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Jefferies

Articles By Jefferies

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HDFC Life Rating: Buy-Rebound in premiums was impressive

Recovery was led by Par business; EPS estimates up given better trajectory on premiums; ‘Buy’ rating retained with TP of Rs 760

We raise VNB estimates and see 17% CAGR in VNB over FY20-23 with 18% FY22 ROEV.

Retain ‘buy’ on Colgate with price target of Rs 1,700

Colgate's GM & Ebitda margins climbed to all-time highs, contributing most to the 2QFY21 earnings beat.

HDFC Bank Rating ‘Buy’; a healthy performance in the quarter

Key positive was collection of 97% of Sept dues; EPS up to factor in better asset quality and retail revival; TP raised to Rs 1,450

Analyst Corner: Retain ‘buy’ on Hindustan Unilever with PT at Rs 2,650

While the company has been able to offset some part of revenue pressure due to strong growth in hygiene portfolio, the impact has been higher on margins.

We estimate that discretionary portfolio contributes 20% to company revenues but given the superior margins, contributes nearly 30% to overall company profits.

Motherson Sumi Rating ‘hold’; restructuring exercise has promise

Merger with SAMIL will enhance potential for global growth; TP up to Rs 120 from Rs 105

TCS Rating buy; Quarter results saw a beat on all counts

Recovery was broad-based; deal TCV, up 25% q-o-q, was very strong; mgmt commentary’s positive; ‘Buy’ retained

Profit beat was driven by both Ebit beat as well as higher other income.

Autos & auto parts: September wholesales a cause for optimism

PVs up 28-30% y-o-y; 2Ws, 11-13%; tractors, 15-17%; and M&HCVs fell 16-20%; numbers boost Q2 prospects

The sharp recovery in wholesales in recent months has also set the stage for a turnaround in performance for auto companies in Q2.

Insurance: Retail health the driver for general sector

Claims are manageable with Covid-19 rise offset by lower normal costs; ICICI Lombard to be key beneficiary of trend

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Finolex Cables Rating’ buy’; company priming for next phase of growth

B/S is strong; the focus on margin-accretive electrical cables a positive; valuation’s inexpensive; ‘Buy’ retained

Equity Strategy: Activity at 90%+ of pre-crisis level

Improvement in 1H Sept was broad-based; urban indicators up consistently; economy holding up well

Broad based indicators such as toll collections, rail and road freight are now consistently higher y-o-y.

ICICI Lombard rating: Buy — Poised to tap industry’s growth prospects

Pick-up in motor segment is better than expected; health can be key growth driver; coverage assumed with Buy and TP of Rs 1,570

IndusInd Bank rating: Buy — The focus on deposits will aid re-rating

FY20 AR shows slippages were high; EPS upgraded to factor in capital raise; ‘Buy’ maintained with TP of Rs 760

Analyst Corner: Potential privatisation can be additional upside for Concor

Concor's volume spurt has been driven by shift to rail from road. Rail is more cost-efficient than road over 330 km at current fuel prices.

FY21 profits are impacted due to the LLF issue, but we expect a gradual normalisation of EBITDA/TEU by FY25E.

Analyst Corner: Initiate ‘Buy’ on Crompton, product mix to aid growth

Further, secular industry opportunity aided by demand traction from unbranded segment, higher penetration and up-trading, augurs well for Crompton’s long-term prospects.

Crompton's four-pronged strategy, product development, new launches — ~44% of sales emanate from new products.

Emphasis on digital likely to keep spending on IT services robust over the next five years

Recovery is expected from FY22; despite premium valuations, further re-rating possible; Infosys is top pick.

HDFC Bank rating: Buy — New leadership looks to double market share

Quality of moratorium loans holding up, limiting risk of slippages; retail is expected to revive from Q3FY21; ‘Buy’ maintained

Management believes market share gains from PSU (60%+ of sector ) to private banks will continue and offers scope to double share in credit from 7-8% now.

Retain ‘buy’ on Eicher Motors with target price of Rs 25,000

Royal Enfield's 1Q volumes fell 69% y-o-y while Ebitda came in at just Rs 12 million as the Covid-related lockdown took a big toll on operations.

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Analyst Corner: ‘Buy’ on Ashok Leyland with price target of Rs 75

Stock is trading at 2.4x FY22E PB, which is in-line with long-term average and attractive in context of an impending up-cycle; past peaks were 5.7x/2.7x/3.7x in 2018/2010/2006.

ASPs rose 13% QoQ led by the cost push for BS6 emission norms.

Analyst Corner: Maintain ‘buy’ on Voltas with target price at Rs 687

Company has embarked on cost reduction with fixed costs in other expenses at 3.9% of sales in FY20 vs 5.1% in FY17 and 4.7% y-o-y.

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Kotak Mahindra Bank rating: Buy — Conservative lending in the face of odds

Fall in moratorium loans encouraging; while FY21e earnings may be weaker, asset quality is likely to hold up; ‘Buy’ maintained

Bank has accelerated downgrade of some stressed cases to NPLs which lifted NPLs by 12% q-o-q to 2.7% of loans. NPL coverage is at 68%.

Analyst Corner: Maintain ‘buy’ on IndusInd Bank with target price of Rs 680

Our current estimates factor 3%/2% of credit cost in FY21-22, a 20 bps lower credit cost will lift FY21 estimates by 21% (on low base) and FY22 estimates by 8%; or the bank may use this to improve coverage.

Capital raise of Rs33 billion lifts net worth by 10% and may have strategic partnerships.

HDFC Bank rating: Buy — Weathering the Covid storm well

Corporate growth offset weak retail; risk to asset quality likely to go down; estimates raised; ‘Buy’ retained with TP of Rs 1,350

Bank delivered 38% growth in corporate loans as it leveraged on deposit franchise and refinancing of capex and working capital loans.

Analyst Corner: ‘Buy’ rating on Axis Bank with a target price of Rs 530

Will de-risking of corporate book pay off? Axis Bank has been de-risking its corporate loan book for over the past two-three years, and this is evident from loans rated ‘A-‘and above forming 90-95% of incremental loans.

Shorter duration of liabilities can lift NIMs in times of low rates.

Analyst Corner | ICICI Bank among top picks in financials with target price of Rs 460

Monetisation of gains on stake in subsidiaries helped mobilise Rs31bn — that may abate risk of dilution. Valuations are attractive at 1.4x FY21 adj. PB and it is among our top-picks in sector.

Analyst Corner: Narayana Hrudayalaya – retain ‘buy’ with Rs 330 TP

Gross debt rose by Rs 30 crore in Q4. Dharmshila was Ebidta positive. Ahmedabad, Jamshedpur and Guwahati had Ebitdar margins of 9% in FY20.

After cost rationalisation, it expects break-even at 70% pre-Covid revenues.

Eicher Motors rating: Buy — A weak performance by the company

Sharp rebound in retail demand; FY21e EPS cut by 4%; outlook over long term bright; ‘Buy’ retained with TP of Rs 20,000

Hero Moto Corp rating: Buy — Numbers in final quarter were weak

While FY21 outlook is dull, FY22-23 should see rebound; valuations reasonable; ‘Buy’ retained with TP of Rs 2,725

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