Top Diwali Stock Picks from JM Financial: RIL, JSPL, Olectra Greentech Lead the Way

As the new Samvat season approaches, brokerage firm JM Financial has curated a list of ten standout stocks that they consider top picks for Diwali. This selection spans a diverse range of sectors, including heavyweights like Reliance Industries, public sector undertakings such as Power Grid and NALCO, and real estate companies like Macrotech Developers. The brokerage’s strategic choices reflect not only strong growth potential but also a robust outlook for several key industries in the coming years. Here’s a closer look at JM Financial’s Diwali stock picks:

1. Reliance Industries

One of India’s largest conglomerates, Reliance Industries, has seen its share price decline by over 15% from its recent highs, underperforming the Nifty 50. Despite this, JM Financial is optimistic that the stock could rebound. The brokerage anticipates that faster-than-expected telecom tariff hikes, recovery in the retail sector, and strategic announcements in the new energy business could serve as growth catalysts. With a focus on diversified segments, Reliance’s earnings growth momentum remains strong. JM Financial projects a Compounded Annual Growth Rate (CAGR) of 15% in net profit over FY24 to FY27 and has set a price target of ₹3,500. However, key risks include ongoing capital expenditure resulting in increased net debt, slow subscriber growth, and weak margins in the downstream segment due to macroeconomic concerns.

2. Power Grid Corporation of India

JM Financial finds Power Grid to be attractively valued, giving it a price target of ₹383 with a “buy” rating. The brokerage highlights Power Grid’s low earnings risk, which is supported by regulated returns and a healthy dividend yield of approximately 4%. With an expected resurgence in transmission capital expenditure and a solid Return on Equity (RoE) of 18% forecasted between FY24 and FY26, Power Grid stands out as a low-risk investment. Risks include slower-than-anticipated project capitalisation and rising competition in the competitive tariff bidding space.

3. Bajaj Finance

Bajaj Finance has long been recognized for its asset quality, and JM Financial continues to rate the company highly. With a price target of ₹8,552, the brokerage emphasizes the firm’s solid asset base and reasonable valuations, slightly below its historical average. JM Financial foresees room for re-rating due to the company’s robust Return on Equity (RoE) and Return on Assets (RoA) metrics, supported by steady growth ahead. However, key risks include higher-than-expected slippages, credit costs, and weaker asset growth.

4. ICICI Lombard

Although ICICI Lombard is trading at premium valuations, JM Financial expects the company to deliver consistent growth, projecting over 17% in earnings and RoE. The brokerage recommends using any seasonal weakness in the company’s results as a buying opportunity, with a price target of ₹2,450. ICICI Lombard’s steady financial performance makes it an attractive pick, though risks include slower growth and competition within the insurance sector.

5. Jindal Steel and Power Limited (JSPL)

JSPL’s expansion plans are a key driver behind JM Financial’s optimistic outlook on the stock. The brokerage expects JSPL to boost its crude steel capacity by 65% to 15.9 million tonnes (MT) by FY26, along with enriching its product mix. JM Financial forecasts a strong Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) per tonne of ₹15,000 by FY26. Additionally, JSPL’s balance sheet is the strongest among its domestic peers, making it a stable long-term investment. JM Financial has a price target of ₹1,500 for JSPL.

6. National Aluminium Company (NALCO)

The public-sector company NALCO is another stock in JM Financial’s Diwali picks. The brokerage expects NALCO’s EBITDA to triple to ₹1,200 crore in the current quarter, driven by a rise in aluminium prices, lower production costs, and the benefit of captive coal mining. With a robust financial outlook, including an EBITDA projection of ₹6,000 crore by FY27 and a net cash balance of ₹3,500 crore, JM Financial has set a price target of ₹264 for NALCO. However, the stock’s performance is sensitive to international price fluctuations and delays in expansion projects.

7. Gravita India

Gravita India’s leadership in the domestic lead recycling space positions it as a growth stock in JM Financial’s view. The brokerage expects a CAGR of 30% in net profit from FY24 to FY27, bolstered by regulatory support and capacity expansion. The stock’s strong RoE of 32% and RoCE of 28% in FY27 reflect its efficient operations. JM Financial has raised its price target for Gravita to ₹3,068. Risks include disruptions in logistics, delays in scaling new capacities, and fluctuations in commodity prices.

8. Macrotech Developers (Lodha)

In the real estate sector, JM Financial is positive on Macrotech Developers. The brokerage anticipates that the company will generate strong operating cash flows between ₹7,000 crore and ₹8,000 crore annually over the next three years, driven by an increase in collections relative to pre-sales growth. Macrotech is also expected to have surplus cash for debt reduction while continuing to invest in business development. JM Financial has a price target of ₹1,480 for the stock, but key risks include a slowdown in pre-sales and significant exposure to the Mumbai Metropolitan Region (MMR).

9. Olectra Greentech

With a growing focus on electric vehicles and green energy, JM Financial sees Olectra Greentech as a potential outperformer. The brokerage has set a price target of ₹2,200, highlighting the company’s long-term growth potential. In the near term, Olectra is expected to ramp up volumes significantly, though execution risks such as delayed project clearances and payment issues could impact its progress.

10. Ashoka Buildcon

Rounding out JM Financial’s top picks is Ashoka Buildcon. The infrastructure company is projected to achieve a net profit CAGR of 33% between FY24 and FY26, with a robust RoE of 10% by FY26. JM Financial has set a price target of ₹290 for the stock, emphasizing its attractive valuation at 15.3 times FY26 standalone earnings. Risks include delays in finalizing key projects and lower order inflows.

In conclusion, JM Financial’s Diwali stock picks for the new Samvat offer a well-rounded portfolio, with selections across various sectors, including telecom, real estate, power, finance, and green energy. While each stock presents substantial growth opportunities, potential risks such as economic slowdowns, project delays, and market volatility must be considered. Investors looking to capitalize on these recommendations should maintain a diversified strategy, aligning their portfolios with both market trends and individual risk tolerance.