stocks to buy: Maruti, IHCL, Godrej Consumer are among Jefferies’ top picks – Blue Barrows

Mumbai: Jefferies expects EBITDA (earnings before interest, taxes, depreciation and amortisation) margin – a popular measure of operational profitability – of companies that it tracks to rebound to 21.8% in FY24 from 20.8% estimated in FY23. In FY22, the EBITDA margin declined by 100 basis points to 21.6%. “Potential recession in the developed world depressing commodity prices can drive the (margin) upside,” said the brokerage in a note to clients. ET looks at six picks that Jefferies has identified in the margin expansion theme.

Maruti Suzuki: The brokerage expects Maruti’s EBITDA margin to improve from 6.5% in FY22 to 11.8% in FY24 with easing commodity prices and improving pricing power amid goDLF, od demand and new launches.

Indian Hotels: Jefferies said the company’s margins could jump to 31-32% for FY24-25 against 13% in FY22. “During Covid, IHCL has deployed several measures to contain its fixed cost and prune variable costs, and some of these are likely to be permanent.”

Corporate Radar

Godrej Consumer Products: After facing margin pressures in the past few quarters, the company’s margins could improve to over 20% in the second-half of FY23 and FY24 as against 16% in the first quarter, the brokerage said.

Jefferies’ Top Picks

DLF: The real estate firm’s margin improvement is led by a jump in Gurgaon property prices and a mix improvement in revenue recognition, said Jefferies.

Cipla: The brokerage said

will launch high-value products like gAdvair, gAbraxane in the second-half of FY23 and will ramp up its peptide injectable, which will lead to margin expansion during FY22-24.

Adani Ports: Jefferies said the company could see double-digit volume growth through market share gains. Operating leverage and cost optimisation at new ports will further help the margins, it said.