Brokerage Reports: CLSA on India Strategy, DLF, HAL, Fusion Fin; JPM on Honasa, City Gas; Jefferies on Thermax, HAL: DLF TP Rs. 870, HAL Rs. 5,500, Honasa Rs. 330, Fusion Fin Rs. 155, Thermax Rs. 3,700.

CLSA on India Strategy

CLSA has revised its October strategy, reallocating funds to India with a 20% overweight stance. The decision comes as China’s economic challenges and market volatility persist, exacerbated by uncertainties surrounding Trump’s re-election. Both MSCI China and MSCI India have witnessed corrections of approximately 10%, limiting overall losses. CLSA’s move signals a strategic pivot to capitalize on India’s relative stability amid global market fluctuations.

CLSA and Citi Differ on Outlook for Indian Equities Amid Market Volatility

CLSA raised its exposure to Indian equities, citing the country’s stable forex and attractive stock valuations, especially with potential US tariff risks. In contrast, Citi downgraded Indian stocks, worried about weak earnings momentum. Despite over $13 billion in foreign selloffs, local institutions maintained cash levels, with ETFs and index funds seeing increased investments, helping keep reserves stable.

CLSA on DLF

Upgrade to Outperform; Target Price raised to ₹870.

Channel checks reveal that DLF received expressions of interest (EOIs) for over 100 units (out of 420) worth ₹8,000 crore (~$1 billion) in its ultra-luxury project, The Dahlias.

Customer conversion rate is ~80%.

This is exceptional demand, given unit prices exceed ₹80 crore ($10 million).

Likely sales are already exceeding FY25 assumptions.

JPMorgan on Honasa

Underweight; Target Price cut to ₹330.

Weak Q2 results with revenue down 7% YoY, leading to an EBITDA loss of ₹307 crore and a PAT loss of ₹186 crore.

Management highlighted slowing growth for the Mamaearth brand, in addition to inventory correction issues.

FY25-26 earnings estimates have been significantly reduced.

Jefferies on Honasa

Buy; Target Price cut to ₹425.

Higher inventory correction and losses were disappointing.

Founders’ comments about revising their strategy add to uncertainty.

The stock could remain under pressure, especially given low liquidity for existing shareholders looking to exit.

Moody’s on India Growth

Moody’s expects India to experience strong economic growth, forecasting 7.2% growth in 2024. This is supported by robust household spending and lower inflation. While global uncertainties pose risks, Moody’s believes India’s long-term growth remains steady, projecting 6.6% growth in 2025 and 6.5% in 2026.

Macquarie on Thermax

Upgrade to Outperform; Target Price ₹3,700.

Q2 underlying margins were weaker than they appeared due to recurring EBITDA/PAT misses.

Margins in the industrial infrastructure segment (48% of revenue) remained a drag.

Q2 orders were dominated by low-margin industrial infrastructure projects.

Jefferies on HAL

Buy; Target Price ₹5,500.

Q2 FY25 EBITDA grew 7% YoY with margins improving 37 basis points to 27.5%, driven by a 6% YoY revenue increase.

Higher-margin service income supported results, compensating for delayed aircraft deliveries.

CLSA on HAL

Outperform; Target Price ₹4,731.

Q2 FY25 EBITDA grew 6%, while PAT rose 20% YoY.

Despite delays in Russian aircraft and helicopter orders, the decade-long order pipeline is ~$45 billion.

Key catalysts include large helicopter orders, SU-30 deals, and visibility on the GE engine tie-up.

CLSA on Fusion Fin

Underperform; Target Price cut to ₹155 from ₹260.

Q2 net loss of ₹305 crore exceeded expectations due to credit costs at 28.6%, higher than guidance.

Management has tightened underwriting norms, making them stricter than regulatory standards.

JPMorgan on City Gas (IGL/MGL)

Downgrade IGL to Underweight, Target Price cut to ₹295 from ₹390.

Downgrade MGL to Underperform, Target Price cut to ₹1,130.

APM gas allocations for IGL and MGL have been reduced by 18-20% (effective Nov 16), following a similar cut in October.

Companies will need to source costlier alternate gas, impacting margins.

FY25-26 PAT estimates were cut by 11-25%, with valuation multiples reduced.

Passing on price hikes (~₹7/kg or 10%) will be challenging without affecting CNG economics.

Equirus on Swiggy

Initiate Add; Target Price ₹450.

Swiggy and Zomato might diverge significantly over the next decade, similar to Tencent and Alibaba in China.

The food delivery industry is expected to grow at an 18% CAGR (FY24-FY29).

Swiggy’s margins lag Zomato’s by 100 basis points due to higher discounts and delivery costs.

Contribution margin is expected to reach 8.8%, with adjusted EBITDA touching 4.7% by FY29 as the market becomes more profitable.

Morgan Stanley on Muthoot Finance

Upgrade to Equal-Weight from Underweight; Target Price increased to ₹1,600 from ₹1,430.

Q2 saw a 10% beat in PPOP (Pre-Provision Operating Profit).

While the environment has improved for Muthoot, structural challenges persist, especially in non-gold segments.

High bad loan ratios indicate diversification remains challenging.

Nomura on Hero MotoCorp

Maintain Buy; Target Price increased to ₹5,805 from ₹5,663.

Q2 results were in line, showing healthy earnings growth with room for margin improvement.

Rural recovery and positive monsoons are expected to support 2-wheeler sales growth of 10% in FY25-26.

CLSA on CG Consumer

Maintain Outperform; Target Price ₹500.

Results were in line with expectations.

Sustained growth and margin improvements provide medium-term visibility for re-rating.

CITI on Grasim

Maintain Buy; Target Price cut to ₹3,100 from ₹3,250.

Q2 performance was below expectations.

Chemicals profitability declined sequentially, while VSF profitability improved.

The paints business remains on track to achieve a high single-digit market share by FY25.

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