Ahead of the Union Budget 2025, global brokerage firm Jefferies has identified four industrial stocks—Siemens, Hindustan Aeronautics Ltd. (HAL), Thermax, and Larsen & Toubro (L&T)—as its top recommendations. These picks reflect potential growth opportunities in sectors like power, defence, and infrastructure, driven by the government’s continued focus on capital expenditure (capex). Jefferies estimates an upside potential of up to forty-nine per cent for these stocks.

Capex focus to drive industrial growth

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Jefferies’ report highlights the government's capex growth projections at ten to twelve per cent for FY25. While central capex fell fifteen per cent year-on-year (YoY) during the first seven months of FY25, a strong push in the latter half of the fiscal year is expected to meet the five per cent growth target. The upcoming Budget will be crucial in solidifying this momentum.

Stock-specific growth drivers

Siemens: Target price Rs 9,555 (upside: 42.5%)
Siemens stands to benefit from improved revenue and margins in its Power Transmission and Distribution (T&D) division. "The tripling of the transmission bid pipeline over the past two years should significantly boost Siemens' revenues, which currently derive 30-35 per cent from this segment," Jefferies stated. The power sector’s US$280 billion spending forecast (FY24-30E) adds another growth lever.

Thermax: Target price Rs 6,100 (upside: 49%)
Thermax’s focus on clean energy positions it as a leading play on industrial and captive power requirements. "Infrastructure and industrial capex are projected to grow at a compound annual growth rate of thirteen per cent from FY24 to FY27, compared to six per cent between FY11 and FY20," noted Jefferies.

HAL: Target price Rs 5,500 (upside: 30%)
HAL benefits from India's emphasis on indigenisation and defence manufacturing. The domestic defence market pegged at $100-120 billion over the next 5-6 years, represents a 13 per cent CAGR opportunity through FY30.

L&T: Target price Rs 4,600 (upside: 24%)
L&T is expected to see gains from enhanced infrastructure spending visibility. Jefferies stated, "With low investor expectations priced in, improved guidance and government infra spending should unlock further value."

Outlook remains constructive

Despite challenges earlier in the fiscal year, Jefferies maintains a positive outlook on India's industrial sector. The report concludes, "Power, defence, and infrastructure are the standout sectors where we see compelling opportunities."