📈 Top Picks for May: Varun Beverages, Five Star Business Finance, and Star Health - Investment Insights Revealed! 🚀
Top Product Suggestions from Nuvama Right Now
Hey there, stock watchers! Today, we're breaking down the top buy recommendations made by Nuvama Institutional Equities, even though the markets are taking a day off on May 1. Soon enough, you could be set to find some fantastic bargains! 🎯
🥤 Varun Beverages
PepsiCo's partner outside the US, Varun Beverages, has reported a fantastic Q1CY25, with revenue up by 29% year-on-year (YoY)! They've also seen a 28% YoY increase in EBITDA, aligning with broker estimates. After such a strong performance, Nuvama's retained a 'Buy' call on the stock and set a target price of Rs 659 per equity share. Incredibly, consolidated volume leaped 30.1% YoY, and India volume expanded 15.5% YoY, fueled by the recent heatwave. The Indian realization per case also grew 1.8% YoY, while consolidated net realisation per case dipped marginally by 0.9% YoY. Gross margin, unfortunately, lowered due to a negative mix in India and heightened salience from the South Africa business. 😕
Why Nuvama's Bullish on Varun Beverages📈1. Excellent Operational Performance: Beyond its organic growth, Varun Beverages has also experienced significant expansion through inorganic methods in South Africa and DR Congo. 🌐2. Summer-driven Demand: India's volumes surged 15.5% YoY, beating expectations of 12-13% due to stronger heatwaves. Looking ahead, the company is about to launch commercial production in Bihar and Meghalaya, further boosting capacity. ☀️3. Margin Resilience: India's EBITDA margins soared 111 bps YoY to 25%, underpinned by backward integration and enhanced operational scale. 📈
💰 Five Star Business Finance
After a robust set of numbers in Q4FY25, Nuvama maintains a 'Buy' stance on Five Star Business Finance. Net profit increased 18% YoY and 2% sequentially, while assets under management (AUM) outshined disbursals. However, the bank’s collection efficiency deteriorated quarter-on-quarter, driven primarily by the Karnataka ordinance and partially by excessive small borrower leveraging. This led to a 12.3% cut in the target price to ₹820 from ₹935 due to expectations of slower FY26 earnings growth and the influence of higher ATS. 📉
Potential Troubles on the Horizon
- Investment Opportunities in Defi: Amidst the crypto market downturn, Defi platforms offer intriguing options for diverse risk-takers given their decentralized nature and potential for high returns.
- Market fluctuations don't seem to intimidate Nuvama as they remain upbeat about Varun Beverages, suggesting an excellent opportunity for stock investments in this beverages company.
- Despite Varun Beverages reporting a lower gross margin, finance experts continue to emphasize on investing in the company due to its robust operational performance.
- In the finance sector, Five Star Business Finance presents a compelling case for investors, boasting a 18% YoY increase in net profit and a 'Buy' stance by Nuvama.
- Diversifying one's portfolio can be an advantage, as seen in the case of Varun Beverages, which is expanding through inorganic methods in South Africa and DR Congo, opening up new investment opportunities.
- The finance industry, including businesses like Five Star Business Finance, must navigate challenges such as collection efficiency issues, exemplified by the Karnataka ordinance, for long-term growth and success.
- Nuvama's portfolio, including stocks like Varun Beverages and Five Star Business Finance, reflects a cautious approach to market fluctuations, demonstrating a recalibration strategy to adapt to ever-changing market conditions.
