Brokerage Views: HCLTech Gets Divergent Ratings, UBS On Ramkrishna Forging And More
NDTV Profit tracks what brokerages are putting out on stocks and sectors. Here are all the top calls from analysts you need to know about on Tuesday.
(Source: Envato)
Brokerages have divergent calls on HCLTech Ltd. after it released its second-quarter financial results. While HSBC has 'hold' rating on the stock, Nomura and Nuvama are bullish. Factors influencing the ratings include guidance for the rest of the year and valuations compared to peers.
Reliance Industries Ltd., Dr. Reddy's Laboratories Ltd., Ramkrishna Forging Ltd., JSW Infrastructure Ltd. and Sunteck Realty Ltd. have also received calls.
NDTV Profit tracks what brokerages are putting out on stocks and sectors. Here are all the top calls from analysts you need to know about on Tuesday.
Brokerages On HCLTech
HSBC
Maintained 'hold' on HCLTech stock, with a target of Rs 1,700, a potential downside of 8.8% over the previous close.
The IT major reported a good quarter, beat on both topline and margins.
Deal wins were stable in the second quarter.
Valuations are now in line with Tata Consultancy Services Ltd. which further restricts near-term re-rating.
HCLT margins are lower than TCS, a smaller base may result in slightly better growth than the larger rival.
The second half of the year's implied guidance does not allude to acceleration.
Nomura
Maintained 'buy' on HCLTech stock, with a target of Rs 2,000, a potential upside of 7.2%.
The IT firm upgraded guidance and the ask rate to achieve guidance is 0-2% compound quarterly growth rate over the remaining two quarters.
This is conservative given strong seasonality in the product business in the December quarter.
Discretionary demand is unlikely to worsen further based on proprietary G2000 database.
Interest rate-cut cycle and a potential thaw in decision-making by US corporates post presidential elections could provide fillip to demand.
The stock trades at 23 times fiscal 2027 earnings per share estimate.
Morgan Stanley
Maintained 'equal-weight' on HCLTech stock, with a target of Rs 1,970, a potential upside of 5.6%.
Better-than-expected second quarter results and constructive comments on improving demand result in EPS upgrades.
Growth in software business surprised positively, although HCLT maintained its view on low to mid-single-digit growth in this business.
It believes upside to margins will be capped unless medium-term view on software revenue growth improves.
Despite no material uptick in order intake, growth can surprise positively as conversion of deal to revenue improves with more short cycle deals.
Consistent industry-leading revenue growth should keep premium multiples intact.
Improving order booking would be key for growth momentum to sustain in the next fiscal.
Citi
Maintained 'neutral' on HCLTech stock, with a target of Rs 1,815, a potential downside of 2.7%.
HCLT continues to deliver relatively well in a tough environment.
See limited absolute upside post 27% return so far this year.
Expect a modest and gradual recovery in IT services.
Forward-looking indicators still don’t look strong for HCLT.
Healthy second quarter follows a weak first one.
Expect cost pressures in coming quarters as utilisation peaks.
Nuvama
Maintained 'buy' on HCLTech stock, with a target of Rs 2,125, a potential upside of 8.8% over the previous close.
The company delivered strong broad-based growth across verticals in the second quarter.
HCLT has been, by far, the best performing stock in the large-cap IT space.
Sharp re-rating has been driven by higher growth than peers.
Rectification of its capital allocation policy and fundamentals shall sustain in the current year too.
The shares are currently trading at 26 times the FY26 price-to-earnings ratio – on a par with Infosys and TCS – versus historical discount of 15%–20%.
CLSA
Maintained 'hold' on HCLTech stock, with a target of Rs 1,696, a potential downside of 9%, due to stretched valuations.
Despite broad based growth, the company did not increase full year guidance materially stating uncertain macro.
HCLT now trading at par with TCS and Accenture for first time in history.
It expects HCLTech to grow faster than TCS, but should trade at discount to TCS due to lower margins.
Post third quarter, HCLT will be entering a seasonally weak growth period.
The company could experience multiple rerating as it saw in the past.
Jefferies
Maintained 'hold' rating with target price of Rs 1,770, a potential downside of 5%.
Second quarter operating performance beat estimates, with both services and product business surprising positively.
Management sees discretionary spending environment improving at the margin.
It expects HCLT to deliver growth of 5% YoY in constant currency basis this year, at upper end of guidance.
The stock is trading at 28 times its one-year forward which is above Infosys. Hence it sees limited scope for re-rating.
Nuvama On JSW Infrastructure
Initiated 'buy' with a target price of Rs 390, a potential upside of 22.2%.
The company is the second-largest port operator with 170 million metric tonnes per annum capacity.
It targets 400 mtpa capacity target by fiscal 2030, a 16% CAGR.
It posted 68% CAGR in third-party cargo on organic/inorganic expansion.
The brokerage expects revenue to grow by 19%, Ebitda by 16% and net profit at 15% over the next three years.
Brokerages On Reliance Industries
Morgan Stanley
Second quarter Ebitda was 2% below brokerage and street estimates.
Lower Ebitda due to energy and retail.
Digital vertical depreciation rose less expected despite 5G monetisation.
Growth recovery is two quarters away.
The management is focused on margin improvement, streamlining operations in consumer retail for next two quarters.
Citi
Maintained 'neutral' and reduced target price to Rs 2,900 from Rs 3,200 earlier, suggesting 8.9% upside to the previous close.
Second quarter performance marked by continued weakness in O2C segment.
Jio performance along expected lines due to tariff hike.
Consolidated Ebitda 2% below estimates.
Net profit 7% above estimates due to lower depreciation, higher other income.
Other disappointing data points: 18% sequential rise in capex and flat net debt.
Lowered Ebitda estimates by 4-5% and made cuts in O2C and retail estimates.
Nuvama
Second quarter Ebitda beat brokerage estimate by 1%.
O2C Ebitda down 24% YoY on lower fuel cracks, petchem deltas.
A rise of 24% YoY rise in data traffic now makes Jio the largest operator globally.
It sees RIL rapidly nearing its new energy vision rollout.
New energy rollout to unleash next leg of growth besides conventional businesses.
EPS estimates remains broadly unchanged.
Systematix
Second quarter Ebitda in-line with brokerage expectations, net profit beat estimates by 9%.
O2C and retail to see revival in the second half of the fiscal.
It expects average revenue per user in digital services to keep rising for next 2-3 quarters.
It forecast 9% CAGR in Ebitda and 10% rise in net profit during the next two years.
UBS On Ramkrishna Forging
Initiated a 'buy' call on the Ramkrishna Forging stock with a target price of Rs 1,500, implying a potential upside of 50%.
Revenue rose 10 times between fiscal 2024 and 2024, compared to domestic peers that saw 2-5 times growth.
The company may outperform peers as it evolves into complete assembly provider.
Capacity addition of 50% in next two years should drive growth.
Consensus has not priced in RKFL's execution track record.
Forecast EPS growth of 34% on a compounded annual basis in the next three years and see moderate re-rating scope.
Nuvama On Sunteck Realty
Maintained 'Buy' rating with target price of Rs 702, a 26.7% upside.
New-sales value shot up 33% yearly and 4% sequentially to Rs 520 crore in the September quarter.
Collections efficiency in the first half of the fiscal decreased to 59% compared to 64% in the same period last year.
Anticipate higher sales trajectory on sustained expansion of portfolio.
Focus on cash flows and low gearing should hold the company in good stead.
Morgan Stanley On Indian Cement Industry
Believe UltraTech Cement and Ambuja Cement are the best cement plays.
Underperformance of cement stocks over the past few months on weak demand and prices.
See green shoots of cement demand coming back.
Higher return of government projects and pick up in retail demand to drive demand growth.
Expect price hikes over net few months.
See limited risks to earnings forecast for fiscal 2026 and 2027.
Companies to see margin expansion due to cost improvement, operating leverage and not huge price hikes.
Investec On Dr Reddy's Laboratories
Rated 'buy' with target price of Rs 8,000, a potential upside of 20%.
Building long-term strategies, evolving its portfolio, management, and capabilities.
Focused on GLP-1 range, especially semaglutide with patent expiries in 2026.
DRRD has synthetic semaglutide API production, offering a competitive edge.
Aspire to be 2-3 times what it is today.
Committed to China market despite setbacks but unable to bid on tenders for 18 months.
Strong pipeline in areas with limited competition, including long-acting injectables and GLP-1s.
$2-2.5 billion available for strategic M&A but no rush to acquire; focusing on performance.
