REVIEW: Explore the potential of L&T, Power Grid, and NTPC according to Jefferies analysts. Discover their rising valuations and re-rating prospects in the stock market today.
Introduction
In the dynamic landscape of the stock market, three key players, Larsen & Toubro (L&T), Power Grid, and NTPC, have caught the attention of analysts at Jefferies. This comprehensive article delves into their recent valuations, potential for further re-rating, and insights provided by the analyst, aiming to provide investors with valuable information.
L&T, NTPC, Power Grid: A Market Overview
The stock market today continues to showcase optimism for L&T, NTPC, and Power Grid. Analysts at Jefferies highlight these companies among their top picks in the industrials and power utilities sectors, emphasizing their upside scope in valuations.
Capital Goods and Utilities Boom
Larsen & Toubro, NTPC, and Power Grid have experienced significant growth, with share prices rising between 68-93% in the last year. This surge is attributed to the flourishing economic growth and a steady increase in power demand within the country.
Jefferies’ Insights on L&T: Further Re-Rating Anticipated
Jefferies’ analysis brings attention to the strong re-rating prospects for Larsen & Toubro, emphasizing its potential for further growth.
Historical Performance and Future Outlook
Looking back at historical data, L&T traded at an average premium of 90% above Nifty from April 2006 to April 2008. Presently, with a 70% premium, the analyst sees a potential 11% further re-rating for L&T. The core margin delivery remains a pivotal factor for this positive outlook.
Top Picks in Industrials: Siemens, Thermax, ABB, KEI
Siemens, Thermax, ABB, and KEI are Jefferies’ top choices in the industrials space, but with a cautious eye on their current valuations.
Siemens and ABB: Navigating Premiums and Changes
While Siemens and ABB India Ltd have experienced substantial share price increases, Jefferies notes that Siemens is trading at a premium of 185% compared to the 187% in the period from April 2006 to April 2008. ABB, despite a 216% increase, has undergone significant changes post the sale of its power grids section in 2018–2019, focusing solely on automation.
Powering the Utilities Sector: NTPC and Power Grid’s Surge
Jefferies identifies NTPC and Power Grid as strong contenders in the utilities sector, projecting substantial re-rating prospects.
Regulated Nature and Price to Book Value
Due to the regulated nature of NTPC and Power Grid’s businesses, Jefferies values them on the Price to Book value. Their share prices, soaring by 84–163% in the last two years, outperform the Nifty, rising by 40%. the analyst’ indicates potential rerates of 17% and 32% for NTPC and Power Grid, respectively.
FAQs
Are these stock picks suitable for long-term investment?
Absolutely. Jefferies’ analysis points towards the long-term potential of L&T, NTPC, and Power Grid, especially with the anticipated further re-rating.
What factors contribute to the positive outlook on Larsen & Toubro?
the analyst emphasizes historical premium trends, core margin delivery, and consistent outperformance against Nifty as factors supporting the positive outlook on L&T.
Why does Jefferies highlight caution regarding Siemens and ABB’s valuations?
Despite substantial share price increases, Jefferies flags Siemens’ premium trading levels compared to historical data and ABB’s business model changes after the power grids section sale.
How does Jefferies value NTPC and Power Grid in the utilities sector?
Jefferies values NTPC and Power Grid based on their Price to Book value, considering the regulated nature of their businesses. The analysis indicates potential rerates of 17% and 32%, respectively.
What changes have occurred in ABB’s business model?
Post the sale of its power grids section in 2018–2019, ABB has shifted its focus exclusively to automation, with some exposure to robots.
How does the power demand in the country contribute to the rise in share prices?
The rising power demand in the country is a key driver behind the surge in share prices for L&T, NTPC, and Power Grid.
Conclusion
In conclusion, the stock market today presents a favorable landscape for L&T, NTPC, and Power Grid. Jefferies’ analysis sheds light on their potential for further re-rating, offering investors valuable insights for informed decision-making. As with any investment, it’s crucial to conduct thorough research and consider various factors before making investment decisions.
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