Brokerage Reports: 11th Dec 2023- Coforge, Max Healthcare, Wipro, Cyient

Morgan Stanley’s outlook on the real estate sector suggests that the current demand is supported by a robust macro environment and a positive industry structure characterized by lower leverage, industry consolidation, and gradual price increases. This could potentially lead to a multi-year upcycle. However, there is also a significant downside risk.

Jefferies’ analysis on Coforge recommends a “Buy” with a target price of Rs 6580. Key takeaways from the management meeting indicate an expectation of growth at the lower end of the 13-16% guidance, despite longer furloughs in the third quarter. The company aims to achieve similar growth in FY25 and plans to enhance margins by 150-300 basis points over the next 3-4 years.

Macquarie’s perspective on Max Healthcare is positive, rating it as “U-P” with a target price of Rs 465. The acquisition of Sahara hospital aligns with the company’s strategy, and the acquisition’s EV of Rs 9.4 billion is seen as reasonable, representing an EV/sales multiple of 4.7x. The management expects swift improvements in operating and financial performance.

Antique’s assessment of DR Reddys is less optimistic, suggesting a “Sell” with a target price of Rs 4766. The recent US FDA inspection of FTO-03 from Oct 19-27, 2023, resulted in 10 observations. Some of these observations are deemed severe, raising concerns about a potential Warning Letter. The facility in question contributes around 30% to the company’s US revenue and manufactures over 100 products.

Morgan Stanley’s stance on Cyient is “Overweight” with a target price of Rs 2300. Takeaways from the analyst meeting include a strong emphasis on embedding technology into offerings, efforts to create consistency in growth, a positive outlook for medium-term revenue growth and margins, and improvements in cash flow conversion with consistent payout ratios.

In contrast, Morgan Stanley rates Wipro as “Underweight” with a target price of Rs 370. The recent resignation of its Chief Growth Officer is highlighted, adding to investor concerns about senior management exits over the past 12 months. The departing Chief Growth Officer played a significant role in managing the large deal team at Wipro.

Outlook for Steel in 2024 by Morgan Stanley:

Despite Steel Stocks Lagging in 2023, Anticipate Further Underperformance in 2024 Amidst a Weak Global Macro Outlook.

Continued Underperformance Projected in 2024 Due to Domestic Supply Surpassing Demand and Unfavorable Valuations.

Metals Analysis by Morgan Stanley:

Tata Steel Receives an Equal-Weight Rating with a Target of ₹120/Sh.

SAIL Also Gets an Equal-Weight Call with a Target of ₹85/Sh.

JSPL is Given an Underweight Call with a Target of ₹525/Sh.

JSW Steel Receives an Underweight Call and a Target of ₹620/Sh.