IIFL Securities lists IndiGo, NTPC, Bharti Airtel as top bets this Diwali

InterGlobe Aviation | CMP Rs. 2580 | TP Rs. 2960 | IndiGo saw a 21 percent rise in volumes in the first five months of FY24. Analysts predict a 15 percent growth for the current fiscal year. With a load factor of 86 percent in August, up from a seasonal low in July, the airline's domestic volume growth stands at 29 percent during April to July, resulting in a surge in market share to around 63.5 percent. The company has achieved a 30 percent on-year revenue growth on the back of a 30 percent spurt in passenger count, leading to an Ebitda margin of 30 percent YoY. IndiGo’s Q1FY24 earnings of Rs 31 billion surpassed the expected 11 percent level and made new annual profits highs. Limited competition arising from the delayed aircraft deliveries of its primary competitor until mid-CY2025 and industry consolidation, have positioned IndiGo for sustained profitability at 15x FY25EPS.

NTPC | CMP Rs. 238 | TP Rs. 271 | NTPC reported a strong performance in Q2FY24 with a 17 percent increase in standalone PAT and a 38 percent increase in consolidated PAT. This comes as the company displayed improvements in operational efficiency, positive outcomes in joint ventures, and a lowered tax rate. NTPC's plans to allocate 11.2GW in new thermal projects over the next 18 months come with its proactive investments in emission control equipment, promoting sustained growth. Despite some challenges in coal stocks at select plants, the overall outlook remains optimistic. With a forward-looking valuation at 11x P/E and 1.4x P/B on FY25, the stock presents an attractive opportunity for investors owing to its strategic position to benefit from the increasing thermal capacity awards, as per the report.

Bharti Airtel | CMP Rs. 932 | TP Rs. 1044 | Airtel achieved a 20 percent growth in revenue, a reduction of 160 basis points in SUC and a 13 percent increase in controllable opex. Resultantly, Bharti standalone + Hexacom’s EBITDA margins increased by 250 basis points. Despite a 13 percent increase in the average tower count, network opex has only risen in high-single digits. Bharti's capacity utilisation in 4G stands at 60-65 percent, and there is an expected capex increase to achieve a 3.5x the data capacity of 1QFY24, by the end of FY24. The implementation of the war-on-waste program caused a 5 percent reduction in energy cost per location in FY23. A decrease in capex-to-sales to 20 percent by FY26ii, driven by reduced capex, sustained ARPU growth, and RMS gains is expected. Analysts have set a valuation through the DCF method with a 10.3 percent Weighted Average Cost of Capital (WACC), and the Africa multiple remains unchanged at 7 times on an adjusted EV/Ebitda basis.

Bajaj Finance | CMP Rs. 7387 | TP Rs. 8800 | Bajaj Finance reported a 28 percent YoY profit growth and a 33 percent YoY surge in AUM, particularly in consumer B2B, SME, and commercial segments. Despite a slightly weaker 30 percent YoY net interest income (NII) growth, the company expects a correction in net slippages in H2FY24, attributing the QoQ increase to seasonality. Despite a 25 basis points increase in cost of funds (COF) in the H2, the company expects a minimal drag on ROA. Bajaj Finance is focused on maintaining a 30 percent AUM CAGR owing to its sector-leading profitability, with a 5 percent ROA and 23 percent ROE. The company's investments in new technologies, such as Generative AI, position it for non-linear growth with a 230 basis points lower cost-to-income ratio.

Cummins | CMP Rs. 1750 | TP Rs. 1992 | Cummins India has launched new electronic products for CPCB-IV+ ahead of peers, accompanied by a strategic 20-50 percent price increase. Despite softer gross margins on new products due to after-treatment costs, Cummins India sustains overall OPMs through 80 percent localisation, operating leverage, and in-group sourcing. Operating at full capacity, the company will increase volumes in H2FY24. Long-term growth expectations, foreseeing business expansion at 2x GDP, align with market trends and heightened consumer power sensitivity. Analysts anticipate an aggressive growth phase in the Indian PG market for the next 8-10 years, supported by infrastructural and industrial capex, positioning Cummins for growth. Despite varied market maturations, including a YoY growth in EU demand but a QoQ decline, flat trends in APAC and LatAm, and Africa emerging as the only market with both YoY and QoQ growth, the stock’s valued at 35x FY25 EPS.