Leading investment bank Jefferies sees a massive upside in an Indian large-cap stock. Recently it initiated coverage on 22 major companies in India and has rated 17 companies with ‘buy’, four with ‘underperform’ and one with ‘hold’.
It said that earnings growth and margin traction are supporting interest in Indian industrials, while utilities have limited interest, and logistics is finally creeping back on the radar.
Jefferies added that power transmission, railroads, data centres, logistics, production-linked incentives, and metals are likely to get the most traction as they have domestic drivers and limited impact from global factors. Moreover, there are talks about raising funds in Asia outside of Japan and China, which could mean larger investments for India.
Shares of Adani Transmission closed at ₹ 808.85 apiece on Wednesday, and Jefferies has a buy rating on the stock with a price target of ₹ 1400.00. This translates to a massive upside of 73% as compared to its share price.
Earlier, the investment bank described Adani Transmission as India’s only pure-play private sector listed entity in the transmission and distribution sector, making it a key beneficiary of the Distribution Amendment Act, if it comes through.
Moreover, the company is focused on the execution of projects, tie-ups with multiple vendors and a higher proportion of sovereign counterparty projects. It aims to scale up to 5.6 times by 2030, according to Jefferies.
Adani Transmission’s shares were trading at ₹ 2,800 levels in January this year, however, they witnessed a steep fall of about 77% and reached a 52-week low of ₹ 631.50 apiece after the release of the Hindenburg Report which accused the Adani Group of “brazen stock manipulation and accounting fraud scheme over the course of decades”. Since then the stock has recovered by 25% to the current level.
Adani Transmission is a large-cap company with a market capitalization of ₹ 91,805 crores. It has a low return on equity of 11.65% and a high debt-to-equity ratio of 2.94.
Moreover, its shares were trading at a price-to-earnings ratio (P/E) of 74.14, which is substantially higher than the industry average of 11.05, indicating that the stock might be overvalued as compared to its peers.
Written By Simran Bafna
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