Earnings growth alone may not be enough to separate the winners from the rest, according to Macquarie. Its latest India earnings monitor draws a distinction between companies where strong growth is already translating into better returns and cash generation, and those where the bigger opportunity lies in a recovery in return on equity. The brokerage has identified 12 stocks across these two groups, with six of its growth-focused names carrying target prices that imply roughly 10% to 30% upside.
In its recent report, ‘The India Diviner: Earnings Monitor, Navigating Promise & Illusion,’ Macquarie analysed earnings expectations across sectors and the top 500 stocks before narrowing its list to 12 actionable ideas. Six stocks qualify as “Trinity leaders” on growth, return on invested capital and free cash flow, while six others are identified for strong improvement in return on equity.
Macquarie cuts earnings estimates for small caps
Macquarie said consensus is projecting around 16% rolling two-year earnings-per-share compound annual growth for the MSCI India index, alongside roughly 10% sales growth. However, aggregate earnings estimates for FY27 have been cut, particularly for small-cap companies, while FY28 expectations have remained broadly stable.
The brokerage also cautioned that recent reported profit growth needs closer examination. June-quarter sales growth for the MSCI India universe was 10%, while profit after tax growth was 13% after excluding volatile contributors, but the breadth of earnings improvement remained limited.
GE Vernova T&D: Strong orders support multi-year growth
GE Vernova T&D India is among Macquarie’s six Trinity leaders, combining strong growth expectations with returns and free cash flow characteristics. The brokerage has an ‘Outperform’ rating and a target price of Rs 5,470, implying about 29.6% upside based on the report’s September 1 reference price.
Macquarie expects sales to grow at around 29% annually between FY26 and FY29. Strong execution and a robust order backlog provide multi-year revenue visibility, while commodity pass-through mechanisms are expected to protect margins.
The brokerage expects elevated capital expenditure to weigh on free cash flow through FY27-FY28, followed by a meaningful recovery from FY29 as recent investments begin to scale.
Dixon Technologies: Electronics growth meets better cash conversion
Dixon Technologies (India) Ltd. is another Trinity leader, with Macquarie assigning an ‘Outperform’ rating and a target price of Rs 16,000, implying about 10.1% upside from the report’s reference price.
Macquarie forecasts 28% revenue growth and 30% earnings before interest, taxes, depreciation and amortisation growth between FY26 and FY29. The brokerage expects the manufacturing ecosystem to benefit from incentives, higher-margin component production and a richer product mix.
As capital expenditure intensity moderates, Macquarie expects cash conversion to improve. It forecasts free cash flow growth of 65% and return on invested capital to increase from 24% to 28% by FY29.
Marico: Growth broadens beyond core categories
Marico Ltd. is included among Macquarie’s Trinity leaders, with an ‘Outperform’ rating and a target price of Rs 965, implying about 16.1% upside from the report’s reference price.
The brokerage expects growth to remain supported by resilient Parachute volumes, rising shampoo penetration and continued strength in value-added hair oils, foods and the digital portfolio.
As profit contribution broadens beyond the company’s traditional categories, Macquarie expects earnings quality, growth durability and return metrics to improve.
Titan: Jewellery demand and market share gains support returns
Titan Company Ltd. is also part of Macquarie’s Trinity group. The brokerage has an ‘Outperform’ rating and a target price of Rs 5,800, implying about 15.6% upside from the reference price used in the report.
Macquarie remains meaningfully above consensus on Titan, supported by expectations of sustained jewellery demand, market share gains and a rising contribution from studded jewellery.
These factors are expected to support margin expansion, stronger cash generation and further improvement in return on invested capital.
Trent: Store productivity keeps the earnings case intact
Trent Ltd. is another Trinity leader in Macquarie’s framework. The brokerage has an ‘Outperform’ rating and a target price of Rs 3,600, implying about 25.9% upside from the report’s reference price.
Macquarie expects sustained sales momentum, supported by healthy discretionary demand, slower store-splitting and productivity gains from Westside refurbishments.
A richer premium mix, a rising contribution from Westside and several margin levers are expected to support continued earnings growth and improvement in returns.
Hitachi Energy: Capacity investments could unlock the next leg of growth
Hitachi Energy India Ltd. has an ‘Outperform’ rating and a target price of Rs 38,500, implying about 19.9% upside from the reference price in Macquarie’s report.
The brokerage expects more than 30% revenue compound annual growth and 44% profit-after-tax compound annual growth between FY26 and FY29. A strong order backlog provides multi-year revenue visibility, while commodity pass-through mechanisms are expected to protect margins.
Capital expenditure is currently weighing on free cash flow, but Macquarie expects a meaningful recovery in FY28-FY29 as new capacity ramps up and operating leverage improves.
Bharti Airtel: Tariff growth could take returns towards 20%
Bharti Airtel Ltd. is among Macquarie’s six stocks identified for strong return-on-equity improvement. The brokerage said India’s return on invested capital has improved from 7% to 13% alongside tariff increases and expects it to move towards around 20%.
The expected improvement is linked to average revenue per user growth, modest subscriber gains, disciplined capital expenditure and strong operating leverage.
Macquarie’s broader telecom view is also supportive. It expects healthy earnings growth through FY26-FY29, driven by subscriber mix improvement, premiumisation and the possibility of further industry tariff increases. With the peak of the industry’s investment cycle behind it, declining capital expenditure intensity should support stronger free cash flow and balance-sheet strength.
Divi’s Laboratories: Capacity ramp-up could drive a return recovery
Divi’s Laboratories Ltd. is another return-improvement pick. Macquarie said the company’s gross block has expanded around 80% over the past three years and expects utilisation to rise as the new capacity gets absorbed.
The brokerage sees meaningful margin recovery and expects return on capital employed to increase to around 25% from below 20% levels currently.
Macquarie’s healthcare view remains particularly positive on the contract development and manufacturing organisation segment, where it expects growth to accelerate into the high teens. It identifies Divi’s as its preferred exposure because of its execution record, integrated peptide platform and expanding customer project base.
Adani Green: Renewable capacity additions drive earnings growth
Adani Green Energy Ltd. is part of Macquarie’s return-improvement group. The brokerage expects the company to add more than 5 GW of renewable capacity annually, while better asset utilisation and battery energy storage system integration support sustained growth.
Macquarie forecasts around 40% earnings before interest, taxes, depreciation and amortisation compound annual growth between FY26 and FY29, alongside improving returns.
The company also sits within Macquarie’s preferred power names. The brokerage expects power demand to grow at 6-7% annually, supported by rising generation capacity and a strong transmission capital expenditure cycle.
CG Power: Power and semiconductor exposure support earnings
CG Power and Industrial is another stock where Macquarie expects a significant improvement in returns. The brokerage sees strong power and industrial demand, a growing export contribution and the semiconductor business ramp-up supporting revenue and profit-after-tax growth of around 25-30% annually between FY26 and FY29.
Macquarie also expects return on equity to continue improving as earnings scale up.
Within industrials, the brokerage sees the strongest earnings growth in companies exposed to defence, transmission, power equipment and other areas linked to domestic capital expenditure. It specifically prefers Hitachi Energy, CG Power and Cummins among the earnings growth leaders.
L&T Finance: Lower credit costs could lift return on equity
L&T Finance Ltd. is included in Macquarie’s six return-improvement ideas. The brokerage forecasts return on equity rising to 15% by FY28, supported by lower credit costs, increasing secured lending and the release of capital from the run-off of its security-receipts portfolio.
Macquarie expects FY27-FY29 earnings-per-share growth to be 5% ahead of consensus, primarily because of stronger margin assumptions linked to the release and monetisation of security receipts.
The broader financials view remains constructive, with recovering credit demand, benign asset quality and expectations of net interest margin improvement supporting earnings growth.
Tata Communications: Digital business turnaround could improve returns
Tata Communications Ltd. completes Macquarie’s list of six stocks where return on equity is expected to improve. The brokerage sees a turnaround in returns as the loss-making digital business scales and margins improve, while the core connectivity business re-accelerates growth.
The company is also grouped with Bharti Airtel among Macquarie’s preferred telecom exposures for return-on-invested-capital improvement.
Earnings growth is improving, but Macquarie sees a need for selective approach ity
Macquarie’s sector analysis shows a mixed earnings picture beneath the headline numbers. Financials remain a major contributor to market earnings growth, while industrials have the strongest revenue-growth outlook because of robust order books. Consumer staples expectations have bottomed, premium discretionary consumption remains strong and autos are benefiting from resilient demand and improving exports.
Industrials stand out particularly strongly. Macquarie sees continued government spending alongside accelerating private-sector capital expenditure, with new orders emerging across metals, automobiles, power equipment, renewable energy, transmission, defence, aerospace, electronics, industrial machinery and data centres. Supply-chain diversification, localisation and export opportunities in high-voltage equipment could support a multi-year growth cycle.
At the same time, the brokerage cautioned that geopolitical risks and higher commodity prices could affect execution and profitability. In industrials, it sees downside to margin expectations for BHEL, Siemens and ABB even as it prefers Hitachi Energy, CG Power and Cummins among the earnings growth leaders.
Conclusion
Within materials, Macquarie expects domestic demand to remain strong at 6-8%, supported by manufacturing expansion, infrastructure spending, improving private capex and resilient rural demand. It remains constructive on steel and expects cement margins to improve as utilisation rises, with JSW Steel and UltraTech Cement its preferred names in the segment.
The report’s central message is that broad market earnings expectations alone may not be enough to identify the strongest opportunities. Macquarie’s 12-stock list instead focuses on companies where growth, profitability, cash generation or return ratios are expected to improve. The brokerage’s framework brings together six Trinity leaders and six stocks at potential profitability inflection points, with “Long live bottom-up stock picking” among the key messages in the report.
Disclaimer: This article is based on the views, estimates, ratings and target prices published by Macquarie in its The India Diviner: Earnings Monitor report. The information is provided solely for informational and educational purposes and should not be considered investment advice, a recommendation to buy, sell or hold any security, or a substitute for independent financial research. Brokerage estimates, earnings forecasts, target prices and ratings are subject to change and may differ from actual business or market outcomes. Stock market investments are subject to market risks, including the possible loss of principal. Past performance does not guarantee future returns, and projected earnings or returns may not materialise due to changes in economic conditions, company performance, interest rates, regulations, commodity prices, competition, liquidity and other factors. Readers should independently assess the information, consider their own financial circumstances, investment objectives and risk tolerance, and consult a qualified financial adviser before making any investment decision. Neither the author nor the publication assumes responsibility for any financial loss arising from reliance on the information presented in this article.