Jefferies' New Stock Picks: SBI, JSW Steel Among 7 Buys

Introduction to Jefferies' Latest Recommendations

Global financial services firm Jefferies has updated its influential 'bottom-up ideas' list, introducing seven new Indian companies with 'buy' ratings. This curated list, which now comprises 23 stocks with 'buy' recommendations and eight with 'underperform' calls, has added State Bank of India Ltd., Star Health Insurance Ltd., Groww, Bharat Forge Ltd., JSW Steel Ltd., Eternal Ltd., and Max Healthcare Ltd. These additions signal the brokerage's confidence in their growth potential amidst the current market landscape.

A Closer Look at the New Entrants

Jefferies provided specific rationales for its new selections, highlighting strong fundamentals and favorable industry trends for each.

For State Bank of India (SBI), the brokerage anticipates robust loan growth, leveraging the bank's lower loan-to-deposit ratio and stable asset quality. Jefferies projects a 13% Compounded Annual Growth Rate (CAGR) in loans for SBI between FY26 and FY28, with core earnings expected to grow at a 12% CAGR. The firm also foresees a Return on Equity (RoE) of 15% by FY27. Reflecting this optimism, Jefferies has raised its target price for SBI to ₹1,300 from ₹1,140.

In the fintech space, Groww (parent company Billionbrains Garage Ventures) is expected to see a 29% revenue growth CAGR over FY26-28. This growth is anticipated to be driven by strong product velocity and the increasing value of client assets over time. Jefferies also predicts that operating leverage will improve Groww's adjusted EBITDA margin by 700 basis points, leading to a 36% earnings CAGR over the next three years. The brokerage has set a price target of ₹195 for the stock.

For Bharat Forge, the outlook is improving due to several factors. Jefferies notes that the US truck cycle appears to be bottoming out, truck demand in India is strengthening, and tariff issues between India and the US are easing. The company's continued traction in the defence sector also contributes to the positive view. While EPS growth moderated to a 12% CAGR over FY24-26, Jefferies sees it accelerating significantly to a 33% CAGR over the FY26-28 period.

Spotlight on JSW Steel: A Consensus 'Buy'

JSW Steel stands out as a key addition, with Jefferies reiterating a 'BUY' rating and a target price of ₹1,400. The brokerage's confidence is rooted in the company's aggressive capacity expansion. Having grown from 8 MTPA in FY10 to 34 MTPA in FY25, JSW Steel plans to reach 42 MTPA by September 2027 and 50 MTPA by FY31. Jefferies expects the company's EBITDA per tonne to expand from ₹8,500 in the December quarter to ₹14,000 by FY27-28, driven by a potential rebound in Asian steel spreads.

Other brokerage houses share this positive sentiment. Motilal Oswal identifies JSW Steel as its preferred large-cap play in the sector, citing its capacity-led growth, cost leadership, and increasing share of value-added products. They have set a target price of ₹1,360. Separately, HDFC Securities issued a technical 'buy' call, noting that the stock has broken out from a bullish chart pattern, with a short-term target of ₹1,260.

JSW Steel: Financial Health and Market Position

The company's financial metrics provide a solid foundation for these optimistic forecasts. With a market capitalization of approximately ₹3.1 lakh crore, JSW Steel is a dominant force in the industry. Below is a summary of its key financial data.

These figures, combined with its strategic growth initiatives, position JSW Steel favorably. The average one-year price target from analysts stands at ₹1,244.60, with forecasts ranging from a low of ₹939.30 to a high of ₹1,491.00, indicating a broad consensus on its fair valuation and growth prospects.

Broader Market Outlook and Strategic Growth

The constructive view on JSW Steel is part of a wider positive sentiment towards the Indian steel sector. Analysts believe that companies with strong balance sheets, clear growth visibility, and improving margins are well-positioned for success. JSW Steel's strategy aligns with this, as its strong operating cash flows are expected to fund ongoing capital expenditures without putting significant stress on its balance sheet.

The company's expansion is not just about increasing volume but also about enhancing operational efficiencies and securing raw materials, which are key drivers of its cost leadership. The potential for rising domestic steel prices, possibly supported by safeguard duties, further strengthens the outlook for margin recovery and profitability in the coming years.

Conclusion

Jefferies' addition of seven new stocks to its top ideas list provides investors with fresh insights into potential growth opportunities in the Indian market. The detailed analysis, particularly for companies like SBI, Groww, and JSW Steel, highlights strong underlying fundamentals and strategic initiatives poised to drive value. JSW Steel, in particular, emerges as a consensus pick among multiple brokerages, backed by its ambitious expansion plans and a favorable industry outlook. Investors will be closely watching these stocks as their growth stories unfold.