JMFS Fundamental Research JMFS Research

October 15, 2024

Diwali Picks
2024

15 October 2024
Abhijeet Bora
Disclaimer: For Fundamental Research Disclaimer, visit Please see
bit.ly/42vEJTI important disclosure at the end of this report | Private & Confidential [email protected]
 JMFS Fundamental Research Reliance Industries
October 15, 2024

Recommendation BUY Under-performance largely factors in weak H1 earnings

CMP (Rs) 2,745
About Company: RIL is diversified conglomerate with businesses spread across oil-to-chemicals (oil refining and petrochemicals), E&P,
Target (Rs) 3,500 digital services, retail, media and new energy. The company derives 38%/12%/14%/34%/1% of its consolidated EBITDA (Rs162233 crore in
Upside (%) 28% FY24) from O2C/oil & gas/retail/Digital Services/others.
Market Cap (Rs bn) 18,574 Key investment rationales:
6-months NSE avg. daily val 59,56,565 Jio – aims for 2x growth in revenue/EBITDA in next 3-4 years: The management guided to double Jio revenue/EBITDA in next 3-4 years
52 week range 3,218 – 2,221 versus FY24 revenue/EBITDA of Rs109,558 crore/Rs 54,959 crore. The major focus would be to benefit from likely higher 5G penetration
(currently serving +130mn 5G subscribers), accelerating home broadband services and highlighted massive opportunities would emerge from
Target Timeframe 6-12 Months
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024
AI. RIL maintained its aim to connect 100 mn home subscribers/20 mn SMBs via FTTH and AirFiber and highlighted that Jio AirFiber added first
1mn homes in 6 months, next 1mn homes in next 100 days and aims to add 1mn homes every month going forward. It is also developing
Financial Summary (Rs Cr)
JioBrain, a comprehensive suite of tools and platforms that span the entire AI lifecycle and announced Jio AI-Cloud welcome offer, under
Particulars FY24A FY25E FY26E FY27E which Jio users will get 100GB of free cloud storage, starting this Diwali.
Net Sales 9,01,064 9,40,899 10,49,015 11,94,453
Sales Growth (%) 2.6 4.4 11.5 13.9
Retail – target to double revenue/EBITDA over next 3-4 years: For retail business, the company is aiming to double its revenue/EBITDA in the
next 3-4 years with continued thrust on store expansion (currently 19,000 own stores with nearly 80 million sq. ft. across 7,000+ cities, 4
EBITDA 1,62,233 1,62,303 1,96,491 2,27,655
million kirana partners) across retail categories and focus to grow JioMart (online platform).
EBITDA Margin (%) 18.0 17.2 18.7 19.1
Adj. Net Profit 69,621 71,371 88,540 1,05,677 New Energy - potential to become as big and profitable as O2C in 5-7 years: RIL maintained its new energy capex guidance of Rs75000 crore so as
Diluted EPS (INR) 102.9 105.5 130.9 156.2 to establish new energy ecosystem (integrated manufacturing ecosystem for solar value chain, BESS and electrolysers). Key project schedules – 1)
Diluted EPS Growth (%) 5.0 2.5 24.1 19.4 solar PV modules to commence by end-2024 with an initial capacity of 10 GW, 2) energy storage solution with 30 GWh annual capacity to
ROIC (%) 9.5 8.8 10.3 11.5 commence by 2H2025 and this will deliver stable and affordable RE-RTC at GW scale (in a phased manner commencing 2026), 3) multi-GW
ROE (%) 9.2 8.7 10.0 10.9 electrolyser facility to be ready by 2026. Moreover, it is scaling up investments in bioenergy to reach 55 Compressed Biogas (CBG) plants by 2025.
P/E (x) 26.7 26.0 21.0 17.6 Most importantly, the company guided that its new energy has potential to deliver earnings like that of its O2C business (FY24 EBITDA of Rs62393
P/B (x) 2.3 2.2 2.0 1.8 crore) in next 5-7 years and the same provides earnings visibility with potential to drive significant value creation for RIL over medium to long term.
EV/EBITDA (x) 13.0 13.1 10.8 9.2 Valuation and view: RIL’s stock price has under-performed broader markets with just 5% returns in CY24YTD versus 15% return for Nifty-50.
Dividend Yield (%) 0.4 0.4 0.5 0.5 We believe that this under-performance could reverse supported by faster-than-anticipated telecom tariff hikes by telcos', recovery in retail
Source: JMFS Research; Note: CMP as of 14th October 2024 business and positive announcements on new energy business. Earnings growth momentum to remain strong across segments and we expect
Abhijeet Bora 15% PAT CAGR over FY24-27E. We retain our Buy rating on RIL with SoTP based target price of Rs3,500.
[email protected]
Key Risks: 1) Continued high capex, resulting in rising net debt with limited earnings visibility from new projects; 2) Weak subs addition and
Refer research disclaimers on www.jmfinancialservices.in limited ARPU hike; and 3) Weak downstream margins due to macro concerns.

Please see important disclosure at the end of this report | Private & Confidential 2
 JMFS Fundamental Research Power Grid Corporation of India
October 15, 2024

Recommendation BUY Capex recovery to drives growth

CMP (Rs) 329
About Company: Power Grid Corporation of India Limited (PGCIL), a ‘Maharatna’ CPSE, is India’s largest power transmission utility, carrying
Target (Rs) 383 around 45% of total power generated in the country. It owns and operates most of India’s inter-regional and inter-state power transmission
Upside (%) 17% system (ISTS), with a transmission network of 1,77,699 ckm and 278 substations boasting a transformation capacity of more than 5,27,446
Market Cap (Rs bn) 3,05,943 MVA. During FY09-19, the company experienced robust growth on the back of high capex, which slowed down in the past 3-4 years.
However, the company is expected to enjoy another growth phase in the medium term due to pickup in auctions of projects related to
6-months NSE avg. daily val 1,70,89,472
Transmission System Integration for 500GW RE by 2030.
52 week range 366-196
Target Timeframe 6-12 Months
Key investment rationales
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024 • Strong transmission growth opportunity till 2032: The company has very strong capex visibility with transmission opportunities worth
Rs1,90,500 up to 2032, which includes ISTS/intra-state/cross-border interconnection projects and international projects worth Rs 7500
Financial Summary (Rs Cr )
crores. Moreover, the company has estimated capex of Rs 17,000 crore for new growth avenues (such as solar generation, smart metering,
Particulars FY23A FY24A FY25E FY26E
and data centers) over the next 7-8 years. Focus on data centers and smart meters are key new growth areas. We highlight here that
Net sales 45,603 45,843 46,838 49,688
Power Grid is strives to become a significant player in the Indian data center industry and is working on a pilot data center at PowerGrid
Sales Growth (%) 9.6 0.5 2.2 6.1
Manesar Substation as well as evaluating potential sites for additional data centers in Bangalore, Hyderabad, Chennai, and other metro
EBITDA 39,500 39,903 40,576 43,087
cities.
EBITDA Margin (%) 86.6 87.0 86.6 86.7
• Robust capex guidance and regulated business model gives confidence on earnings visibility: Recovery in capex is finally gaining traction
Adjusted Net Profit 15,171 16,145 16,539 17,506
with upward revision in CapEx guidance to Rs 18,000 crores for FY25 and Rs 55000 crores over FY26-27 as compared with subdued capex
Diluted EPS (INR) 16.3 17.4 17.8 18.8
of Rs 9100/9200/12500 crores in FY22/FY23/FY24, respectively. Capex recovery and regulated RoE model provides strong earnings
% YoY growth 8.1 6.4 2.4 5.9
visibility over FY26-27E.
RoCE (%) 13.3 13.9 14.0 13.6
RoNW (%) 19.0 19.0 18.4 18.2 • Valuation at steep discount to private power companies: Valuation of PSU power companies is at steep discount to private power
P/E (x) 20.2 18.9 18.5 17.5 companies, and we expect this to narrow down given strong earnings growth visibility and healthy dividend yield. We highlight here that
P/B (x) 3.7 3.6 3.3 3.1 Power Grid valuation of 3.1x FY26E P/BV is at a 28% discount to average valuation of private power companies on FY26E P/BV.
EV/EBITDA (x) 8.4 8.1 7.9 7.6 Valuation and view: Valuation is reasonable at 3.1x FY26E P/BV stock offers healthy dividend yield of ~4%, low earnings risk given regulated
Dividend yield (%) 2.8 3.6 3.5 3.7 returns, and most importantly, we see sharp recovery in transmission capex cycle. We expect the company to maintain a ROE of ~18% during
Source: Company; JMFS Research; Note: CMP as of 14th October 2024 FY24-26E. Valuing at 3.6x FY26E P/BV, we arrive at a TP of INR 383.
Abhijeet Bora Key Risks: 1) Slower-than-expected capitalisation of projects could impact earnings growth and 2) rising competition for tariff-based
[email protected] competitive bidding could impact its ability to win new projects.
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Please see important disclosure at the end of this report | Private & Confidential 3
 JMFS Fundamental Research Bajaj Finance
October 15, 2024

Recommendation BUY Leading diversified NBFC delivering superior performance

CMP (Rs) 7209
About Company: Bajaj Finance is a leading diversified NBFCs having large number of products including Two and Three wheelers loans,
Target (Rs) 8552 consumer durables, housing, MSME loans, Rural, Gold loans, mortgages etc. It is one of key players in consumer durable and lifestyle products
Upside (%) 18.6% finanacing. As of Q1FY25, Bajaj Finance’s AUM stood at ~Rs 3.5 lakh crore while serving >83 million clients. It has one of the largest deposit
Market Cap (Rs bn) 446,995 profile amongst the NBFCs at ~Rs 63000 crore. The company has in the past and currently continues to deliver strong and consistent
performance in terms of growth, margins and best in class asset-quality owing to its robust standing in the retail finance space. Strong
6-months NSE avg. daily val 12,17,349
management pedigree and high capital adequacy is the key highlight of the company.
52 week range 8159–6187
Target Timeframe 6-12 Months
Key investment rationales
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024 • The Bajaj Finance stock has over last 2 months witnessed a decent recovery of ~20%. One of the important triggers behind this was IPO of
Financial Summary (Rs Cr ) its housing finance division recently.
Particulars FY21A FY22A FY23A FY24A • However, we believe despite such a run up, there is still steam left in the stock owing to following factors as out-lined below.
Net Profit (INR Crore ) 4,420 7,028 11,508 14,451
Net Profit (YoY) (%) -16% 59% 64% 26%
• AUM growth of Bajaj Finance over the last 2-3 years has remained healthy at >25% YoY levels. In Q1FY25, slight moderation was witnessed
Assets (YoY) (%) 4% 24% 30% 31%
owing to the company shifting focus from unsecured loans to secured loans after RBI instructions for the entire sector wrt unsecured
loans.
ROA (%) 2.6 3.7 4.7 4.4
ROE (%) 12.8 17.4 23.5 22.0 • With festive season ahead, Q3FY25 is seasonally a good quarter in terms of AUM. On an annual basis too, we believe the company would
EPS (Rs) 73.5 116.5 190.4 234.0 maintain its healthy growth strategy ahead, owing to its diversified asset book
EPS (YoY) (%) -16% 59% 63% 23%
• Margins for Bajaj Finance are strong at >12% levels. We expect company’s NIMs would remain steady going ahead as ~48% of liabilities are
PE (x) 97 61 37 30
bank based which would reprice faster thus enabling stability to margins
BV (Rs) 614 725 900 1241
P/BV 11.6 9.8 7.9 5.7 • Overall, Asset quality has been under control and infact best in class, with GNPA ratio as on FY24 being less than 1.5% levels. We expect,
Source: Company; JMFS Research; Note: CMP as of 14th October 2024 credit cost i.e provisioning cost would improve in H2FY25 vs. Q1FY25 which got impacted owing to lower collection efficiency owing to
elections and heatwaves across India.
• Further, with recent IPO of its housing finance division, the capital adequacy improves further
Valuations and view: On the valuation front, Bajaj Finance is at a reasonable levels of ~4x FY26E BV which is a tad below its long term
Vasant Lohiya
average. Thus, scope for re-rating on the upside is there considering its healthy ROEs and RoA and growth prospects ahead.
[email protected]
Key Risks: Higher than expected slippages and credit cost, lower AUM growth, Keyman Risk.
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Please see important disclosure at the end of this report | Private & Confidential 4
 JMFS Fundamental Research ICICI Lombard General Insurance Co Ltd
October 15, 2024

Recommendation BUY Leader in private general insurance space

CMP (Rs) 2090
About Company: ICICI Lombard is the second largest Indian general insurer, behind the public insurer New India Assurance Co., with a market
Target (Rs) 2450 share of 8.6% of FY24 premiums. It is the segment leader in motor insurance space and amongst the private insurers, it is the leader in key
Upside (%) 17% commercial segments of fire, engineering, marine & liability and scaling up rapidly in the fast-growing health segment – growing 37%/29% over
Market Cap (Rs bn) 103,325 FY23/FY24. It has strong moats to consistently grow at a 17%+ CAGR with 17%+ RoEs. Its track record and calibrated growth provides comfort on
underwriting, and the government’s push for penetration and transparency should aid return ratios.
6-months NSE avg. daily val 8,86,171
52 week range 2302 – 1313 Key investment rationales
Target Timeframe 6-12 Months
• Strong moats for a healthy growth ahead: The company has strong moats in health & motor segment owing to a strong product suite, growing
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024 retail agency & banca relationships and digital capabilities, deep distribution & conservative underwriting and a large balance sheet, reinsurance
and agility. These capabilities have made the company a leader in this large and fast growing segments. A smooth management transition after a
Financial Summary (Rs Cr )
CEO at the helm for 14 years indicates depth in leadership, visible also in consistent growth and 15%+ returns, even as it toggles segments in
Particulars FY23A FY24A FY25E FY26E
response to customer demand and competition.
Gross Premiums (INR bn) 218 256 302 357
GWP Growth (YoY) (%) 17% 18% 18% 18% • Key segments of fire, motor and health on-track, see 17%+ premium growth in medium term: Multi-line offerings have enabled consistent
Net Profit (INR bn) 17 19 25 29 growth for the company. Despite regulatory changes, it has managed 20%+ growth in commercial lines, with 40%+ RoE in the key fire segment.
EPS 35.2 38.9 49.8 59.0 The motor segment has seen weak growth with sluggish underlying industry and poor combined ratios; however, it has made a strong comeback
EPS Growth (YoY) (%) 36.0 10.6 27.8 18.5 in FY24-FY25. Meanwhile, in the fast-growing health segment, it has grown through tied agents, banca partners and digital outreach, with
Combined Ratio % 104.5 103.3 101.7 101.1 improving return ratios. It is comfortably placed on EOM (28.8% of GWP against the required 30%), which can drive growth as peers struggle. We
ROE % 18% 17% 18% 19%
see it sustain 17%+ growth over FY24-FY26.
PE (x) 60 55 43 36 • Comfort on underwriting, EOM, investments book drive sustained 17%+ RoEs despite a strong 256% solvency: The company has managed its
BV (Rs) 216 263 298 339 exposures and cat (catastrophe) risks admirably, while growing in line with the industry. While COR rose over FY22-FY24, the company looks on-
P/BV 9.8 8.1 7.1 6.3 course for <102% COR in FY25, which will improve as the health portfolio develops. It has admirably managed investments through cycles, to
Source: Company; JMFS Research; Note: CMP as of 14th October 2024
generate generating 15%+ RoE every year over FY15-FY24. It is well-capitalised with a solvency of 262%, well above the required 150% and RoE
in line with growth
• Valuation and view: With COR trajectory on target, comfort on growth as peers align with EOM guidelines, and sorted ownership, the stock has
do during the last 17 months. While the stock trades at premium valuations, we believe it can compound with consistent 17%+ growth & 17%+
Vasant Lohiya RoE. It has seen growth slowdown in 2Q after a strong start to FY25, - any seasonal weakness in numbers can be bought into. We g=have a TP of
[email protected]
Rs 2450 valuing the company at ~41x FY26e EPS.
Refer research disclaimers on www.jmfinancialservices.in
• Key Risks: 1) Heightened competition; Regulatory risks.
Please see important disclosure at the end of this report | Private & Confidential 5
 JMFS Fundamental Research Jindal Steel & Power
October 15, 2024

Recommendation BUY Strong growth pipeline backed by captive coal to drive earnings
CMP (Rs) 980
About Company: Jindal Steel and Power (JSPL) is one of India's leading steel manufacturers with current capacity of 9.6mtpta. The company is
Target (Rs) 1,150 undergoing capex to expand its crude steel production capacity by 65% to 15.9mtpa.
Upside (%) 19%
Key investment rationales
Market Cap (Rs bn) 1,04,217
• Capacity expansion to drive performance: The company’s ongoing expansion would significantly enhance its crude steel capacity, by 65%,
6-months NSE avg. daily val 16,60,000
to 15.9m tonnes and finished steel capacity, by 90%, to 13.75m tonnes, catapulting it to the fourth largest steel manufacturer in India by
52 week range 1097-582 FY26. On the capex completion, its share of flat-steel products is likely to rise to ~65%, which would boost margins. Over the last decade,
Target Timeframe 6-12 Months though the company raised its steel capacity from 3m tonnes to 9.6m tonnes, it was predominantly a long-steel manufacturer. However,
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024
with its greater focus on flat-steel products, the latter’s share in the product mix is expected to rise to ~65% by FY26. Flat-steel products
Financial Summary (Rs Cr ) command a premium to long-steel products; hence the company increasing the share of “flats” augers well for its long-term growth
Particulars FY24A FY25E FY26E prospects.
Revenue 50,026 60,016 67,166
• RM links to expand margins: The company has many iron ore and coal mines in India and internationally. This aids in timely raw-material
Growth (%) -6% 20% 12%
availability and paves the way for it to be the lowest-cost domestic steel producer. The edge the company enjoys is the proximity of its
EBITDA 10,200 13,178 15,780
EBITDA (%) 20% 22% 23%
mines to its manufacturing plants. JSP has 60% integration of iron ore and post commissioning of all its thermal coal mines it will have
EPS 57.8 68.2 80.9 100% integration of coal.
EPS Growth (%) 30% 18% 19% • Strong 1Q25 Results: JSP reported 1Q consol. EBITDA of INR28bn, significantly higher than JMfe of INR25bn driven by strong volume
ROE (%) 14.2% 14.6% 15.0% delivery ~2mn ton + and higher captive thermal coal integration during the quarter. Performance was driven by higher sales volume and
P/E 17.6 15.0 12.6 reduction in costs. The company reported a sales volume of ~2mn tons + for the first time driven by ~450ktpa contribution from the newly
P/BV 2.3 2.0 1.7 commissioned hot strip mill.
Source: Company; JMFS Research; Note: CMP as of 14th October 2024

Valuation and view: JSPL’s strategic expansion would augment its crude steel capacity by 65% to 15.9m tonnes and enrich its product mix.
Also, the company is strengthening raw-material integration and increasing the share of VAPs which should aid margins. Considering its strong
focus on margin expansion, we expect it to achieve INR 15,000 EBITDA/tonne by FY26. With a 0.9x net debt/EBITDA, it has one of the
strongest balance sheets among domestic peers. We recommend Buy on JSPL with TP of Rs1,150 (valued at 8x FY26E EV/EBITDA).
Yash Agarwal Key risks: 1) Sharp decline in international steel price and jump in coking coal/iron ore price could impact margins, 2) delays in capacity
[email protected]
expansion plan and economic slowdown may impact volume and earnings growth.
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Please see important disclosure at the end of this report | Private & Confidential 6
 JMFS Fundamental Research National Aluminium Company
October 15, 2024

Recommendation BUY Key beneficiary of higher alumina & aluminum price

CMP (Rs) 227
About Company: NALCO is PSU with government of India stake at 51.3% as of June 2024. The company is one of the largest producer of
Target (Rs) 264 bauxite, alumina and aluminum in India with production of 0.46mt/2.12 mt for aluminium/alumina in FY24. The export sales volume of
Upside (%) 17% alumina stood at 1.17mt in FY24.
Market Cap (Rs bn) 41,600 Key investment rationales
6-months NSE avg. daily val 1,91,23,000 • 1MTPA Alumina refinery expansion – bode well for integrated business model of NALCO: The current alumina refinery expansion by 1
52 week range 233-89 MTPA (at estimated capex of Rs88bn) is expected to be completed by Q2FY26 and start contributing to volume by H2FY27. Likely ramp-up
Target Timeframe 6-12 Months
of expanded alumina refinery would supplement NALCO’s integrated business model.
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024 • Elevated Alumina price amid supply imbalances – could drive significant earnings upgrades: International alumina prices has soared by
Financial Summary (Rs Cr ) whooping 75% CY24YTD to ~$550/tonne reflecting supply chain challenges and strong demand from China, which would mean overall
Particulars FY21A FY22A FY23A FY24A alumina deficit of ~0.5mtpa in CY24E. Also, bauxite price are on rising trend due to China enacting stronger mine regulations, export ban
Net sales 8,956 14,215 14,257 13,149 by Indonesia and supply concerns from Guinea, an elevated alumina prices could result into significant earnings upgrade for NALCO as well
Sales Growth (%) 5.7 58.7 0.3 -7.8
benefit from likely higher external alumina volumes post 1mtpa alumina refinery expansion.
EBITDA 1776 4527 2450 2873 • Captive sourcing of coal- to reduce production cost: NALCO has two coal blocks (Utkal-D and Utkal-E) with combines reserves to the tune
EBITDA Margin (%) 19.8 31.9 17.2 21.8 of 172mtpa and production capacity of ~4mtpa. The ramp-up of captive coal production would result in lower requirement expensive e-
Adjusted Net Profit 1299 2951 1435 1676 auction coal and thus would reduce cost of production for both alumina as well as aluminum. Lower cost of production along with higher
Diluted EPS (INR) 7.1 16.1 7.8 9.1 price for alumina/aluminum bodes well for margin improvement going forward.
% YoY growth 853.8 127.1 -51.4 16.8 Valuation and view: NALCO’s Q2FY25 EBITDA is expected to increase by ~3x y-o-y to Rs1,200 crore supported by rise in alumina/aluminium
RoCE (%) 10.8 29.5 13.5 15.2 price, lower cost and benefit of captive coal mining. FY27E EBITDA estimate of Rs6,000 crore and 7.5x EV/EBITDA + FY26E Net cash of Rs3,500
RoNW (%) 12.6 25.4 11.2 12.2 crore gives us equity value of Rs48,500 crore (Rs264/share). At CMP of Rs227, the stock trades at attractive valuation of 6.8x on FY26E EBITDA
P/E (x) 32.0 14.1 29.0 24.8 and offers healthy dividend yield of 3%.
P/B (x) 3.9 3.3 3.2 2.9
Key Risks: 1) Sharp decline in the international alumina and aluminum price, 2) delay in commissioning of Alumina refinery expansion , 3)
EV/EBITDA (x) 22.3 8.4 16.1 13.5
lower-than-expected benefit of cost savings from captive coal mines.
Dividend yield (%) 1.5 2.9 2.0 2.2
Source: JMFS Research; Note: CMP as of 14th October 2024

Abhijeet Bora
[email protected]
Refer research disclaimers on www.jmfinancialservices.in

Please see important disclosure at the end of this report | Private & Confidential 7
 JMFS Fundamental Research Gravita India
October 15, 2024

Recommendation BUY Leading recycling player; Capex to drive growth

CMP (Rs) 2,541
About Company: Gravita India is a leading player in India’s recycling industry and currently operates in three verticals i.e. lead, aluminum,
Target (Rs) 3,068 plastics and have concrete plans to diversify into other verticals (steel, paper and lithium-ion batteries). The company is one of the largest
Upside (%) 21% lead recyclers in India and derives 82% of its EBITDA from lead recycling vertical while aluminum/plastic/turnkey projects contributed
Market Cap (Rs bn) 17,544 5%/4%/9% of its FY24 EBITDA (Rs343 crore).
6-months NSE avg. daily val 4,59,720 Key investment rationales
52 week range 2,700-731 • Massive capex plan of Rs600 crore – to drive 29% volume CAGR over FY24-26E and diversify towards non-lead business: Gravita has
Target Timeframe 6-12 Months
aggressive capex plan of Rs600 crore to expand its existing verticals (Rs400 crore capex) and establish new verticals (Rs200 crore capex) so
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024
as to take advantage of Favourable regulatory regime (BWMR rules for lead recycling) and availability of cheap scarps in overseas markets.
The capacity for existing verticals would rise by 67% to 5 lakh tonnes by FY27E as compared to capacity of 3 lakh tonnes in FY24. Moreover,
Financial Summary (Rs Cr )
the company has plans to add steel/paper recycling capacity of 90kt/90kt in overseas markets. The expansion plans is aligned with the
Particulars FY24A FY25E FY26E FY27E
management’s Vision 2028 - target of 25%+/35%+ revenue/ PAT CAGR over FY24-28E along with strong 25%+ RoCE.
Net sales 3,161 4,165 5,410 6,814
Sales Growth (%) 12.9 31.8 29.9 26.0
• Regulatory tailwinds for lead business – to help expand market share: Battery Waste Management Rules (BWMR 2022) has mandated
EBITDA 343 432 557 710
EPR obligation for batter manufacturers which would mean shift of battery scarp to organized sector versus unorganized. Moreover,
EBITDA Margin (%) 10.8 10.4 10.3 10.4
government has recently announced favourable regulatory changes for battery recycling industry: (1) Environmental compensation (a
financial penalty of Rs18/kg) on battery OEMs for non-compliance with Extended Producer Responsibility obligations and (2) introduction
Adjusted Net Profit 239 302 406 529
of reverse charge mechanism (RCM) under GST on metal scrap. The stricter regulations would act as key catalyst to increase domestic
Diluted EPS (INR) 34.6 43.7 58.8 76.7
battery scrap availability, which help more than double the share of organized player in battery recycling to 75% over FY26-27E versus 35%
% YoY growth 18.9 26.1 34.6 30.4
currently. Thus, we expect lead vertical to sustain 25%+ volume CAGR over FY24-27E.
RoCE (%) 26.0 25.7 27.4 28.6
RoNW (%) 33.5 31.2 32.1 31.8 • Entry into Europe recycling market – expands geographical reach and addressable market: Gravita Netherlands BV (GNBV, subsidiary of
P/E (x) 73.3 58.2 43.2 33.1 Gravita India) has recently signed an MoU to acquire 80% stake in a waste tyre recycling plant (17,000 mtpa capacity) in Romania with
P/B (x) 21.0 16.0 12.2 9.3 total investment of Rs32 crore. The plant will be Gravita's first facility in Europe aimed to tap European recycling market.
EV/EBITDA (x) 52.5 41.4 32.1 25.1 Valuation and view: Regulatory tailwinds in the domestic lead recycling space and massive capacity expansion plan focused to diversify
Dividend yield (%) 0.2 0.3 0.3 0.5 earnings toward non-lead business/improve VAP mix (25%+/50% share) to drive strong 30% PAT CAGR over FY24-27E along with high
Source: BSE; JMFS Research; Note: CMP as of 14th October 2024
RoE/RoCE of 32%/28% in FY27E. Hence, we maintain our Buy rating on Gravita India with an increased target price of Rs3,068 (valued at 40x
Abhijeet Bora FY27E EPS of Rs76.7). At, CMP the stock trades at 43x/33x FY26E/FY27E EPS.
[email protected]
Key Risks: 1) Impact on volume from any logistics disruptions and 2) Delay in ramp-up of new capacities, 3) volatility in aluminum price could
Refer research disclaimers on www.jmfinancialservices.in impact margins in the absence of back-to-back hedging mechanism, 4) Country specific risk given large overseas capacities.

Please see important disclosure at the end of this report | Private & Confidential 8
 JMFS Fundamental Research Macrotech Developers
October 15, 2024

Recommendation BUY Going from strength to strength

CMP (Rs) 1,200
Macrotech Developers (Lodha) should be able to consolidate its leadership position further, led by its robust sales machinery and healthy mix
Target (Rs) 1,480 of premium, mid-income and affordable projects, coupled with existing tailwinds across the residential cycle. It has also continued to expand
Upside (%) 23 into segments such as logistic parks, commercial and retail, as part of mixed-use developments, to strengthen its position as a top developer
Market Cap (Rs bn) 1,20,000 across product categories and customer segments
6-months NSE avg. daily val 14,00,000 Key investment rationales
52 week range 1,650 - 702 • Market leader with a proven track record: Lodha is the largest real estate developer in India by cumulative residential sales value for the
Target Timeframe 6-12 Months
past 7 years with a dominant presence in MMR (India’s largest real estate market) and Pune. It has successfully executed large phases of
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024 townships (Palava and Upper Thane) and continues to expand into segments such as logistic parks, commercial and retail as part of mixed-
use developments. Macrotech has been able to leverage its brand presence and track record of successfully delivering projects to increase
Financial Summary (Rs Cr )
sales volumes and command premium pricing for products compared to other projects in the respective micro-markets.
Particulars FY24A FY25E FY26E
Revenue 10,316 12,328 13,546 • Ability to develop townships and generate annuity-like cash flows: Lodha has the ability to identify land, acquire it at competitive cost,
Revenue Growth (%) 9% 20% 10% aggregate it from several landowners and design a master plan to develop township projects. It is currently developing large townships
EBITDA 2675 3585 3685 located at Palava (Navi Mumbai, Dombivli Region) and Upper Thane (Thane outskirts) under its affordable and mid-income housing
EBITDA Growth (%) 26% 29% 27% projects. On the back of a strong brand name and innovative sales and marketing strategies, Lodha is able to drive sales volumes and
EPS 16.6 27.4 28 generate recurring operating cash flows. Furthermore, it is able to command c. 50% cash margins from these townships (most of it is paid-
EPS Growth (%) -1% 65% 2% up land) making them highly profitable due to lower land costs
ROE (%) 11.0% 14.6% 13.1% • Higher intensity of asset-light portfolio additions to drive pre-sales growth: Since the IPO, Lodha has added projects with a total
P/E 72.3 43.8 42.9 estimated gross development value (GDV) of c.550bn, with a significant portion of these projects being asset-light in nature. Of the total,
P/BV 6.6 5.8 5.1 c.54% of the GDV added was in markets where Lodha has no/minimal presence. These markets today together contribute c.41% of the
Source: Company; JMFS Research; Note: CMP as of 14th October 2024
total sales (As of FY24).
Valuation and View: We expect Lodha to generate robust operating cash flows (OCF), as collections catch up to the growth in pre-sales (in the
last 3 years). We expect the company to generate OCF of INR 70bn-80bn on average for the next 3 years. We estimate that Lodha should
have surplus cash available for deleveraging even after accounting for a consummate increase in business development investments (growth
investments) . Lodha currently trades at 4x FY27E Pre-sales.
Abhijeet Bora
[email protected] Key Risks: Prolonged slowdown in pre-sales and significant exposure to the MMR market.
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Please see important disclosure at the end of this report | Private & Confidential 9
 JMFS Fundamental Research Olectra Greentech
October 15, 2024

Recommendation BUY Pick up in volumes to drive earnings growth

CMP (Rs) 1,725
About Company: Olectra is one of the largest manufacturers of electric buses in India. It has establishing greenfield State-of-the-Art plant in
Target (Rs) 2,200 Hyderabad with capacity of 5,000 units/year and scalable to 10,000 units/year. Company has commenced partially operations for
Upside (%) 27% manufacturing electric buses and other EV products in the new plant. Over the next 2 fiscals ramp up will be visible.
Market Cap (Rs bn) 14155
Key investment rationales
6-months NSE avg. daily val 9,00,000 • Technology tie up with BYD provides product edge: It has strong technology capabilities with a diverse product portfolio and significant
52 week range 2,222 – 1,018 market share in India. Last fiscal has successfully extended the technology Co-operation Agreement with BYD till 31st Dec’30
Target Timeframe 6-12 Months • Huge under penetrated market: Electric Buses have been there in for the past 7-8 years, still when one looks at the maturity of the
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024
industry, it is at a very, very nascent, overall, total population of buses is about 1.8 million and almost less than 1% is electrified as of now.
Financial Summary (Rs Cr ) Hence electric buses is in stage of take-off and also the government has been pushing for adoption of EV
Particulars FY22A FY23A FY24A
• Focus on local procurement: The Company is consistently been pursuing towards localization of EV components. EV component supply
Revenue 593 1,090 1,154
chain is being constantly evaluated by R&D to ensure improved quality & cost competitiveness
Growth (%) 100% 84% 6%
EBITDA 85 141 166 • Significant Order book- First OEM to achieve a milestone of 10,000+ e-bus orders. It Secured world largest e-Bus order of 5150 Buses from
EBITDA (%) 14% 13% 14% MSRTC
EPS 4.3 8 9.4 • New Plant commissioning to drive volumes: Co. had acquired 150 acres of land from Govt. of Telangana for constructing an EV plant, with
EPS Growth (%) 350% 86% 18% an expanded capacity of 10,000 buses per year, first phase of 5,000 buses has been commissioned in FY25E, and management expects to
ROE (%) 5.0% 7.0% 10.0% ramp up over the next few quarters
P/E 401.2 215.6 183.5
Source: Company; JMFS Research; Note: CMP as of 14th October 2024
• Strong Guidance- Olectra delivered 156 units of E-buses in 1Q25, management guides for volumes to double in 2Q25, and further 1,000+
buses in 2HFY25 equating to 1,800-2,000 buses volumes for FY25 which is an annual growth of nearly 300%. For FY26E management is
targeting growth of 2x over FY25E levels, hence volumes for Olectra should grow 8x from FY24 levels in 2 years’ time.
Valuation and View: Based on Pro-forma estimates, Olectra trades roughly at 35x FY26E P/E, ROEs expected to be robust at 25%+. We
believe considering the strong long term potential and near term ramp up in volumes Olectra should rerate to higher levels

Key risks: 1) Delayed clearances for big ticket projects, 2) Payment delays and labour shortage could lead to slowdown in execution and 3)
Yash Agarwal
Slower-than-anticipated awarding especially from government clients.
[email protected]
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Please see important disclosure at the end of this report | Private & Confidential 10
 JMFS Fundamental Research Ashoka Buildcon Limited
October 15, 2024

Recommendation BUY Asset Monetization will drive the re-rating

CMP (Rs) 252
About Company: Ashoka Buildcon (ABL) provides a wide range of construction services related to the building of roads, bridges, and power
Target (Rs) 290 transmission and distribution projects. The company is one of the leading players in the BOT (Build Own, Transfer) segment. The company
Upside (%) 15% also recently forayed into the CGD (City Gas Distribution) segment. Going forward, companies’ performance is expected to improve given a
Market Cap (Rs bn) 7,070 diversified order book, respectable execution capabilities, an anticipated acceleration in execution, and a reduction in debt. The company's
EBITDA margins are expected to recover to 9-10% in H2FY25 and further to 10-11% in FY26 as low-margin projects are expected to be
6-months NSE avg. daily val 23,68,915
completed in H1FY25. We believe the company has further room for re-rating if asset monetization goes as planned.
52 week range 285 – 101
Key investment rationales
Target Timeframe 6-12 Months
Source: BSE; JMFS Research; Note: CMP as on 14th October 2024
• Pickup in order flow: During FY24, award of road projects saw sharp dip in award of road contracts mainly due to delay in cabinet approval
Bharatmala Pariyojana. Around ~Rs 3,00,000 crores worth of projects related to Bharatmala Pariyojana are yet to be awarded and
Financial Summary (Rs Cr )
primarily consist of BOT and HAM assets, which bode well for listed road construction companies. Bidding for these projects is expected to
Particulars FY23A FY24A FY25E FY26E pick up in H2FY25 onwards. The company remains bullish about its prospects across verticals and has guided order inflows of Rs 10,000–
Net sales 6,373 7,727 8,037 8,592
12,000 crore for FY25E. The company’s order book stood at Rs 10,356 crore excluding the L1 project worth around Rs 3,434 crore.
Sales Growth (%) 37.2 21.3 4.0 7.0
EBITDA 534 577 698 903
• Margin Improvement: The company's margin has suffered over the past two to three years due to increases in input costs, the execution
of projects with aggressive bids, and diversification into new markets. As per the company, the project with a low margin is expected to get
EBITDA Margin (%) 8.4 7.5 8.7 10.5
completed by H1FY25, which will enhance its margin in FY25E.
Adjusted Net Profit 322 269 316 467
Diluted EPS (INR) 11.5 9.6 11.3 16.6 • Strong Guidance: The company has guided for revenue growth of 15-20% in FY25E to Rs 8,900-9,300 crore. Management expects EBITDA
YoY growth (%) -30.1 -16.4 17.5 47.6 margins to improve in H2FY25 to 9-10% and further to 10-11% in FY26.
RoCE (%) 10.5 9.0 10.8 13.8 • Asset Monetisation: The company’s asset monetization plan is expected to fructify soon as the company targets to monetize 11 HAMs and
RoNW (%) 10.6 7.5 8.0 10.4 5 BOT assets in FY25E, while monetization of assets like Chennai ORR and Jaora Nayagaon is expected to be delayed. Monetization of ABL’s
P/E (x) 22.0 26.3 22.4 15.3 11 HAM and 5 BOT assets is at an advanced stage, with Shareholder Agreements (SHA) expected to be signed within a couple of months.
P/B (x) 2.2 1.8 1.7 1.4 Timely monetization of assets would help in deleveraging.
EV/EBITDA (x) 6.6 8.6 12.7 9.0
Valuation and view: The company is expected to clock a PAT CAGR of 33% over FY2024-2026E with a robust ROE of 10% in FY26E. The stock
Dividend yield (%) 0.0 0.0 0.0 0.0
Source: Company; JMFS Research; Note: CMP as of 14th October 2024
trades at 15.3x FY26E Standalone EPS. We value Company’s EPC business at 12x September-FY26E core EPS, HAM portfolio at 1.6x P/B and
other ABL assets at 0.5x P/B and arrive at an SOTP-based price target of Rs 290.
Prashant Sharma
[email protected] Key Risk: 1) Delays in finalizing SPAs for HAM and BOT projects, 2) Low order inflows.
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Please see important disclosure at the end of this report | Private & Confidential 11
JMFS Fundamental Research
October 15, 2024

Disclaimer for Fundamental Research

Important Disclosures and Disclaimers
Definition of ratings

Rating Meaning
Buy Total expected returns of more than 15%. Total expected return includes dividend yields.
Hold Price expected to move in the range of 10% downside to 15% upside from the current market price.
Sell Price expected to move downwards by more than 10%
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JMFS Fundamental Research
October 15, 2024

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