NAVRATNA PICKS – 2025 | Equity deskInsights

HCL Technologies Ltd

HCL Technologies Ltd. is a global technology company delivering industry-leading capabilities centered around digital, engineering, cloud and AI, powered by a broad portfolio of technology services and products. The company caters to clients across major verticals, providing industry solutions for Financial Services, Manufacturing, Life Sciences and Healthcare, Technology and Services, Telecom and Media, Retails and Consumer Packaged Goods (CPG) and Public Services. The company generated revenue and net profit CAGR of 13% and 12% over the period of 3 years (FY21-24). Average 3-year ROE & ROCE is around 23% and 28% for FY 21-24 period. The company has a robust capital structure with a debt-to-equity ratio of 0.08.

The company has secured numerous deals across the US, Europe, Asia, and Africa in AI and GenAI platforms. The Total Contract Value (TCV) for Q2FY25 stands at $2.2 billion, with a strong mix of clients from various sectors including financial services, medical technology, biopharma, telecom, semiconductor, and power & energy distribution. Recently, the company acquired Zeenea, a Paris-based software firm specializing in data catalog and governance solutions, further enhancing its data and analytics business. Management is optimistic that GenAI will significantly boost revenue streams. The strategic acquisitions and expansion initiatives are expected to strengthen the company’s global market presence. We anticipate that HCL Technologies Ltd. will maintain its growth trajectory, supported by its diverse order wins and execution capabilities.

Risks:

• Forex Risk – The company has significant operations in foreign markets and hence is exposed to forex risk. Any unforeseen movement in the forex market can adversely affect the company.

Rainbow Childrens Medicare Ltd

Incorporated in 1998 and headquartered in Hyderabad, Rainbow Children’s Medicare Ltd. is a leading pediatric multi-speciality and perinatal care hospital chain in the country. The company is a comprehensive provider of pediatric and perinatal care services offering holistic healthcare solutions that cover the entire spectrum from fertility till conception, maternal care during pregnancy to foetal health, newborn through childhood care and gynecology services. The revenue and net profit CAGR of the company for the past 3 years is around 26% and 75% between FY21-FY24. The 3-year average ROE and ROCE for the company is around 22% each for the past 3 years. The company has a healthy capital structure with a debt-to-equity ratio of 0.57.

The company is expanding its capacity by adding new beds in existing facilities as well as setting up new facilities across multiple locations. With an aim to enhance retail experience within hospital facilities, the company is planning to launch “Butterfly Essentials,” a specialized retail store for women and children. Its operational strategy and expansion plan are aimed at capitalizing on significant opportunities in the maternity and pediatric sectors. The growth of its hospital network has driven revenue growth, and we expect the company to maintain this momentum. With its strong market position and futuristic business strategies, we are confident that the company will continue to grow alongside the vast potential in pediatric and maternity care.

Risks:

• Regulatory risk – Healthcare is a highly regulated industry, and changes in healthcare and associated policies can impact cash flows.

JSW Infrastructure Ltd

JSW Infrastructure Ltd. stands as the second-largest private port operator in India with a cargo handling capacity of 170 MTPA and a goal to enhance the capacity to 400 MTPA by 2030. The company has 10 port and terminals facilities strategically located at key locations along the East and West coasts of India along with multi-modal evacuation channels. The company’s financial performance is robust with a 3-year (FY21-24) revenue and net profit CAGR of 33% and net profit CAGR of 59% respectively, average 3-year ROE of 17% and ROCE of 15% backed by a healthy capital structure with debt-to-equity ratio of 0.56.

The company has secured multiple orders from both government and non-government entities, both domestically and internationally, including for railways and port operations, positioning it to meet its FY25 volume growth target of 10-12%. It has also acquired a 70.37% stake in Navkar Corporation Ltd., a cargo transit service provider. With significant progress toward its long-term objective of enhancing logistics and last-mile connectivity across India, the company has set a capex guidance of Rs. 13,000-14,000 crore for the next three years. We believe the company is strategically positioned to benefit from the growing Indian economy, substantial infrastructure development, and strong cargo growth potential.

Risks:

• Industry risk – A reduction in economic activity or slowdown in critical sectors may lead to decreased cargo movement, potentially impacting port utilization and revenue predictability.

Minda Corporation Ltd

Minda Corporation Ltd. is a leading auto-ancillary major catering to passenger and commercial vehicles, motorcycles, off-road vehicles and Tier 1 automobile manufacturers. With product portfolio spanning across Mechatronics, Electrical Distribution System, Interior Plastic Division, Drivers Information System etc., the company has presence in India as well as international markets such as Indonesia, Vietnam, Europe, Japan and Uzbekistan. The company has generated revenue and net profit CAGR of 25% and 35% over the period of 3 years (FY21-24). Average 3-year ROE & ROCE is around 15% each for FY21-24 period. The company has a robust capital structure with a debt-to-equity ratio of 0.25.

The company is making significant investments to expand its production capacity. In the first half of FY25, the total lifetime order book surpassed Rs.4,750 crore, and the number of patents exceeded 285, with 14 new patents filed during the period. Additionally, the company has entered into a technology license agreement with SANCO (China) to improve its wiring harness product for the electric vehicle (EV) market. To meet the increasing demand, the company is establishing four new facilities – two in diecasting, one in the instrument cluster division, and one in the wiring harness component division. By aligning with future trends and increasing production capabilities, we believe the company is positioning itself for long-term growth.

Risk:

• Socio-economic risk – Any socio-economic instability that could result in an increase in input costs such as raw material, freight costs, etc. might negatively impact the margins and profitability.

Oberoi Realty Ltd

Incorporated in 1998 and headquartered in Goregaon, Oberoi Realty Ltd. is focused on premium developments in residential, office space, retail, hospitality and social infrastructure projects. The company is one of the strongest brands in Mumbai Metropolitan Region (MMR). The company generated revenue and PAT CAGR of 30% and 34% over the period of 3 years (FY21-24). The average 3-year ROE & ROCE is at 14% each for FY21-24. The company has a strong balance sheet with a robust debt-to-equity ratio of 0.14.

The company has a robust pipeline of upcoming launches in key locations, including two towers in Goregaon, one in Borivali, and two in Thane (Kolshet and Pokhran). Construction is already underway, with work progressing on floors 10 to 15. In addition, the company is looking for opportunities to expand beyond the MMR region, particularly targeting Delhi NCR. It is expected to raise Rs.6,000 crore, which is anticipated to generate a Gross Development Value (GDV) of Rs.70,000-80,000 crore over the next few years. We believe the company will maintain its growth trajectory due to its strong market position, efficient execution, healthy cashflows, and a solid pipeline of upcoming projects, ensuring clear revenue visibility for the future.

Risk:

• Macro-economic conditions – Changes in macro-economic conditions such as high inflation, economic slowdown, high interest rates etc. could have an impact on the company turnover.

Doms Industries Ltd

Incorporated in 2006, DOMS Industries Ltd. is a stationery and art product company primarily engaged in designing, developing, manufacturing, and selling a wide range of these products under the flagship brand, DOMS. The products offered by the company include pencil and accessories, drawing, colouring and paper stationery, mathematical drawing instruments, marker pens etc. The company has generated a revenue and net profit CAGR of 56% and 190% over the period of 3 years (FY21-24). Average 3-year ROE & ROCE is around 24% and 25% for FY21-23 period. The company has a strong balance sheet with a robust debt-to-equity ratio of 0.23.

With 16 manufacturing facilities across 4 locations supported by a network of 11,500+ employees and 4,750+ distributors, the company sells its products across 50+ countries. The company has completed the acquisition of nearly 52% stake in Uniclan Healthcare, a producer of baby hygiene products. The company is also undertaking a 20% capacity expansion in mathematical instrument boxes, initiatives to improve the utilization of its third pen plant to maximum capacity of 1 million pens per day and a 20% increase in book manufacturing capacity. The company’s continued focus on launching new products and expansion into new product categories backed by robust distribution network are expected to be key growth drivers.

Risk:

• Raw material price volatility – Volatility in raw materials prices may affect the earnings and profit margins.

KPIT Technologies Ltd

Founded in 2018 and based in Pune, KPIT Technologies Ltd. is a leading software and system integration partner for the global mobility ecosystem. The company is a trusted collaborator for major automotive industry leaders, having established over 25 strategic partnerships with Original Equipment Manufacturers (OEMs) and Tier 1 suppliers to drive mobility transformation. The company has generated revenue and PAT CAGR of 34% and 61% over the period of 3 years (FY21-24). Average 3-year ROE & ROCE is around 27% and 31% for FY 21-24 period. The company has a robust capital structure with a debt-to-equity ratio of 0.14.

The company plans to boost profitability by securing more fixed-price projects. Management is also focusing on strategic partnerships and potential acquisitions to strengthen its market position. Leveraging its expertise in emerging technologies, along with deep client relationships and trusted partnerships, has led to significant deal wins. In addition to acquiring new deals from the existing clients, the company is in discussions with new clients from Europe and America to build long-term large engagements.

Risk

• Forex risk – The company has significant operations in foreign markets and hence is exposed to forex risk. Any unforeseen movement in the forex market can adversely affect the company.

Aurobindo Pharma Ltd

Incorporated in 1986 and headquartered in Hyderabad, Aurobindo Pharma Ltd. is an integrated global pharmaceutical company engaged in the development, manufacturing, and commercialization of a wide range of generic pharmaceuticals, branded specialty pharmaceuticals, and active pharmaceutical ingredients (APIs) worldwide. The company has generated revenue and PAT growth of 12% and 54% over the last twelve months (TTM). The average 3-year ROE & ROCE is around 10% and 12% FY21-24 period. The company has a robust capital structure with a debt-to-equity ratio of 0.27.

The company launched 14 products and received approval for 8 ANDAs during Q2FY25. It is actively expanding its capacities in China and across product segments like Penicillin G, 6-APA, and Granulation, which will boost operational efficiencies and help achieve growth objectives in the upcoming quarter. Penicillin G product facility is expected to break-even by Q4FY25 and start contributing positively from FY26 onwards. The company is targeting EBITDA margin of 21-22% in FY25. The management is confident in maintaining growth momentum, supported by increased volumes, new product launches and stable pricing dynamics.

Risk:

• Regulatory risk – Vulnerability to regulatory changes, especially scrutiny by agencies like USFDA might impact operations.

Nippon Life India Asset Management Ltd

Established in 1995, Nippon Life India Asset Management Ltd. is engaged in managing mutual funds including exchange traded funds (ETFs), managed accounts, including portfolio management services, alternative investment funds and pension funds; and offshore funds and advisory mandates. It is the 4th largest AMC based on Quarterly Average Assets Under Management (QAAUM). It is also ranked number 1 non-bank sponsored MF in India.

During Q2FY25 (YoY comparison), the company’s SIP folio increased from 71 million to 99 million, a 39% growth. SIP AUM increased by 59% YoY to Rs.13,817 crore from Rs.8,704 crore of corresponding quarter in the previous year. The company’s revenue increased by 44% to Rs.5,713 million, core operating profit increased by 57% to Rs.3,653 million and net profit increased by 47% to Rs.3,601 million.

Risk:

• Regulatory Risk – Any adverse change of regulations might adversely impact the business.

Note: Please note that this is not a recommendation and is intended only for educational purposes. So, kindly consult your financial advisor before investing.

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