Stocks To Buy: Jefferies picks five financial names that can grow substantially in three years

Stocks To Buy: Jefferies picks five financial names that can grow substantially in three years

Brokerage firm Jefferies has picked Groww, Paytm, PB Fintech, AU Small Finance Bank and Poonawalla Fincorp as the five stocks that have a market capit... Read More

1/ 7 Brokerage firm Jefferies has picked Groww, Paytm, PB Fintech, AU Small Finance Bank and Poonawalla Fincorp as the five stocks that have a market capitalization at, above or near $5 billion and can grow their operating profits at a Compounded Annual Growth Rate of 25% over the next three years with healthy revenue growth. 2/ 7 Jefferies has rated all the five stocks highlighted above as "buy" and anticipates them to deliver healthy investor returns as with growth compounding, investor returns will come despite higher valuations. Here's a look at these stocks individually. 3/ 7 Groww | The brokerage sees Billionbrains Garage Ventures, the parent company of Groww to hit a price target of ₹240 apiece, which implies an upside potential of 24% from current levels. Jefferies says Groww has several levers to drive a 30% Profit After Tax (PAT) CAGR over financial year 2026-2029, which include an 18% growth in the broking business led by client vintage and market share gains, new initiatives like MTF and wealth management and a 10 percentage point margin expansion. Groww is also adding US stocks in financial year 2027 to its platform which, Jefferies believes, could add another 5% to 9% to its financial year 2028 earnings. 4/ 7 Paytm | Jefferies has raised its price target on the stock to ₹2,100 from ₹1,600 earlier. The revised price target is nearly the same as its IPO price of ₹2,150. Paytm stands out on the monetization of client base in a near-zero MDR regime, which is now changing favourably, Jefferies said. Paytm's 49 million merchant base, coupled with strong loan-origination model should help the company deliver a 25% revenue CAGR over financial year 2026-2029 and this, along with operational synergies will aid a sharp rise in its EBITDA and profit, Jefferies said. The brokerage has raised Paytm's earnings estimates for financial year 2028-2029 by 20% and 25% to factor in a 25 basis points MDR on UPI. 5/ 7 PB Fintech | The brokerage has a price target of ₹2,050 on PB Fintech, which implies an upside potential of 15% from current levels. It expects PB Fintech to see a 35% CAGR in premiums over financial year 2026-2029. Strong operating leverage and growing renewal book should also aid the company's adjusted EBITDA to quadruple over the same timeframe, the brokerage said, adding that while risks exist from adverse commission regulations, levers exist in the form of combined operating model and claim support / sales initiatives. 6/ 7 AU Small Finance Bank | The brokerage has a target of ₹1,270 on the stock, which implies an upside potential of 21% from current levels. Jefferies said that the transition to a universal bank can lower funding costs, lift fees and strengthen the brand to aid growth. Over the next three years, Jefferies projects strong deposit growth to aid credit growth of 22% CAGR and the RoA to rise to 1.8% by financial year 2028. Leadership continuity will also ensure growth, profitability and aid valuation premiums, Jefferies added. 7/ 7 Poonawalla Fincorp | The brokerage sees the stock heading to levels of ₹560, which implies an upside potential of 27% from current levels. Poonawalla Fincorp should deliver an AUM CAGR of 34% over the next three years led by a scale up of its new products to 34% of the total AUM from 16% currently. Margins should also expand led by higher disbursement yields and faster growth in prime PL and gold loans. Credit costs should also ease with benign asset quality in unsecured segment. At 2.6 times book value, the stock is at a premium valuation to other NBFC peers, although the growth outlook is much stronger. Continue Reading