The stock market is experiencing a gradual upward trend as the Nifty index approaches the significant milestone of 23,000. Investors are keenly watching recommendations from JM Financial Institutional Securities, which highlight promising buying opportunities based on share valuations and vital sectoral trends. Let’s delve into what JM Financial is suggesting for investors looking to make informed decisions.
Buy Recommendations from JM Financial
Suzlon: A Strong Buy with Promising Growth
JM Financial has reiterated its Buy rating on Suzlon, setting an ambitious target price of Rs 71 per share, representing a potential upside of 24% from its current valuation. The company’s order book has reached an all-time high of 5.9GW, fueling optimism about the industry’s revival and the resolution of execution hurdles expected within the next 2-3 quarters.
- Key Highlights:
- Highest-ever order book of 5.9GW.
- Anticipated resolution of execution challenges.
- Target price reflects a 24% growth potential.
The report emphasizes that Suzlon is enhancing its operational capabilities. JM Financial notes, “the company is expanding its shop floor by converting existing warehouse space into a new assembly hub.” This transformation is expected to boost the manufacturing capacity from 3.15GW to 4.5GW across its Daman and Pondicherry facilities.
Despite this positive outlook, JM Financial has adjusted its earnings forecasts and lowered the target price from the previous Rs 80 per share due to anticipated growth constraints beyond FY27.
Tata Communications: Solid Prospects Ahead
Another stock gaining traction is Tata Communications, which JM Financial has initiated coverage on with a Buy rating and a target of Rs 2,030 per share. This projection suggests an impressive upside of nearly 35% based on an 11x FY27 EV/EBITDA multiple, slightly above its five-year historical average of 10.2x. The firm expects the data segment’s EBITDA to grow robustly at a CAGR of 21% from FY24 to FY28.
- Key Insights:
- Target price set at Rs 2,030.
- Anticipated 35% upside potential.
- Data segment expected to grow at 21% CAGR from FY24 to FY28.
However, potential risks remain, including “weak global macroeconomic conditions leading to delays in discretionary technology spending” and unfavorable rulings regarding Adjusted Gross Revenue (AGR). Nevertheless, JM Financial believes Tata Communications holds a competitive advantage due to its extensive network of undersea cables, stretching over 500,000 km. This infrastructure has contributed to improving EBITDA margins, soaring from 30.1% in FY18 to 45% in FY24.
Additionally, the firm notes that the core connectivity sector continues to serve as a reliable revenue stream, accounting for a substantial portion of the company’s EBITDA while requiring only 60% of total capital expenditures. This balance ensures stable and predictable cash flows for the company.
Conclusion
As the Nifty index inches closer to the 23,000 mark, the recommendations from JM Financial on Suzlon and Tata Communications present valuable insights for investors. With Suzlon’s robust order book and Tata’s strategic advantages in connectivity, both stocks offer intriguing prospects for growth in the upcoming quarters. Investors should carefully consider these recommendations as they navigate the evolving market landscape.
