Cement rules Moneycontrol list of 7 stocks with potential to double earnings in FY25 (2024)

Moneycontrol has found seven stocks from the Nifty 500 index that are likely to double earnings next year. These stocks are Shree Cement, Ceat, ACC, JK Cement, BEML, Motilal Oswal Financial and Birla Corp

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Seven stocks out of the Nifty 50 basket have the potential to double their earnings next year, a Moneycontrol study has found.

The shining seven includeShree Cement, CEAT, ACC, JK Cement, BEML, Motilal Oswal Financial and Birla Corp. The list is dominated by four cement stock, while the other three are from defence, brokerage and tyrebusinesses. Analysts expect these stocks to post strong earnings by 2025 amid capacity expansion and strong orders.

Shree Cement

Shree Cement is the first stock in Nifty 500 where the EPS is expected to surge over 100 percent by next year. Its trailing 12-month earnings per share stand at Rs 352, poised to reach Rs 704 in FY25, as per Bloomberg data. The stock gained 3.4percent in the last one year and surged 24 percent in the past year while doubling its bottomline.

Analysts are bullish on the cement major, citing its robust earnings, capex plans, and strong growth delivery. Nuvama Institutional Equities praised the company's cost leadership and efficient operations, while Morgan Stanley issued an 'equal weight' call on the stock with a target price of Rs 28,500. Shree Cement's improved volumes, operational efficiency, and anticipation of increased government spending for the 2024 elections contribute to its positive outlook, according to analysts.

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CEAT

The stock surged 72 percent in the last one year and gained an additional 8 percent so far in 2024. The Bloomberg data indicates a prospective doubling of its EPS from the current trailing 12-month EPS of Rs 46 per share to Rs 171 per share. The tyre manufacturer aims at capiptalising on the boom in passenger vehicle sales in India, anticipating increased demand in the replacement market. Managing Director and CEO Arnab Banerjee in a recent interview with PTI stated that the growth of four million cars translates into immediate replacement demand over the next two to three years.

CEAT is also set to enter the US passenger vehicles (PV) and truck and bus radial (TBR) tyre market in the first quarter of the upcoming fiscal year, aiming to make its international business a significant growth driver. In 2023, India's PV sales reached a record high of 41.08 lakh units, growing by 8.3 percent driven by SUVs, comprising nearly half of total dispatches from manufacturers to dealers.

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ACC

The ACC stock surged 38 percent inin last one year and added 15 percent so far in 2024. The Bloomberg data shows a trailing 12-month EPS of Rs 46 per share and an expected FY25 EPS of Rs 114 per share. A recent Motilal Oswal report highlights ACC's positive surprises in robust volume growth and improved profitability, attributed to cost-efficient initiatives. The commissioning of clinker and cement capacity in Madhya Pradesh is expected to drive future volume growth.

Analysts believe clarity on expansion plans and sustainability of the current cost structure could lead to a reevaluation in valuation and multiples.

JK Cement

The fourth stock on the list surged 66 percent in the past year and gained over 16 percent in January 2024. With a trailing 12-month EPS of Rs 55 per share and an expected FY25 EPS of Rs 133 per share, the company recently commissioned a 1.5-million-tonne grinding unit in Ujjain, Madhya Pradesh. Additionally, a 2-million-tonne capacity in Prayagraj, Uttar Pradesh, may commence by Q2FY25. JK Cement announced new growth projects with a Rs 2,850-crore capex, including clinker expansion in Panna (Madhya Pradesh), cement expansion in Panna, Hamirpur (Uttar Pradesh), and Prayagraj, and a 3 million tonnes greenfield grinding unit in Bihar.

Analysts note the positive impact of better demand, completion of ongoing projects, and the phased completion of newly announced projects, contributing to both near-term and long-term volume growth. Lower fuel prices and cost-saving measures are expected to enhance cost optimisation.

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BEML

BEML showed strong a run-up in the last one year, surging 174 percent and gaining over 35 percent so far in 2024. Its trailing 12-month EPS stands at Rs 38 per share and is likely to double its earnings with an expected FY25 EPS of Rs 113 per share. The company anticipates a 20 percent YoY revenue growth in FY24, driven by execution ramp-up in defence and aerospace and rail and metro segments, with both the segments projected to post a 30-40 percent CAGR over FY24-26, while mining and construction may record a 5-8 percent CAGR, according to its management.

The EBITDA margin is expected to rise by 200bp in FY24, with the aim to achieve margin levels of 12-14 percent in the next 3-4 years. The current order book at Rs 12,700 crore provides revenue visibility for the next three years, supported by ongoing projects in Mumbai and Bengaluru Metro, defence orders, and a strong inflow pipeline in rail, Metro and defence. Analysts express optimism about the growth prospects.

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Motilal Oswal Securities

The brokerage house recordeda 175percent surge in the past year and a 46 percent rise so far in 2024. The Bloomberg data shows a trailing 12-month EPS of Rs 63, which is expected to double to Rs 134 per share in FY25. Despite a QoQ decline in broking revenues in the December quarter due to lower volumes in the institutional business, the company's market share increased in both cash and F&O segments.

The AMC and wealth business demonstrated a scale-up with funds performing in the top quartiles. Diversification from the cyclical broking business is identified as a key growth driver. The company focuses on adding quality clients, resulting in continued growth in ARPU and a rising client base. Strategic measures include allocating dedicated RMs for improved penetration in the distribution business and leveraging data analytics for client understanding.

In the housing finance segment, the company onboarded 232 RMs in Q3 FY24, aiming to grow this count to 1,000 in FY24. In private wealth management, the RMs count increased from 182 in FY23 to 233 in Q3FY24, with a target of reaching 300 RMs by FY26. Although this expansion impacted the margin profile, the company expects to regain these margins in six to eight quarters. Active RM additions in tier II cities aim to tap into new investors residing outside major metropolitan areas.

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Birla Corp

The Birla Corp stock surged 75 percent in the past year and 12 percent so far in 2024. As per Bloomberg, its trailing 12-month EPS stands at Rs 5 per share, which is expected to rise to Rs 76 in FY25. The Mukutban plant in Maharashtra, operating at 40 percent utilisation after a year, is delivering improved EBITDA numbers.

Analysts note the gradual ramp-up at Mukutban and highlight the strategy of focusing on premium products in Maharashtra, anticipating profitable results as utilisation increases. The company is also initiating a grinding unit in Prayagraj (UP), eligible for 300 percent capital incentives. With Kundanganj incentives set to expire, the new plant is expected to compensate.

The nalysts foresee an acceleration in earnings momentum, predicting enhanced profitability with improved pricing and incentives accrual.

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