Brokerage Reports: Citi upgrades Reliance Industries to Buy, TP Rs 1530; Bernstein on NTPC, MS on SBI Cards, Oberoi Realty, DLF, Auto Sector, PVC Pipes with TPs Rs 650, Rs 2060, Rs 910 and More 👇

Citi on Reliance Industries

Upgrade to Buy, Target Price (TP) Raised to Rs 1530: After a period of underperformance, Citi believes that the risk/reward for RIL has improved.

Refining Margins: RIL is expected to see better refining margins due to reduced export competitiveness from China.

Jio: Jio is well-positioned for future tariff hikes, better data pricing, and further monetization of its 5G services.

Retail: Retail sales may remain weak for the next couple of quarters, which could lead to lower earnings projections.

Bernstein on NTPC

Outperform, Target Price Rs 440: Bernstein’s positive outlook on NTPC is based on several factors:

Rising power demand.

Evening shortages in power supply.

Lower cost of debt.

Advantageous receivables position.

Limited Upside: They don’t expect significant growth beyond this, but they don’t foresee a major downside either.

Morgan Stanley on SBI Cards

Equal Weight, Target Price Rs 650: SBI Cards’ market share in spending remained stable at 15.8% in October.

YoY Decline in Spending: There was a 10% drop in spending, which is lower than the industry’s 13% increase, reflecting the impact of the RBI’s corporate card spending notification.

Morgan Stanley on Oberoi Realty

Equal Weight, Target Price Rs 2060: Oberoi’s management reports strong demand due to favorable macro conditions and higher upgrade demand.

Price Increases: The company has seen 30-40% increase in average selling prices (ASP) over the last 3-4 years, helping growth.

Strong Margins: The luxury market focus helps maintain strong margins, which stood at 58% in Q2.

Morgan Stanley on DLF

Equal Weight, Target Price Rs 910: DLF is expected to see 10-12% compound annual growth rate (CAGR) in pre-sales during an upcycle.

Margin Growth: The EBITDA margin is expected to increase to 36-38% (from 33% in FY24).

Improved ROE: Return on equity (ROE) is projected to rise from 7.5% to a double-digit figure in 3-4 years.

HSBC on Tractor Industry

M&M: HSBC maintains a Buy rating with a target price of Rs 3390, benefiting from strong regional reservoir levels and positive tractor volume growth.

Escorts: HSBC maintains a Reduce rating with a target price of Rs 3180.

Long-term Growth: They expect tractor sales to grow at a 5-6% CAGR from FY24-27 due to strong demand and favorable conditions.

Jefferies on Suven Pharma

Bullish on Indian CDMOs: Jefferies is optimistic about Indian Contract Development and Manufacturing Organizations (CDMOs) like Suven Pharma, as they stand to benefit from innovators looking to de-risk their supply chains.

Emerging Modalities: ADCs (Antibody-Drug Conjugates) and Oligonucleotides are key areas for growth.

Growth Outlook: Suven expects organic business to double in five years, with additional growth from potential mergers and acquisitions (M&A).

Goldman Sachs on Pipes Sector

Astral: Goldman maintains a Buy rating but lowers the target price to Rs 2170 from Rs 2410. The company is strong in pricing and margin discipline.

Prince Pipes: Downgraded to Neutral with a lower target price of Rs 480 from Rs 705 due to margin pressures.

Gradual Recovery: While margins and volumes in the pipes sector are likely bottoming out, recovery will be slow, with China’s PVC prices remaining weak.

Jefferies on Auto Sector

M&M: Jefferies maintains a Buy rating with a target price of Rs 3700, stating that M&M is a better investment than Maruti due to:

Strong industry demand and increasing market share in tractors, SUVs, and LCVs.

Better margin sustainability.

Expected 19% EPS growth over FY24-27.

Maruti Suzuki: Jefferies maintains a Hold rating with a target price of Rs 10900, but Maruti’s market share is declining in passenger vehicles.

M&M’s Advantage: M&M is expected to outperform Maruti in the coming years with higher growth.

Macquarie India Strategy

BJP’s Big Win: The BJP secured a strong victory, signaling that populism is on the rise.

Cash Transfers: The government is providing Rs 1,500 every month directly into the bank accounts of women.

Planned Increase: After re-election, the government has promised to increase this amount to Rs 2,100 per month.

Impact on Voter Turnout: As a result of this initiative, voter turnout among women rose from 59.3% in the 2019 state elections to 65.2% in 2024.

Fiscal Implications for Maharashtra: Due to this policy, Maharashtra’s fiscal deficit is expected to exceed its target of 3%.

Capex Cuts Needed: To meet fiscal targets, the state will have to reduce its capital expenditure (capex).

Increase in National Capex: At the central government level, capital expenditure will need to rise by about 52% in the second half of FY25, and at the state level by around 40%.

Kotak Securities on India Strategy

BJP’s Victory and Continuity: After BJP’s strong wins in Maharashtra and Haryana in 2024, it’s likely the central government will continue its development agenda.

Fiscal and Capex Outlook: There will likely be minimal fiscal consolidation, but central government capital expenditure is expected to increase in the second half of FY25, boosting market sentiment in the short term.

Focus on Execution: The government will focus on executing existing plans rather than introducing new reforms or stimulus packages.

Market Valuations: The broader Indian market still has high valuations, which might be a concern for future performance.

Earnings Outlook: There is a possibility of further cuts to earnings estimates due to growth challenges, weakening consumer demand, high inflation, and ongoing risks from disruptions.

Market Sentiment: The market might experience short-term sentiment boosts but could face further challenges in the coming weeks due to these factors.

Indian markets face challenges in the coming weeks, despite a short-term boost from BJP’s wins in Maharashtra and Haryana, which have strengthened political stability and investor confidence. However, concerns over high market valuations and the possibility of earnings downgrades remain.

The BJP’s victory in Maharashtra ensures the continuation of development plans, with increased government spending expected in areas like infrastructure and manufacturing. However, analysts believe focus should be on effective execution rather than new reforms.

Despite political stability, economic concerns persist. High valuations and potential earnings cuts due to rising inflation, growth issues, and weak consumption weigh on the market. Corporate earnings for Q2 show slow growth, with net profits up just 3.6% year-over-year, the weakest in 17 quarters. This, along with rising costs, has dampened market sentiment, with benchmarks down 9% from their highs.

JM Financial on India Strategy:

BJP and its allies are expected to win big in Maharashtra.

One of the main reasons for the victory is the support from women voters.

The market is likely to have a positive reaction to the election results from Maharashtra and Uttar Pradesh.

However, concerns about the state government’s finances will remain.

Motilal Oswal’s on State Elections:

The big victory of NDA (led by BJP) in Maharashtra will create an optimistic sentiment in the market.

After the elections, the focus will shift to government spending.

Positive factors like recovery in rural spending, increased demand during the wedding season, and election results will boost demand.

Corporate earnings are expected to grow by 9% in the second half (H2) of the year.

Antique Stock Broking on State Assembly Elections:

BJP’s big win in Maharashtra and Uttar Pradesh will bring stability at the national level.

This will encourage increased consumption.

There is an expectation for increased government spending in Q2.

A 25% rise in capital expenditures (Capex) is anticipated in the second half of FY25.

Jefferies on State Assembly Elections:

With BJP’s win in Maharashtra, there will be more political stability at the national level, which will help promote consumption.

Government spending is expected to rise in Q2, and corporate earnings growth will likely continue.

The recent market correction has created a good opportunity to buy shares.

There is a very low chance of earnings downgrades in the second half of FY25.

ICRA: 15 Major States Need 30% Revenue, 26% Expenditure, and 40% Capex Growth in H2FY25 to Meet Targets

ICRA reports that for 15 major states in India, to meet the fiscal targets for FY25, revenue, expenditure, and capital expenditure (capex) must increase by 30%, 26%, and 40%, respectively, in the second half of FY25 (H2FY25). This follows a slower-than-expected start to the year, partly due to the impact of state elections. India’s overall capex target for FY25 is ₹11.11 trillion, but only ₹4.15 trillion was spent in the first half of the year (April-September), which is lower than the ₹4.9 trillion spent in the same period in 2023.