Zomato, Axis Bank, Bharti Airtel feature on Jefferies hotlist for next 5 years, With the US dollar clocking a CAGR of around 10-12 percent, the Indian equity market is likely to reach $10 trillion in market valuation by 2030, Jefferies noted

Brokerage firm Jefferies has shared a list of its top 11 picks with the potential to deliver returns at a compounded annual growth rate of 15-25 percent over the next five years. The stocks, ranging across sectors, were selected based on two major themes -  strong fundamentals and long-term plays.

With the US dollar clocking a CAGR of around 10-12 percent over the last 10 and 20 years, the Indian equity market is likely to reach $10 trillion in market valuation by 2030, Jefferies noted. The brokerage firm believes consistent and fast-growing domestic flows will complement FPI inflows to sustain Indian market performance, especially for stocks with strong fundamentals.

A revival in India's capex cycle, which has turned around from its FY20 bottom, should last more than five years as the housing and corporate capex cycle play out, Jefferies said. "The capex cycle theme drives several of our top picks (Ambuja, Axis, JSW Energy, L&T, Macrotech). Other themes to play include government manufacturing push (Amber), state-owned enterprise reforms (SBI), penetration stories (Max Health, Zomato), financialization of savings (Axis, SBI) and key consumer / bottom-of-pyramid ideas (Bharti, TVS)."

Let's take a look at the 11 stocks that made it to Jefferies's list of top picks.

Amber Enterprises: Jefferies touted Amber Enterprises as the key beneficiary of India's manufacturing growth narrative, particularly within the small and midcap space. The company's core competency in ACs and diversification into components, supported by the government's production-linked incentive (PLI) scheme, is projected to drive a CAGR of 36 percent in earnings from 2024 to 2030.

Ambuja Cements: As the second-largest cement producer in India, Ambuja Cements is expected to achieve strong operational performance compared to its peers. Factors contributing to the bullishness include the company's increased capacity, cost cutting, and investments in green power, which combined are expected to drive 19 percent EBITDA CAGR.

Axis Bank: Jefferies forecasts an earnings per share (EPS) CAGR of 18 percent for Axis Bank from 2024 to 2029. This growth trajectory is attributed to improvements in deposit franchises, ramp-ups in the digital and lending platforms, and the expansion of subsidiaries. The integration of Citibank India is also seen as a catalyst for cost and revenue synergies, while initiatives like hyper-personalization platforms and loans for small and rural enterprises are expected to drive loan growth. Jefferies also sees potential for valuation re-rating.

Bharti Airtel: Jefferies has a favorable opinion of Bharti Airtel due to its consistent market share gains and improving pricing environment, with room for growth in Average Revenue Per User (ARPU). The brokerage expects a 12 percent to 13 percent CAGR in India revenue or EBITDA from 2024 to 2030, driven by market share expansion and higher ARPU. The generation of consistent free cash flow is seen as a factor that could lead to a shift in valuation benchmarks towards free cash flow yields, Jefferies believes.

JSW Energy: Jefferies outlines three potential triggers for JSW Energy over the next 12-24 months, including increased visibility in renewable energy capacity, commissioning of a 700 MW merchant capacity during peak power demand, and progress on green hydrogen plants and energy storage batteries. The company's execution capabilities and prudent cash flow utilization are expected to maintain elevated multiples and create shareholder value in the medium term.

Larsen & Toubro: Jefferies identifies Larsen & Toubro (L&T) as a significant beneficiary of India's capital expenditure upswing, projecting a 25 percent EPS CAGR and an 18-20 percent return on equity (RoE). The potential for re-rating is also open given sustained EPS growth and shareholder-friendly capital allocation policies. However, risks include management's capital allocation decisions and government spending on infrastructure.

Macrotech Developers: According to Jefferies, Macrotech Developers stands to benefit from the current housing capex cycle and its substantial land bank in Mumbai's suburbs. Jefferies expects a 15-20 percent medium-term pre-sales CAGR driven by land value resets and expansion into new geographies.

Max Healthcare: Jefferies sees Max Healthcare as a potentially lucrative investment with sustained growth momentum in the hospital business. The brokerage expects a 20 percent average EBITDA growth rate from 2024-30, driven by new bed additions and efficient operations. However, the brokerage also sees some risks for the healthcare firm which include construction delays and overpriced acquisitions.

State Bank of India: Jefferies has an optimistic view of the State Bank of India's (SBI) prospects, citing its strong deposit base, digital offerings, and leadership in lending segments. Alongside, the ability to raise capital and potential valuation re-rating are viewed as growth drivers.

TVS Motor: Jefferies expects TVS Motor to benefit from the revival in Indian two-wheeler demand, narrowing profitability gaps with peers, and strong earnings growth prospects. However, the brokerage stands concerned over the company's investments in overseas entities with unclear strategies.

Zomato: Jefferies considers Zomato as a compelling food delivery investment with strong growth potential and profitability. EBITDA break-even for Blinkit and visible profit pool growth over the next five years are key upside triggers, with capital allocation strategies being a key factor to monitor.