As the markets remain closed on May 1, investors are on the lookout for promising stock opportunities for the month ahead. Nuvama Institutional Equities has identified several stocks worthy of a ‘Buy’ recommendation, driven by robust quarterly earnings, increased gross written premiums (GWP), and substantial EBITDA growth. Let’s delve into these investment picks that are catching the eye of analysts.

Varun Beverages: A Refreshing Investment

Varun Beverages, the bottler for PepsiCo outside the United States, has reported impressive results for Q1CY25, showcasing a 29% year-on-year revenue increase. The company’s EBITDA surged by 28% YoY, aligning closely with brokerage expectations. Following these positive figures, Nuvama has reaffirmed its ‘Buy’ recommendation, setting a target price of Rs 659 per share.

• Volume Growth: Varun’s consolidated volume rose 30.1% YoY, with India alone experiencing a 15.5% YoY increase, driven by an unexpected heatwave.
• Realization Trends: The realization per case in India saw a slight uptick of 1.8% YoY, while the overall net realization dropped marginally by 0.9% YoY.
• Margin Dynamics: The gross margin stands at 54.6%, reflecting a decrease of 171 basis points YoY due to a challenging mix in India and a greater focus on the South African market.

Five Star Business Finance: Navigating Challenges

Nuvama has also placed a ‘Buy’ stance on Five Star Business Finance, following a robust Q4FY25 performance. The company’s net profit grew by 18% YoY and 2% sequentially. Notably, assets under management increased in comparison to disbursals, highlighting a strong recovery after Q3’s recalibration.

However, the bank faced some challenges:

• Collection Efficiency: There was a noticeable decline in collection efficiency quarter-on-quarter, primarily due to the Karnataka ordinance and issues related to overleveraged small borrowers.
• Revised Target: As a result, Nuvama has adjusted its target price downwards by 12.3%, now setting it at Rs 820, down from Rs 935. Analysts noted, “Short-term concerns regarding the TN ordinance and slower earnings growth for FY26E are likely to persist.”

Star Health and Allied Insurance: Adjusting Expectations

The brokerage has also assigned a ‘Buy’ rating to Star Health Insurance, slightly increasing the target price by 2.3% from Rs 440 to Rs 450. In Q4FY25, the company achieved a 12.9% YoY growth in GWP, despite facing challenges with elevated loss ratios.

Key highlights include:

• Loss Ratios: The loss ratio stood at 69.2%, reflecting a 512 basis point rise YoY, although it did decrease by 220 bps QoQ.
• Combined Ratio: There was a significant 642 basis point YoY increase in the combined ratio, now at 99.2%, leading to an underwriting loss of Rs 280 crore, a staggering 202.2% YoY increase.
• Future Outlook: Nuvama anticipates corrective measures in the form of selective underwriting and repricing to mitigate costs. They have adjusted their FY26/27 profit projections down by 7.8% and 5.1%, respectively.

Conclusion

As investors gear up for the month ahead, these stock recommendations from Nuvama offer insights into potential opportunities and challenges. With Varun Beverages showing strong growth, Five Star Business Finance navigating headwinds, and Star Health Insurance adjusting its expectations, the market presents a complex yet intriguing landscape for savvy investors.