We like Tata Motors for the strong ongoing business cycle at JLR, improving Indian CV/PV demand, market leadership in Indian Electric 4W and improving margins across segments with accelerated balance-sheet deleveraging. At JLR, a strong product cycle, easing chip constraints should drive strong operating performance (healthy Order Book 185K units). JLR remains on track to deliver 400K vols in FY24 (24% YoY growth), FCF of £2B and nil net debt target in FY25 (current net debt £2.5B). In India, co has more than doubled its PV market share to 14% in 5 years and average monthly volumes have increased from ~15.5k in FY18 to ~45k units in FY23. Company is targeting double-digit EBITDA margin even in PV business (Q1FY24 5.3%). MHCV Industry outlook continues to remain promising (5-10% growth in FY24/25, Tata Motors has 42% market share in CVs). Tata Motors has been a pioneer in the Electric 4W space in India and currently commands ~84% (FY23) market share in the category, targeting 100k EV unit sales in FY24 (double of FY23). By FY25E, company’s EBITDA will be more than 2x of its FY23 EBITDA, EPS to rise to a new high, and auto balance sheet to turn net cash, while stock trades at PE of 11x on FY25e. (DVR shares will be converted to Ordinary Shares, further 4% accretive to EPS/valuations)

We recommend Bharat Forge on account of strong and visionary management team led by Baba Kalyani with focus on to de-risk business model and diversify its product offering like defence, EV, aerospace to reduce the cyclical nature of business. After hard work for many years, these new businesses made their position in the market and are ready to lead the company next leg of future growth. For example, in defence space, Bharat Forge is emerging as an important company in India and globally for its products like artillery guns etc. In FY23 defence revenue was Rs.300+ cr. which we believe increased to Rs.1400+ cr. by FY25E. Like, the defence, company is also gaining the similar traction in other segments also.

SKF India, a leading global bearings company, was recommended due to its over six-decade track record and market leadership in Bearings across Automotive, Industrial sectors and aftermarket. Its global parent company, AB SKF, is a market leader in the global bearings business. It is the only company in the world that supplies Tesla with Hybrid bearings.  Its clientele includes most of the major automotive firms such as Maruti, Hyundai, Tata, and Volkswagen, as well as reputable cement and steel companies for industrial bearings. The results were far superior to our expectations which comprised a revenue and PAT increase of 15% and 26%, respectively. India currently produces around $400 billion in manufacturing goods, a fraction of China's output. However, it is expected to grow at least 3-3.5 times by 2030. 

Gokaldas Exports, is a hold recommendation based on the view that it is a leading apparel manufacturer with a 36 million annual capacity and has seen a 17% revenue CAGR in FY18-23 and a 68% PAT CAGR in FY19-23. India currently exports approximately $4bn worth of apparel to the US market which expected to expand rapidly in the future, and the company's financials have seen a 24% YoY growth in revenue since initiation (FYE22), 32% YoY growth in EBITDA, and 37% YoY growth in PAT, outperforming expectations.The company is incurring a capex and has recently acquired Atraco, allowing it to access duty-free export destinations. The stock is trading at a PE of 23x/18x on FY24e/25e earnings, with proceeds from the capex expected to kick in from FY26. 

We expect the company to do Rs.4000 cr. EBITDA in FY26 (hence 3x EV/EBITDA) and almost debt free. Rs 3200 cr. capex done and more Rs.3900 cr. capex planned (to be completed by FY26E). Co is not only into steel but has added aluminium foil, stainless steel, and others to its portfolio. The game changer for Shyam can be the new stainless-steel business and its shift in focus towards the B2C channel. We believe that the company's fresh capital expenditure will increase its backward integration and new product segment additions such as ductile iron pipe, hot flat products, and parallel flange beams will provide the company with a fresh source of income in the coming year.

Triveni Engineering is a bet on undiscovered engineering business plus ethanol play. It is one of the leading sugar conglomerates with diversified businesses in sugar and ethanol, co-generation, power transmission, including industrial gears & gearboxes and defence and water treatment solutions. The company with ethanol capacity of 660KLPD and with 450KLPD capacity underway, is well poised to capitalize on the E20 ethanol blending program by EY25. It is also one of the most efficient companies in the sugar business with combined crushing capacity of 61,000MW and co-gen capacity of 105MW across its 6 plants. Its power transmission and water businesses have also showcased strong potential with a strong order book, propelling growth CAGR of 15% respectively over the last 5 years. Going forward, we expect EBITDA CAGR of 24% & PAT CAGR of 22% over FY23-25E. The stock currently trades at 12.5x FY25E P/E & 8.6x FY25E EV/EBITDA.

Ion Exchange is one of the most efficient end-to-end water solutions providers with capabilities around constructing the water treatment plant to its O&M to manufacture required water chemicals. Water is already a scarce commodity and opportunity size is not only huge but will keep getting bigger and bigger with time. Company currently has an order book of Rs 3430cr as of FY23 which is a Book to bill of 1.72x which shows growth visibility of almost 2years with an order bid pipeline of Rs 8125cr as of FY23. The company is coming with a new chemical capacity which is going to be commissioned in FY26 with an investment of Rs 400cr. India’s water and wastewater treatment market will likely reach $2.08 billion by 2025 from $1.31 billion in 2020, registering growth at a CAGR of 9%. At the same time, we expect ION Exchange to grow its revenue by a CARG of 20% and its EBITDA at a rate of 20-21% showing outperformance to the industry growth.

Recommendation of Craftsman was done with a view of it being a diversified engineering company with vertically integrated manufacturing capabilities. It operates in three business segments: Automotive Powertrain (52% of revenues), Aluminium Die Casting (25%), and Industrial and Engineering (23%). The company is expected to register a PAT CAGR of 41% over FY23-25e, driven by continued strength in the MHCV Segment, ramp-up operations in the aluminium castings segment, and manufacturing wave in India. The company's financials show a 43% increase in sales, 25% and 61% increase in EBITDA and PAT respectively over FY21-23.

We have recommended Sansera Engineering with a view of it being an engineering-led manufacturer of complex and critical precision engineered components across automotive and non-automotive sectors like Aerospace & Defense. Co has a track record of outperforming Auto Industry growth by +10% historically. It is having healthy order book of Rs. 1,700 cr (53% of order book is Tech Agnostic, EV + Non-Auto segment vs 22% of Revenue share currently from these segments). It expects 50% CAGR in Aerospace Segment, 40% growth in Exports and overall more than 20% CAGR with 20% RoCE going forward. Co is expected to deliver Revenue / PAT CAGR of 20% / 39% over FY23-25e.  Structurally, with ongoing diversification (towards Aerospace, Defense, EV Components), Sansera is set to get re-rated (currently at 17x on FY25e) in line with other auto ancillary majors and become a top quality market cap compounding company

ZFCV was recommended with a view of being the market leader in the domestic CV braking segment, with diversified exposure across OEMs, aftermarket, and exports. The company's content per vehicle is set to rise by 3x, and the parent company is focusing on ZF CV India as a key sourcing hub. The market size is expected to grow by 4x from current levels, with a value addition of around Euro 600/CV in India compared to 1600/unit in Europe. Margin growth was seen in EBITDA from 10% to 14% and rise in revenues and PAT by 35% and 85% respectively. 

We had recommended KPIT with a view that increasing electric vehicle investment by global auto companies (Top 15) would lead to increasing requirement of services of Auto ER&D players like KPIT who provide whole gambit of solutions such as ADAS, Connected device, EV Powertrains etc. Also, KPIT margins were at the lower range of 12%, which we expected to improve going ahead due to better utilization of resources & pick up in the orders inflows. We anticipated that margins would improve to near 20% which would lead to rerating of earnings multiple as it was trading at just 18x on FY23e basis which was significantly discount compared to peers such as Tata Elxsi and LTTS.

We recommended HAL with a view that increased GOI action towards indigenization and manufacturing in India presents HAL with a significant decadal growth runway, with deal pipelines (Helicopters, Aircraft, Engines) worth between $35-40 billion. With a leading ROE and net cash position, HAL's financials exceeded expectations, with revenue and PAT growing by 8% and 28% CAGR respectively.

We recommended ACE with the view, considering that it holds a significant market share in the cranes segment, with 60% market share in Pick and Carry and Tower cranes. The company is expected to maintain growth due to the government's focus on infrastructure investments in roads, metro, high-speed rail, water, renewable power, and airports. The company's investments in agricultural equipment, defense, and exports should mitigate cyclicity risk. The market size is $3.3 billion for cranes, $6.7 billion for construction equipment, and $2.2 billion for tractors.

KSB Ltd, a German multinational firm, manufactures Pumps & Vales for various industries we recommended as the company is a proxy play for water/energy/industrial capex recovery. New product introduction and focus on export and service business should boost earnings in the medium term. KSB is looking at an opportunity of Rs. 3,000 cr in coolant pump, secured by Rs 10 billion (2 orders). The company has registered revenue, EBITDA, and PAT growth of 23%/21%/25% over CY20-22.

Recommendation of Titagarh was based upon the fact that it is a leading freight wagon manufacturing company and the only company in India to be able to manufacture Stainless steel and Aluminium coaches for Metro, it had won the largest order for 24,177 freight wagons from the Indian railway in 2022, worth Rs 7,838cr. With a market size of 30,000cr, the company's financials have seen a 16% CAGR in revenue and a 78% growth in profitability over the same period.