Stock Picks: EBITDA CAGR of these 11 firms including TVS Motor, Havells likely to double in 3 years

KEC International: The brokerage has a ‘buy’ call on the stock with a target price of ₹750, indicating an upside of 13%. With sustained uptick in T&D activity across both domestic and international markets, receding competition in railways and sustained momentum in civil, the brokerage expects the traction to remain strong and drive healthy earnings. The brokerage sees a 60% EBITDA CAGR over FY23-25 and a 139% EPS CAGR in this period.

Trent: The brokerage has a target price of ₹2,088, indicating an upside of 1%. The brokerage sees a 50% EBITDA CAGR over FY23-25 and a 50% EPS CAGR in this period. On almost a doubling of effective store area (25% CAGR over FY23-FY26E), the brokerage expects the absolute EBITDA/sqft flowthrough to improve significantly from ₹2,100 to ₹3,100 over the same time frame (+47%).

Escorts Kubota: The brokerage has a target price of ₹3,150, indicating a downside of 2%. The brokerage sees a 40% EBITDA CAGR over FY23-25 and a 43% EPS CAGR in this period. Margin expansion, healthy cash flow and strong return ratios are expected to expand the valuation closer to MNC premium, going forward, it said.

Bharat Forge: The brokerage has a target price of ₹1,150, indicating an upside of 6%. The brokerage sees a 36% EBITDA CAGR over FY23-25 and a 63% EPS CAGR in this period. The government’s indigenisation initiatives and focus on the defense sector, coupled with the company’s successful launches of various defense products, provide ample defence opportunity for BHFC over the next decade, noted DAM. BHFC would emerge as a key engineering and defence player and would command a premium valuation like an engineering conglomerate, it added.

Astral: The brokerage has a target price of ₹2,420, indicating an upside of 27%. The brokerage sees a 35% EBITDA CAGR over FY23-25 and a 44% EPS CAGR in this period. Eye-popping valuations at first glance but significant addressable market, talismanic leadership at the helm, proven mettle of ground-level execution especially when the odds were against it and clean corporate governance, make ASTRA a must-have for all long-term portfolios, said the brokerage. 

TVS Motor: The brokerage has a target price of ₹1,875, indicating an upside of 23%. The brokerage sees a 32% EBITDA CAGR over FY23-25 and a 42% EPS CAGR in this period. Market share gain, margin expansion, and better mix would lead to earnings upgrade and valuation expansion for the company over the next 3-5 years, it said. DAM expects TVSL to surprise the street on the EBITDA margin front FY25 onwards on account of a sizable improvement in the export market from the current distressed level, while domestic margins are already trending up closer to double digits.

IDFC First Bank: The brokerage has a target price of ₹100, indicating an upside of 6%. The brokerage sees a 31% EBITDA CAGR over FY23-25 and a 28% EPS CAGR in this period. IDFCFB is seeing incremental cost metrics improving with the emergence of scale and has witnessed an improved return ratios profile with ROAs/ROEs of +1.3%/12% in FY23/Q1FY24. This should further improve towards 1.35%/13.5% by FY25E on the back of strong CAGR growth in retail loans, granular liability franchise and tailwinds from favorable asset quality cycle, forecasted the brokerage.  

IndiaMart: The brokerage has a target price of ₹3,530, indicating an upside of 23%. The brokerage sees a 30% EBITDA CAGR over FY23-25 and a 28% EPS CAGR in this period.  The brokerage is confident of strong fundamental growth in operations for the company driven by high growth in digitisation among SMEs, strong network effect, over 70% market share and ability to increase ARPU on account of low price sensitivity. The firm's continued buybacks and dividends have also given consistency to capital allocation, unlike other platform companies, it added.

Havells: The brokerage has a target price of ₹1,500, indicating an upside of 9%. The brokerage sees a 30% EBITDA CAGR over FY23-25 and a 35% EPS CAGR in this period. Profitability is expected to improve in with price hikes, lower RM costs and sustained investments in technology and innovation, it added.

UNO Minda: The brokerage has a target price of ₹705, indicating an upside of 18%. The brokerage sees a 28% EBITDA CAGR over FY23-25 and a 38% EPS CAGR in this period. Production ramp-up, and increasing contribution from high-margin products of alloy wheels, blow moldings, etc., are expected to expand margins and lead to higher earnings CAGR, which justifies premium valuation. “We expect strong industry outperformance and higher earnings CAGR would continue expanding its valuation over the next 3-5 years, it said. The company’s focus on EV-specific products and revenue target of ₹1500 crore from EVs over the next 2-3 years is expected to strongly boost overall growth,” added the brokerage.

M&M Financial: The brokerage has a target price of ₹352, indicating an upside of 20%. The brokerage sees a 27% EBITDA CAGR over FY23-25 and a 22% EPS CAGR in this period. With a brighter outlook of its OEM which constitutes 44% of the vehicles financed by MMFS, it expects the buoyancy in growth of its business assets to continue in FY25-FY26 as well. It estimates a loan CAGR of over 20% in FY24 to FY26 and earnings growth to be higher in FY25/FY26 with improvement in margins and controlled credit cost.