Synopsis: Jefferies’ latest Buy calls include Hindustan Unilever, Fortis Healthcare, Sona BLW Precision Forgings and Bharat Forge. The brokerage sees up to 25% upside, supported by premiumisation, hospital expansion, improving margins and stronger auto-component earnings.
Jefferies is betting that some of the market’s next winners could come from very different corners of the economy. Among the key names are Hindustan Unilever and Fortis Healthcare. In the auto-component space, Jefferies prefers Sona BLW Precision Forgings and Bharat Forge.
The reasons behind the calls are different. For HUL, the focus is on premium products and better execution. For Fortis, it is hospital expansion and improving margins. In auto components, the brokerage sees stronger earnings growth than original equipment manufacturers.
Here is a closer look at the investment rationale behind Jefferies’ recommendations.
Jefferies on HUL: Betting on premiumisation
Jefferies has retained its ‘Buy’ rating on Hindustan Unilever with a target price of Rs 2,450. This implies an upside of around 25% from the current market price.
The brokerage believes HUL is changing the way it approaches growth. Instead of simply expanding its reach, the company is looking for faster growth from specific customer segments and categories.
Jefferies said, “HUL’s playbook for ‘New India’ is shifting from a broader reach to sharper, segment-led growth.”
The company expects premiumisation, new categories and wider distribution to account for a large part of incremental growth. HUL is also expanding its presence in rural markets, with more outlets being added each year.
Another part of the strategy is cost saving. Management is targeting around 500 basis points of savings over five years, with these savings expected to be reinvested in brands, media, pricing and distribution.
Artificial intelligence is also being used across marketing, planning and supply-chain operations. Jefferies expects these productivity initiatives to support margins over time.
The brokerage sees a medium-term EBITDA margin range of 22-24%. However, it has reduced its target price from Rs 2,850, mainly because of near-term margin pressure and a broader valuation correction across the fast-moving consumer goods sector.
Jefferies on Fortis Healthcare: Can operational growth outweigh audit concerns?
Jefferies has retained its ‘Buy’ rating on Fortis Healthcare with a target price of Rs 1,125. This indicates an upside of around 23% from the current market price.
The stock has been under focus after the Delhi High Court ordered a forensic audit into historical transactions connected with the company.
Jefferies believes the development is unlikely to materially affect day-to-day operations or the hospital chain’s expansion plans.
It said, “Investor update call reassured that the Delhi HC-ordered forensic audit is unlikely to disrupt Fortis’ operations, expansion plans or strategy.”
The brokerage also sees room for growth from brownfield expansion, which involves adding capacity at existing hospitals rather than building completely new facilities.
Occupancy and profitability are improving at some hospitals, while the company is also planning to add oncology services at facilities such as Jaipur and Faridabad.
Fortis aims to reach 25% EBITDA margins by FY28, according to management guidance.
Jefferies expects earnings growth to remain supported by higher occupancy, better profitability and expansion at existing hospitals. It also believes any temporary weakness caused by audit-related concerns could provide an opportunity for investors.
Jefferies on auto components: Sona BLW and Bharat Forge remain preferred picks
The auto-component segment is another area where Jefferies sees earnings momentum.
According to the brokerage, the 20 auto-component companies it tracks delivered 19% year-on-year growth in earnings before interest and tax in the June quarter.
That compares with just 10% EBIT growth for original equipment manufacturers.
The difference suggests component makers are doing a better job of converting revenue growth into operating profit, even as commodity costs remain elevated.
Jefferies also found that nine of the 20 companies saw more than 3% upgrades to their FY27 consensus earnings-per-share estimates during the September quarter.
The brokerage’s preferred names are Sona BLW Precision Forgings and Bharat Forge.
It said, “We prefer Sona BLW Precision Forgings and Bharat Forge.”
Both companies have also benefited from expanding business relationships and new opportunities beyond their traditional markets.
However, Jefferies pointed out that valuations for many auto-component companies are now above their long-term averages. This means earnings growth and execution will remain important for these stocks to justify their valuations.
What investors need to watch
Jefferies’ recommendations are based on the growth plans and earnings potential it sees across these companies.
For HUL, premiumisation, rural expansion, new categories and cost savings are the key drivers.
For Fortis Healthcare, improving occupancy, higher margins and brownfield expansion are expected to support earnings.
For Sona BLW Precision Forgings and Bharat Forge, the focus is on stronger EBIT growth, new business opportunities and earnings upgrades.
The broader message from Jefferies is that earnings growth could become increasingly important in determining which stocks outperform. However, investors also need to consider valuations, execution risks and company-specific developments before taking any investment decision.
The brokerage’s target prices and upside expectations reflect its own estimates and assumptions, and they may change as business conditions and market valuations evolve.
Happy investing.
Disclaimer: This article is based on research reports from one or more brokerage firms and is for informational purposes only. The views, target prices and recommendations expressed are those of the respective brokerage firms and do not reflect the official policy or position of Financial Express. This should not be construed as an offer, solicitation or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor before making any investment decisions.
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