The global brokerage firm Jefferies has identified six promising stocks for investors, emphasizing the significant growth in private capital expenditure (capex) driven by both corporations and households. This surge in spending is particularly evident in sectors such as power, ports, and cement. While government capex growth has slowed, private investment continues to thrive, signaling a revitalization of the housing market and robust economic activity.
Strong Private Capex Growth
Recent data highlights that household capex is booming, with a staggering 22% CAGR from March 2021 to March 2024. This growth is a clear indicator of the housing cycle’s recovery. In tandem, corporate capex has seen an impressive 18% CAGR, while government spending has increased at a more modest 16% CAGR. Both private and government entities contribute to corporate capex, with the latter being funded through central and state budget allocations.
- Private projects approved by banks have surged, achieving a 20% CAGR from FY20 to FY24.
- Strong corporate balance sheets further enhance the optimistic outlook for future investments.
Sector-Specific Insights
Jefferies notes that while the budget allocation for road infrastructure may see a decline, other sectors are poised for substantial growth. Notably, investments in power, steel, cement, ports, and aviation are expected to remain robust.
Power Sector Expansion
The power industry is gearing up for significant capacity increases, driven by rising demand. Forecasts suggest a 19% CAGR in power capex from FY24 to FY30. Additionally, both the cement and steel sectors are planning substantial expansions:
- Steel aims for an increase of 9 million tons per annum from FY25 to FY27.
- Cement targets an expansion of 43 million tons per annum during the same period.
Ports and Aviation Developments
Ports are also expected to enhance their capacity at a 6% CAGR from FY24 to FY30, with private players accounting for half of this growth. In aviation, the upcoming inauguration of two new private airports near Mumbai and Delhi underscores the momentum in this sector.
Recommended Stocks for Investors
With these trends in mind, Jefferies has pinpointed several stocks positioned for growth in the capex arena:
- JSW Energy
- Coal India
- Siemens (top picks within the power sector)
- Adani Ports
- Kaynes Technologies
- Ultratech Cement
These recommendations highlight Jefferies’ confidence in the ongoing capex trends and the sectors likely to benefit most in the coming years.
Conclusion
As private capex continues to flourish, investors may find lucrative opportunities in the stocks identified by Jefferies. With the housing market’s revival and robust corporate spending, the outlook for sectors like power, ports, and cement remains optimistic. As always, investors should conduct thorough research and consider market conditions before making investment decisions.
