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Jefferies

Articles By Jefferies

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ICICI Bank Rating: buy-Healthy operating profit growth in Q4

Buffer provisions were a drag; estimates tweaked to factor in results and Covid surge; poised for re-rating in valuations; Buy retained

We tweak earnings & see ROE rising to 14-15%; ICICI stays among top sector picks.

Nestle India Rating ‘Hold’; Results were in line with expectations

Domestic revenues grew 10%; sharp rise in input prices a concern; Covid not expected to disrupt business

The channel witnessed 66% growth y-o-y in Q1CY21 (after 110% growth in CY20) and now contributes 3.8% to domestic revenues.

Materials (Steel): Cyclical revival for electrode makers

Higher ASPs and utilisations likely to boost Ebitda; TP for GRIL/HEG up to Rs 810/2,855

Energy: Q4 preview-Steep q-o-q decline likely for OMCs

RIL expected to see 11% q-q Ebitda growth; GAIL to clock q-q PAT growth; valuations are attractive for P-LNG

We note Dahej’s volume has improved over the quarter with March utilisation rate > 100% which augurs well for Q1FY22e.

Tata Consultancy Services Rating: Buy- A strong performance in the last quarter

Margins at a 5-year high; deal TCV of $9.2 bn augurs well for growth; FY22-23e EPS up 1-2%; TP revised to Rs 3,740; ‘Buy’ retained

TCS’ margins expanded 20bps q-o-q to 26.8% – its highest in 22 quarters despite a sharp 20% q-o-q rise in subcontracting costs and employee additions of 19,388 (highest ever) during Q4.

India financials: Credit growth at 5.6%; profits to rise sharply

4QFY21 results of financials will benefit from low base driving 108% rise in profit for banks, 30% VNB growth for life insurers & 68% rise in AMCs' profit.

credit growth

Equity Strategy: Covid wave likely to affect the recovery

Activity levels felt limited impact in March; OW on IT firms, UW on Fin; RIL, PGRD, Tata Steel among top picks

OWT IT Svcs, UWT Fin. Other top picks – RIL, Tata Steel, Concor, PGRD, GPL, Colgate, Dr Reddy’s & Maruti.

ICICI Bank rating – Buy: Earnings are likely to turn less volatile

This will reduce discount to HDFC Bank; performance to improve from FY22 onwards; TP up to Rs 780; Buy retained

SBI Card and ICICI Bank saw an 80-110 basis point (bps) increase in market share in outstanding cards to 19% and 16.8%, respectively, in February 2021 from 18.3% and 15.8%, respectively, in FY20.

JSW Steel rating – Buy: BPSL deal to have minimal impact on earnings

But BPSL acquisition will up net debt by ~9%; deal provides firm footprint in eastern India; ‘Buy’ rating retained with TP of Rs 510

It will also have a diversified regional footprint with ~13mtpa capacity in south, ~10mtpa in west and ~4mtpa in east of the country.

HDFC Rating ‘Buy’; Growth prospects for company remain healthy

Spike in Covid cases may not disrupt business; asset quality is holding up; valuations attractive; ‘Buy’ retained with TP of Rs 3,380

They expect 15-18% AUM growth to be achievable in the medium term led by retail segment.

Analyst Corner: ‘Buy’ on RIL; company to gain from lower leverage

An investment in RIL’s O2C subsidiary could give Aramco an India footprint

RIL would benefit from lower leverage and lower carbon footprint. Reiterate ‘buy’ on RIL.

Bandhan Bank can take heart from election manifestos

Our channel checks had indicated that BJP is a strong contender to remain in power and the mention of waivers by BJP had a bigger negative impact on collections than the mention by Congress.

Bandhan (rated ‘buy’) can benefit.

HDFC Bank Rating: Buy

RBI’s review of digital platforms is in progress; valuations are reasonable; TP raised to Rs 1,860 from Rs 1,800; ‘Buy’ maintained

Analyst Corner: Initiate ‘buy’ on Bandhan Bank with Rs 470 target price

We initiate coverage with a Buy rating and a price target of Rs 470 based on 3x Mar-23 adjusted PB.

Clouds of uncertainty to clear; growth to pick up.

Dr Reddy’s Laboratories rating – Buy: API supplies for Vascepa are an issue

Gradual ramp-up of drug expected through FY22, with US revenues of $25 m; FY22e EPS down 1%; ‘Buy’ retained with TP of Rs 5,533

Equity Strategy: Mid-caps have led rebound since June

A bottom-up stock selection approach recommended in SMID; FY22/23e PAT growth estimated at 50+/23% y-o-y

Top Picks are CROMPTON, BLSTR, KEII, SI, KJC, TRCL, OBER, SOBHA, IPCA, MAXHEALT, HMN, BHFC, NEWGEN & MAHGL.

Hindustan Unilever rating – Buy: Input price inflation’s a headwind for firm

Offsetting factors likely to limit impact on margins; FY22/23e EPS down 4-5%; TP revised to Rs 2,650 from Rs 2,780; ‘Buy’ maintained

While HUL would be able to largely maintain Ebitda margins, this warrants EPS cuts of 4-5%, despite which growth would be strong at 14%+ over FY21-23e; BUY.

Two-wheelers witnessing revival in urban demand

State-wise two-wheeler (2W) registrations show that the urban-centric states have started to witness relatively better demand trends than the rural-centric ones.

two wheeler

‘Buy’ on Concor; additional upside is privatisation

We were positively surprised at Tughlakabad (TKD) seeing limited volume loss, despite the 10-12% realisation hike effective 6 Dec 2020.

concor

SBI Life Rating: buy- New partnerships offer growth opportunities

Mgmt is optimistic about a rebound in premiums; overlap with LIC’s base needs to be watched; Buy retained with revised TP of Rs 1,110

Maintain Buy with price target of Rs 1,110.

Telecom: Prospects of hikes in tariff recede

Jio may sell capacity given spectrum deals; Bharti eyes share gain; ‘Hold’ retained on Bharti with TP of Rs 590

Operators will have to pay Rs 276 bn upfront while the remaining Rs 502 bn can be paid over the next 18 years but will attract an interest of 7.3%.

HDFC Life: Maintain ‘buy’, roll forward target price to Rs 850 from Rs 820

HDFC Life has been looking to expand its agency force and also increase their contribution to premiums from 12-13% in 9MFY21 to a more balanced level of 25% by going beyond top 25-30 cities.

The pension subsidiary clocked robust growth of 98% in AUM to over Rs 160billion.

Analyst Corner: Jubilant Foodworks now looking beyond Domino’s

The recent quarters have seen a series of initiatives beyond 'Domino's', including FMCG, Biryani, Hong's Kitchen ramp-up and 10.8% stake in Barbeque Nation.

jubilant fireworks

Finolex Cables: Maintain ‘buy’ as volumes grow

After four qtrs of YoY sales decline, FNXC saw a sharp recovery (+18%) in Q3. Volumes across most categories improved, both YoY and QoQ.

finolex

Tata Steel Rating: buy- Ebitda in Q3FY21 beat estimates

Net debt was down 11% q-o-q; outlook is strong; FY22e EPS up 18%; TP raised to Rs 900 from Rs 850; ‘Buy’ retained

We upgrade FY22 Ebitda by 9% and EPS by 18% on higher steel prices, but broadly retain our FY23 estimates.

Analyst Corner: Maintain ‘buy’ on SBI with revised TP of Rs 480

SBI's 3QFY21 profit of Rs52bn (-7% YoY) was ahead of estimates, led by lower credit costs.

sbi

Analyst Corner| HDFC: Maintain ‘buy’ with target price of Rs 3,340

The two key positives were strong disbursement growth of 26% and largely stable asset quality - collections 98%, restructuring 1%, stage-3 2.3%, buffer provision at 1.2%.

HDFC
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