Global investment bank Jefferies has initiated 'Buy' ratings for three prominent Indian companies: Varun Beverages Ltd (VBL), Welspun Living Ltd, and PB Fintech Ltd. The firm projects significant potential upsides ranging from 22% to 54% for these stocks, based on their latest analysis and target prices.
Welspun Living Ltd: Strong Performance and Resilient Margins
Jefferies noted a robust quarter for Welspun Living, with both revenue and Profit After Tax (PAT) exceeding its estimates by 2% and 10% respectively. Despite localized flooding in Vapi impacting revenue growth temporarily, the firm expects a reversal in coming quarters. Margins remained resilient at approximately 12% even amidst cotton inflation, thanks to strategic management.
The investment bank anticipates double-digit revenue growth to be supported by stable US tariffs, the India-UK Free Trade Agreement (FTA), and expansion in its Flooring and Pillows segments. Scale benefits are expected to offset cotton inflation, ensuring mid-teen margins over the medium term. Jefferies has set a target price of Rs 260 for Welspun Living, indicating a potential upside of 22%.
Varun Beverages Ltd (VBL): Fizzing with Growth Potential
For Varun Beverages, Jefferies highlighted strong volume growth, with India volumes increasing 23% year-on-year (YoY). International growth was reported to be even higher. While inflation, particularly in packaging, led to a slight margin miss, India's realization turned positive, and management maintains a confident outlook regarding competitive pressures.
Jefferies believes VBL is attractively valued at 35 times its calendar year 2027 Price-to-Earnings (PE) ratio. Despite slashing its target price to Rs 530 from an earlier Rs 615, the new target still suggests a 28% upside. The company plans aggressive distribution expansion in 2027, aiming to add 100,000 outlets annually. Significant capital expenditure of Rs 1,000 crore in India and $90 million internationally (primarily in Africa) is planned for 2027. The 'Sting' energy drink segment, which faced restrictions, is now showing signs of month-on-month recovery.
PB Fintech Ltd: High-Risk, High-Reward Opportunity
PB Fintech, the parent company of Policybazaar, is viewed by Jefferies as a high-risk, high-reward investment. The September quarter saw revenue grow by 35% YoY, surpassing estimates. However, adjusted EBITDA of Rs 220 crore, though up 39% YoY, missed expectations due to higher operating expenses.
The company has outlined strategies to mitigate regulatory risks, including boosting non-insurance revenue, improving productivity, and aligning costs with Net Present Values (NPVs). Jefferies acknowledged the risk of slower growth in the second half of the year as Goods and Services Tax (GST) tailwinds diminish. The firm has slightly cut its FY27 estimated PAT by 3% to account for increased operational costs. Based on a sum-of-the-parts (SOTP) valuation, Jefferies has assigned a target price of Rs 1,540, implying a substantial 54% upside potential.