Stocks to buy: Helped by strong capital expenditure by corporations and households, which together form private capex, global brokerage firm Jefferies has recommended six stocks to buy, belonging to sectors like power, ports and cement.
While the government capex (forming 13% of total) growth has slowed, private capex continues to be robust, with household capex growing at the fastest rate with a March 2021-March 2024 CAGR of 22%, showing the revival of the housing cycle. Corporate capex increased 18% CAGR while government capex grew at a more moderate 16% CAGR. Private and government corporations form corporate capex, while central and state budget allocations make up government capex.
RBI data on private projects approved by banks has risen by a 20% CAGR over FY20-24, and corporate balance sheets remain strong, further driving the optimistic outlook, said Jefferies.
Against this backdrop, road infrastructure capex may witness some moderation, as reflected in the FY26 budget allocation for roads, along the trends see in FY25. Whereas power, steel, cement, ports and aviation sectors could see strong investments.
Who’s leading the capex growth?
According to Jefferies, power companies are set to expand their capacity significantly, driven by rising demand, with power capex expected to grow at 19% CAGR from FY24-30E. The cement and steel sectors have also announced substantial capacity additions, with steel targeting 9mt per year over FY25-27E (vs. 4mt per year over FY20-24) and cement aiming for 43mt per year over FY25-27E (vs. 27mt per year over FY20-FY24).
“Ports are expected to increase capacity at a CAGR of 6% from FY24 to FY30, with private players contributing 50% of the additional capacity. In the aviation sector, two new private airports near Mumbai and Delhi are on the verge of inauguration,” said Jefferies, as these developments underscore the capex momentum anticipated in the coming years.
Stocks to buy as capex plays
As a result, within capex verticals, Jefferies remains most sanguine on power sector. Within this space, JSW Energy, Coal India and Siemens are its preferred power sector plays. Other preferred plays are Adani Ports, Kaynes Technologies and Ultratech Cement, it added.
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