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Top 10 stock picks for 2025

1. Zomato
2. Polycab
3. ICICI Bank
4. Larsen & Toubro
5. Nippon Life AMC
6. Mankind Pharma
7. HCL Technologies
8. Lemon Tree Hotels
9. Macrotech Developers
10. Syrma SGS Technologies

ICICI Securities Company Research Report

ICICI Securities was incorporated in 1995 is a subsidiary of ICICI Bank Ltd. It is an integrated technology-based platform which operates www.icicidirect.com, a virtual financial supermarket, meeting the three need sets of its clients - investments, protection, and borrowing through its four lines of businesses - broking, distribution of financial products, wealth management, and investment banking. I-Sec serves customers ranging from the retail and institutional investors to corporates, high net-worth individuals, government. The company’s product portfolio is spread across retail and institutional broking, distribution of third-party products such as mutual funds, life insurance, fixed deposits, loans disbursements, and wealth management services, amongst others. As on 31st March 2024, the company serves ~1 cr clients. They have a NSE active client market share of 3.9% as on 30th September 2024. The company operates its business via three operating segmentsBroking & Commission - This business segment consists of equity, currency & derivative brokerage services, the distribution of thirdparty products, research, and fees from financial planning/education, interest on bank fixed deposits held by exchanges as margins for the brokerage business, interest on trade receivables from brokerage business, interest on margin funding, and income derived from the trading of securities by the broking and commission business. Advisory Services – This business segment consists of equity capital markets services and financial advisory services that cater to corporate clients, the government and financial sponsors. Investment & Trading – This business segment consists of treasury and proprietary trading activities. Income from this segment includes income derived from the trading of securities and interest received on investments for company’s own account. The board approved the delisting of the company via share swap deal, that would make ICICI Securities a wholly owned subsidiary of ICICI Bank subject to requisite approvals.

#SALES #GROWTH 5 Year CAGR 24.3%

In FY24, the company reported a growth in net sales of 47.8% to ₹5,049 cr. This was on account of ~50% growth in the broking income led by increase in retail ADTO both in derivative & cash market and higher block deals from institutional business. Interest income grew by 67% YoY, on account of increase in the MTF book and fixed deposits book. Income from services grew by 30% YoY, primarily on account of increase in issuer services & advisory fee income and income from distribution products. In H1 FY25, the company reported a growth in net sales of 53.3% to ₹3,347 cr. This was on account of ~49% growth in the broking income led by increase in retail ADTO both in derivative & cash market and higher block deals from institutional business. Interest income grew by 75% YoY, on account of increase in the MTF book and fixed deposits book.

#EBITDA #GROWTH 5 Year CAGR 33.6%

In FY24, EBITDA was ₹3,371 cr, an increase of 60.3% compared to FY23. This was aided by an increase in revenue. However, operating expenses increased by 36% in line with increase in business volumes. During H1 FY25, EBITDA increased by 66.7% on a YoY basis and stood at ₹2,303 cr, due to operating leverage benefits.

#PAT #GROWTH 5 Year CAGR 28.2%

In FY24, PAT was at ₹1,695 cr, i.e., a growth of 52% as compared to FY23. There was a significant increase in finance cost due to rise in cost of borrowings and the company consciously did not pass the rate hike completely in H1 FY24. During H1 FY25, the PAT increased by 52% YoY and stood at ₹1,056 cr. There was a significant increase in finance cost primarily due to increased borrowing to fund MTF and increase in borrowing cost on account of increased interest rate.

#EBITDA #MARGIN

EBITDA margin for FY24 improved to ~66.8%. During H1 FY25, EBITDA margin improved by 552 bps and stood at 68.8%. The company continues to enjoy a healthy EBITDA margin due to high degree of operating leverage.

#PAT #MARGIN

PAT margin for FY24 stood at 33.6%, an improvement by 88 bps YoY. During H1 FY25, PAT margin contracted by 26 bps and stood at 31.6%.

#COMPANY #POTENTIAL

• The domestic broking industry’s revenue registered a CAGR of ~10.5% between FY15-20 and reached ₹22,500 crore, on account of a ~34% increase in turnover in equity markets during the same period. In the next five fiscals, the industry is expected to grow at a CAGR of ~11%-12%. (CRISIL) • The industry is expected to see strong growth going ahead, after facing difficulties on account of pressure on yields and changing regulatory landscape. The growth will mostly be due to increased scalability and reach of players to untapped markets, especially lower tiered cities, leveraging their highly agile digital models. • This will be adequately supported by the growing turnover levels across the equity derivatives and cash segments. These segments are expected to cumulatively grow at a 23-25% CAGR upto FY25. This growth will be driven mainly by the higher investor awareness, increased retail interest across market segments, easier and faster means to access the markets and continuing FII inflows. • India’s wealth management industry (only of banks and broking companies offering such services) was ₹17.6 lakh crore in FY20. It is projected to grow at 11-13% CAGR to ₹31 lakh crore by FY25, supported by a growing population of affluent individuals, increasing shift from physical assets to financial assets and increasing complexity of assets amid rising competition. (CRISIL) • The total life insurance premium is expected to grow at 11%-13% CAGR during FY20 to FY25, from ₹5,68,400 cr to ₹9,75,000-10,25,000 crore. An improving economy, post the low growth in FY21 owing to the pandemic, increase in financial savings, and growing awareness of insurance would be the key catalysts.

#MANAGEMENT #OUTLOOK

• The management would continue to reduce the cyclicality component which is brought about by cash broking and capital market business. This would be done through diversification by generating meaningful revenue from different sources, going forward. • The company would also look for cost optimization measures to minimize the impact on the profits, going forward. • They would focus on wealth management, derivatives, insurance, loans as their key levers for growth, going forward. • They also guided capex of ₹100 cr in the next 3-4 quarters, towards technology spend. • In the wealth management business, they would be expanding their geographical presence and strengthening their RM footprint. • The company has tied up with Tata Capital for LAS and personal loans. • The guidelines regarding upstreaming of client funds would not have any impact on the company as they don’t do bank guarantee. • With respect to delisting, the company is waiting for the approval from exchanges which is the first step for the process of delisting post which the company would be taking other approvals. They anticipate the entire process to be completed in next 1-2 quarters.

ICICI Securities Limited ISEC 740-840
Expected level 1000
Support 690

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Tata Elxsi Company Research Report

Tata Elxsi was founded in 1989 to develop and promote electronic, embedded systems and software applications. The mission was to accelerate the adoption of advanced technologies and foster innovation in the rapidly evolving IT market. Tata Elxsi is currently one of the world’s foremost providers of design and technology services for industries such as Automotive, Broadcast, Communications, Healthcare, and Transportation. The company operates in 2 segments: Software Development & Services (SDS) and System Integration & Support (SIS). The Software Development & Services segment is further sub-divided into Embedded Product Design (EPD) and Industrial Design & Visualization (IDV) division. The EPD division provides technology consulting, new product design, development, and testing services for Transportation, Media, Broadcast & Communication and Healthcare sectors. IDV services span across consumer research and strategy, branding and graphics, product design, service design, user experience design, transportation design, 3D-prototyping, visualization and manufacturing support. The System Integration & Support segment provides professional services for cloud and infrastructure management, Virtual Reality (VR), 3D Printing and Robotics. From Q4 FY24 onwards, the company would only verticalize SDS & SIS. Tata Elxsi works with leading OEMs (original equipment manufacturer) and suppliers in the automotive and transportation industries for R&D, design and product engineering services from architecture to launch and beyond. It is engaged with broadcasters & operators to create solutions for smarter living, engaged entertainment and a digital future driven by IoT, analytics and artificial intelligence. At the device level, it has powered the next generation voice-based user interfaces and integration across platforms including Android, iOS, Web as well as Android TVs. It also works with leading telecom operators in their digital and network transformation journeys, supporting integration, workflow automation and roll-out of new services. In the Healthcare segment, it designs next-generation products in critical care, patient monitoring, and drug delivery. It is working on cloud-based platforms that help consolidate and provide valuable data for analytics on the digital side.

#SALES #GROWTH 5 Year CAGR 17.3%

In FY24, revenue stood at ₹3,552 cr, up by 13%. In cc terms, revenue grew by 9.6%. Growth in transportation was driven by overall uptick in SDV (software defined vehicle) demand despite deal rampdown delays, in healthcare, demand for new product engineering led to modest growth. However, media & communication witnessed a flattish growth due to sector headwinds as well as one-time impact of a client ramp down on account of its merger. In H1 FY25, revenue stood at ₹1,882 cr, up by 9% YoY. In cc terms, revenue increased by ~7% YoY. Continued traction in design, software & digital technologies led to robust revenue performance, led by the Transport vertical backed by growth in SDV & OEM business and large deals. Communications continued to be down on account of weak macro while healthcare was down due to delay in renewal of certain projects. Region wise, growth was broad based except US due to communications, majorly led by India & Japan.

#EBITDA #GROWTH 5 Year CAGR 20.3%

The company reported EBITDA of ₹1,046 cr during FY24, a growth of 9%. Employee costs were up by 20% while other expenses were up by 1%. Continued employee additions along with higher investment on technology infrastructure led to higher expenses. However, sustained revenue growth along with optimized cost of sales aided profitability. In H1 FY25, EBITDA stood at ~₹519 cr, higher by ~1% YoY. Overall, operational costs were higher by 12% YoY, majorly due to other expenses increase by 27% YoY and employee cost rise of 10% YoY. Other expenses were higher due to an exceptional cost of ~₹20 cr related to contribution to ‘Progressive Electoral Trust’ in Q1 FY25.

#PAT #GROWTH 5 Year CAGR 22.3%

In FY24, PAT was up by 5% to ₹792 cr. Finance costs and depreciation expenses were higher by 27% and 22%, respectively, majorly due to higher lease liabilities. Other income was higher by 65%, out of which forex gain increase was 41%. Higher revenue growth coupled with other efficiencies led to a modest PAT growth. In H1 FY25, PAT stood at ₹414 cr, up by 6% YoY. Finance costs and depreciation were higher by 4% and 17% respectively on a YoY basis. Additionally, tax expenses were higher by 12% as one of their facilities was out of the SEZ unit leading to higher tax rate, slightly offset by tax credits of ₹19 cr. Other income was higher by 76% YoY leading to sustained profitability, due to UK R&D credits of ~₹14 cr. Additionally, interest on certain tax refund orders amounting to ₹14 cr also led to higher other income.

#PAT #GROWTH 5 Year CAGR 22.3%

In FY24, PAT was up by 5% to ₹792 cr. Finance costs and depreciation expenses were higher by 27% and 22%, respectively, majorly due to higher lease liabilities. Other income was higher by 65%, out of which forex gain increase was 41%. Higher revenue growth coupled with other efficiencies led to a modest PAT growth. In H1 FY25, PAT stood at ₹414 cr, up by 6% YoY. Finance costs and depreciation were higher by 4% and 17% respectively on a YoY basis. Additionally, tax expenses were higher by 12% as one of their facilities was out of the SEZ unit leading to higher tax rate, slightly offset by tax credits of ₹19 cr. Other income was higher by 76% YoY leading to sustained profitability, due to UK R&D credits of ~₹14 cr. Additionally, interest on certain tax refund orders amounting to ₹14 cr also led to higher other income.

#EBITDA #MARGIN

EBITDA margin in FY24 was 29.5% as compared to 30.6% in FY23. Cross currency headwinds led to impact of 30 bps on the margins, higher investment towards workforce impacted margins by 80 bps and 10 bps impact due to other headwinds. These were marginally offset by 10 bps of optimised cost of sales. The margin in H1 FY25 was 27.6% as compared to 29.7% in H1 FY24. Margins have been lower despite reduced onsite presence, operational efficiency and other positive factors due to salary increments, oneoffs and higher cost of tools & hardware on account of a large deal ramp up.

#PAT #MARGIN

The margin was 22.3% as compared to 24% in FY23. Lower margins were due to the impact of higher costs and higher tax expenses on the back of the SEZ benefits being lapsed. However, modest revenue growth as well as higher forex gain helped sustain margins at the average level. The PAT margin was ~22% in H1 FY25, down by 47 bps YoY. Modest profit growth on account of higher costs along with slower albeit stable revenue growth have led to a contraction in margins.

#COMPANY #POTENTIAL

• Geopolitical risks and foreign exchange rate volatility, coupled with some slowdown in key industries such as automobiles, continue to present challenges for growth in the sector. However, technology and digital spend by customers across verticals are set to increase, providing opportunities for service companies to pivot themselves and engage with customers. • According to a report published by Deloitte, the global demand for new electric vehicles (EVs) is expected to grow from 2.5 million units in CY20 to 31.1 million by CY30. It is expected that going forward, growth in passenger vehicles would be primarily contributed by EV sales. With an expectation of gradual shift to EV in the coming years, the adoption of automated driving/ advanced driver assistance systems, in-car infotainment systems and other related technologies would also witness strong growth. ~73% of the overall spend. • According to NASSCOM, revenue from ER&D in India is expected to be $41 billion in 2023, aided by a steady increase in digital ER&D spend. And in 2022-23, Automotive, Telecom and Medical Devices emerged as the top sectors in terms of deals. Tata Elxsi provides Design-Led ER&D services in these key verticals of Transportation, Media & Communications and Healthcare & Medical Devices. • The global automotive ER&D spend stood at $180 billion (~₹14.8 lakh cr) as of 2022. It is expected to grow by a CAGR of 7% by 2026 to reach $238 billion (₹19.6 lakh cr). The top 20 ER&D spenders like Volkswagen, General Motors, Toyota, etc account for • In terms of geography for the automotive ER&D spend, Europe has the highest market share (~49%), followed by APAC (38%) and North America (13%) as of 2022. The outsourced automotive ER&D spend market stood at $18-$20 billion during the same period and is expected to grow by a CAGR of ~11% to reach $27-$29 billion by 2026.

After the spurt in streaming and online media market during the pandemic, year 2022 witnessed a decline in the number of subscribers and overall profitability of service providers. The global digital media production software market was $11.4 billion in 2021 and is expected to grow by a CAGR of 13% by 2031 to reach $36 billion. • On the communication side, according to Grand View Research, the global telecom services market was valued at $1,805 Billion in 2022 and is expected to expand to $2,874 Billion by 2030 at a compound annual growth rate (CAGR) of 6.2%. The advent of 5G and its increasing footprint across the globe is expected to drive growth in this market. 5G captures 6.5% of the total subscribers globally (~8.1 billion subscribers) and it is expected that by 2025, 25% of global subscribers would be on 5G. Telecom players would invest $527 billion between 2022 and 2025 on 5G. • Post-pandemic, global healthcare has displayed a pressing need to digitize, with digital healthcare and diagnostics emerging as key growth areas for the future. Digital healthcare helps market players and providers in cost control, quick expansion in new markets, derive technology and business benefits of connected-care use cases, and integrate new technologies into platforms to help with real-time diagnosis and consulting. With the advent of Artificial Intelligence (AI) and the prospect of its proliferation in the healthcare market, the possibilities to leverage data and image analysis using AI have increased manifold. According to Grand View Research, the global digital health market size was valued at $211 Billion in 2022 and is projected to expand at a compound annual growth rate (CAGR) of 18.6% from 2023 to 2030. This reflects the market potential and opportunity for all market players and healthcare providers to leverage design, innovation and emerging technologies like AI to address the growing demand for preventive diagnostics and healthcare across the globe.

#COMPANY #OUTLOOK

• For FY25, the company remains hopeful of double-digit cc revenue growth on account of stable demand environment, operational efficiency, continued confidence in the design-led engineering capabilities, strategic relationship with key clients, qualitative change in revenues towards OEMs and SDV programs, entries into new operators and marquee healthcare logos, strong deal pipeline and leveraging on opportunities. • Margins would grow due to higher utilization and other levers at ~28%-29%. • Moving towards Q3 FY25, they are optimistic of a healthy deal pipeline, continued growth in the transportation business, deal wins and recovery in other key verticals. • It would continue to hire freshers and laterals. For FY25, ~1,500-2,000 freshers would be hired depending upon the demand scenario while the lateral hiring would completely be on a need basis. • Going ahead, ~25% of its overall workforce would be AI ready through specialized programs by Q3 FY25. • The global companies cutting their EV targets would not impact company’s growth in the near term. They have several bids in pipeline as well as several deals to execute which gives growth visibility for a healthy H2 FY25. • The Media vertical has bottomed out and the growth would revive from Q3 FY25 onwards. They are in talks with several companies for deal closures. • The company expects transportation vertical to be a major growth driver for the company in FY25, followed by industrial design business. It foresees a lot more traction in the OEM segment v/s Tier-1 with a healthy pipeline, enabling growth for the company in the upcoming quarters.
They are optimistic regarding the Healthcare vertical going ahead on the back of AI led operations and new capabilities. Their aim is to broaden customer engagements. The headwind from the large customer would stabilize in H2 FY25. • The focus would be on Top 20 customer growth for a longer-term growth perspective. • The tax rate would be in similar levels of ~26%-27% for FY25.