crore over the coming years.
On the domestic front, the tractor industry is expected to increase from $1,938 million in CY23 to $2,677 million by CY30 led by increasing higher crop yields, growing population and crop cycles. In the tractor division, the company plans to enter the Western European market in FY26 and aims to expand its market share in the coming years. In Q1FY25, the company’s topline at Rs 27,038.8 crore grew by 12% YoY and 7% QoQ, led by a 70% recovery in tractor volumes. EBITDA was Rs40,222mn up by 22% YoY and 22% QoQ. EBITDA margin was 14.9% up 126bps YoY and 178 bps QoQ, led by operating leverage in the tractor segment QoQ. Adjusted PAT was down 5% YoY and up 31% QoQ to Rs 2,612.7 crore. M&M has guided for 5% volume growth for the tractor segment and 15-18% volume growth for the auto segment in FY25 on the back of a strong order backlog for UVs, new launches in ICE and EVs and a leadership position in tractors. We believe that such a company’s strategic approach with a strong balance sheet will continue to leverage its performance in the coming quarters. We assign a “Buy” rating on the stock with a target price of Rs 3,250 per share.
Tejas Networks specializes in the design and production of wireline and wireless networking solutions, with a strong emphasis on technology, innovation, and research & development. Their carrier-grade products are deployed by telecom operators, utilities, government agencies, and defence networks across more than 75 countries. The company is currently owned by Panatone Finvest, a subsidiary of Tata Sons. Wireless business: the company has ramped up their 4G/5G RAN shipments for BSNL’s network. In Q2 FY25, the company did more than 30k sites and has shipped 58k sites to BSNL network cumulatively. Recently Tejas Network have been selected for packet transport network (PTN) and Wavelength division multiplexing (WDM) equipment from one of the Tier-1 telcos in India for capacity expansion of 4G/5G mobile networks. In international markets, the company has also won new customers from America and Africa. Indian railways- Kavach is another opportunity in the wireless business for Tejas Network. Wireline business: Bharatnet for Phase 3, expansion of DWDM backbone networks in the utility segment and FTTH and Network Modernization deals with multiple operators in EMEA and America are some of the key opportunities that are targeted by the company.
Order book: the company has a total order book of Rs. 4,845 crore, of which the order book from India is Rs 4,627 crore and outside India is of Rs 218 crore. There is a large total addressable market (TAM) in both wireline and wireless markets because of a strong push for make in India. Wireline business is currently a $33 billion market and is expected to reach $50 billion by FY29 whereas wireless business currently is a $44 billion market and is
expected to reach $58 billion by FY29. We expect Tejas Network to report strong growth going forward mainly backed by: (1) Large opportunities from the expansion of BSNL’s 4G network and 5G upgrades, (2) Indian railway tender on collision avoidance system, (3) Bharatnet for Phase 3, (4) opportunities from international markets. We assign a “Buy” rating on the stock with a target price of Rs 1,650 per share.
KRN Heat Exchanger and Refrigeration\
KRN Heat Exchanger and Refrigeration Ltd (KRN) specializes in manufacturing aluminium and copper fin-copper tube condensers and evaporator coils for the HVAC&R industry. Their products are used by OEMs in heating, ventilation, air conditioning and refrigeration systems across domestic, commercial and industrial sectors. KRN’s product portfolio includes evaporator and condenser coils, fluid and steam coils, condensing units, copper headers and sheet metal parts. KRN is increasing its global footprint and augmenting growth in current geographies steadily expanding its customer network across Europe and plans to diversify by increasing sales in existing markets and expanding into new geographies, particularly North America and Europe. The company receives repeated orders from key customers like Daikin Air Conditioning which the company derives 33.34% of revenues. KRN has served a total of 112 customers during FY23 wherein their top 10 customers account for 75.94% of their revenue from operations. During FY23, KRN sold their products in 17 states in India and exported their products to 9 countries. As of March 31, 2024, domestic sales contributed 85% of its revenue down from 90% in FY22, while exports contributed 15% up from ~10% in FY22. Capacity expansion: KRN is expanding the business to reap the benefits of forward integration and incorporated a wholly owned subsidiary KRN HVAC Products to increase value-added products in their existing portfolio and distribution of a complete product range of heat exchangers. KRN is expanding its capacity multifold which will generate increased growth in revenues from existing as well as new products like bar and plate heat exchangers, oil cooling units with blower and motor and roll bond evaporators with improved margins from the export markets.
Going forward KRN could experience strong demand from emerging sectors like data centers. It is estimated that by 2025, the total number of data centres in operation in India will reach to 183. Such a strong growth could transform into a higher demand for heat exchangers used in HVAC systems. We expect KRN to report Revenue/PAT at the CAGR 25%/50% mainly because the company is strong in its in-house design and development team, supported by marquee clients, along with full-service manufacturing capabilities which further enhances its ability to adapt to customer needs and maintain competitive advantages. We assign a “Buy” rating on the stock with a target price of Rs 550 per share.
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