Nuvama and Jefferies have expressed optimism over HDFC Bank Ltd., as foreign holding in the bank stood below the threshold mandated by MSCI. Citi has India consumer, retail and media and other sectors under its radar. Bernstein initiates coverage on Rural Electrification Corp. and Power Finance Corp. Jefferies reports on Indian brokerages and asset management companies.
NDTV Profit tracks what the brokerages are putting out on stocks and sectors. Here are all the top calls from analysts that you need to know about on Wednesday.
Nuvama On HDFC Bank
Foreign institutional investor holding for June quarter came in at 54.83%.
Current weight of HDFC Bank in MSCI index is 3.8%.
The stock's weightage could jump to 7.2%-7.5%.
Expect stock to gain momentum and cross Rs 1,900 until official announcement on Aug. 13.
Domestic funds bought because of reasonable valuation and should continue to hold.
Jefferies On HDFC Bank
Foreign holding came in below the MSCI's threshold to raise foreign inclusion factor.
Bank may be eligible for jump in index weight at next review in August.
This could be positive for near term.
In medium term, strong deposit growth and improving net interest margin security's should be key drivers.
Bernstein Initiates Coverage On REC, PFC
Firms see volumes of $125 million, but trade at 8-10 times its trailing price–earnings ratio.
Investors under-estimating intensity in power capex cycle.
Expect addition of more than 300 GW of power generation in next six years.
Power Finance Corp. and Rural Electrification Corp. lend to government entities or private renewables.
Low non-performing-asset risk as there is a lower chance of default in renewables.
Lower default chance on short execution cycle, back ended-capex, power purchase agreement backing.
Expect provisional reversal to continue in fiscal 2025.
See stocks as leverage power sector plays despite risks.
Counters have better return on equity, growth than power peers.
Citi on India Consumer, Retail and Media
There is a growing interest in India among emerging markets.
Investors are optimistic about improved demand and growth acceleration.
Investors are turning incrementally constructive on the consumer space after the recent election outcome.
Top buys include Hindustan Unilever Ltd., Godrej Consumer Products Ltd., Britannia Industries Ltd., Honasa Consumer Ltd., and Jubilant FoodWorks Ltd.
Top sellers include Colgate-Palmolive (India) Ltd., Dabur India Ltd., Asian Paints Ltd., Page Industries Ltd., and Bata India Ltd.
Investors in Asian Paints and Pidilite Industries Ltd. are cautious as competition intensifies.
Page Industries and Bata India investors are awaiting signs of a turnaround.
Hindustan Unilever Ltd., Dabur India Ltd. and HMN Emami Ltd. have the highest rural salience.
DMart, or Avenue Supermarts Ltd., shows risk from quick-commerce, margin, and store growth.
Investors perceive faster growth in the following companies, but there are concerns about their valuations:
Godrej Consumer Products' new active ingredient-based LV.
Tata Consumer Products Ltd.'s acquisitions and distribution changes.
Nestle India Ltd.'s pricing and mix led
Investors remain cautious on ITC due to overhangs from the upcoming union budget, normalised volume growth expectations, competitive intensity, and margin challenges.
Jefferies On India Brokers, Asset Managers And Exchanges
Capital market players may face divergent regulatory risks.
SEBI’s order to replace volumes based transaction with flat fees to impact discount brokers.
Zerodha, largest discount brokers, may levy fees now.
Regulatory tightening of futures and options can affect exchanges and clearing members.
Doesn’t see regulatory risks for asset management company's and wealth managers.
Prefers 360 One WAM Ltd., HDFC Asset Management Co. and KK Fincorp Ltd.
Motilal Oswal On Emami
Retains a ‘buy’ rating on the stock and a target price of Rs 850 apiece, implying a potential upside of 17% from the previous close.
Looking to neutralise seasonal fluctuations by expanding its non-seasonal portfolio.
The company’s seasonal portfolio is expected to perform well.
Improvement in volume delivery in fiscal 2025.
Growth mainly by volume, with a limited price hike (~2%) in two years.
Management is positive about the government's initiatives to drive rural income.
Management expects positive steps in the upcoming budget.
Domestic businesses can deliver a revenue compound annual growth rate in the high single digits during fiscal 2024–2026.
International business is expected to deliver healthy double-digit growth.
Revenue contribution from international business to increase to over 20% from 17–18% in two to three years.
With the softening of Ringgit Malaysia prices, gross margin is expected to expand in FY25.
Ebitda margin is expected to be in the range of 27-29%.
Citi On Jewellery
Jewellery continues to be of high interest.
Investors were cautious on Titan near-term growth.
Titan could face potential margin pressure amid the increasing competitive intensity and impact of lab-grown diamonds.
Top buy is Kalyan Jewellers India Ltd. as investors are comfortable on execution. But they do question timeline on further divestment of non-core assets.
Citi On Quick Service Restaurants
Underlying demand remains subdued implying risk to estimates.
Possibility of turnaround in second half of fiscal 2025 if consumer sentiments improve.
Top buys include Devyani International Ltd.
Citi Research on India Economics
Overall season monsoon deficiency comes down to 7%.
Severe heatwave has subsided but might have impacted crops.
Aggregate vegetable prices rise in June not significantly higher than seasonal trend.
Pulses production, arrival and prices remain a concern.
Trends in wheat crop are favourable.
Expect headline inflation to ease to 4.6% YoY in June vs 4.75% in May.
Citi On RBI Circular To Lenders On Disbursals
Time lag in sanction and disbursement were more prominent for home loans.
Aavas Financiers Ltd will be relatively more impacted, Aptus Value Housing Finance India Ltd. to marginal extent.
Lenders following online transfers may be relatively less impacted.
Disbursements or yields may be adversely impacted for concerned lenders.
Immediate-term disruption, doesn't change structural thesis.
RBI advised lenders to refund excess interest/other charges to customers.
Unsure if listed lenders have been advised.
Aavas Financiers Ltd.
Target price of Rs 2,200 apiece implies a potential upside of 18%.
Key risks include difficulty in tech integration project, lower growth, higher operating expense and lower return ratios.
Aptus Value Housing Finance India Ltd.
Target price of Rs 360 implies potential upside of 6.8%.
Key risks include senior management changes and profitability impact due to expansion beyond core states.
Aptus' customer segment is more vulnerable in a weak environment.
Upside risks include sustenance of net interest margin, high growth and low credit costs
CLSA on ICICI Lombard
Upgrade to 'outperform' rating with an increased price target of Rs 2,000 apiece implying a potential upside of 11%.
Earlier target price was Rs 1,760.
Motor insurance premiums up 31% YoY in 2MFY25 Vs industry rate of 15%.
Peers' motor third party loss ratio worsening is the key reason for ICICI Lombard's gains.
Premiumisation of cars, benefits from the Motor Vehicle Act could also be aiding motor book.
Raised overall premium growth estimate by only two percentage points in FY25.
Believe momentum in motor book could persist.
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