Dam Capital on Reliance Industries
Buy with a target price of Rs 3042.
Reliance is building a new growth area in New Energy.
Despite short-term issues in retail and O2C (Oil to Chemicals), all businesses should grow in the next few years.
EBITDA is expected to grow by 13% annually from FY25 to FY27.
Singapore refining margins (GRMs) should rise from $3 per barrel to $5-6 in the next year.
Retail business is expected to recover from the festive season onwards.
Jio is performing well across various metrics.
New Energy investments will start showing returns from next year.
Morgan Stanley on Bajaj Auto
Overweight (OW) rating with a target price of Rs 11,389.
Bajaj Auto noted slower-than-expected sales in the early festive season.
They expect the industry to grow around 5%, lower than the 8-10% market estimate.
The company aims to maintain its current margins.
CLSA on Bajaj Auto
Underperform rating.
EBITDA margin was 20.2%, slightly better than last year but flat compared to the previous quarter.
Gross margins fell due to higher electric two-wheeler (E2W) volumes.
Trading at around 33 times FY26 earnings estimates.
Jefferies on Bajaj Auto
Buy with a target price of Rs 13,400.
EBITDA and recurring profit grew 21-24% year-on-year but were slightly below estimates.
Bajaj expects only 3-5% motorcycle growth during the festive season but is optimistic about export improvements.
CITI on Bajaj Auto
Sell with a target price of Rs 7,800.
Second-quarter performance slightly below expectations due to lower average selling prices (ASPs) and gross margins.
The company is positive about its electric vehicles (E2Ws), CNG bikes, and three-wheeler segments.
Festive demand outlook was surprising, with industry volumes only up 1-2% compared to last year.
BoFA on L&T Tech
Underperform with a target price of Rs 4660.
Q2 revenues were in line with expectations, but growth remains modest.
EBIT margins dropped by 50 basis points due to higher investments, which seem to have peaked.
Investec on L&T Tech
Sell with a target price of Rs 4980.
Revenue and margins were weaker than expected.
Revenue grew 3.4% quarter-on-quarter in constant currency terms, but the company needs higher growth to meet full-year targets.
EBIT margins fell to 15.1%, below estimates.
Nomura on L&T Tech
Reduce rating with a target price cut to Rs 4840.
Q2 was a mixed bag with slightly better revenues but lower margins.
The company’s goal of achieving 8-10% growth remains, but hitting 16% EBIT margins by FY25 looks challenging.
UBS on SRF
Downgraded to Sell with a target price cut to Rs 2100 from Rs 2700.
The company faces long-term growth challenges and potential negative surprises.
Weak demand in the agricultural chemicals segment and soft demand and prices in refrigerant gases are expected.
EPS estimates for FY25 and FY26 were cut by 20% and 22%, respectively.
Morgan Stanley on Mphasis
Equal Weight (EW) with a target price of Rs 3200.
Q2 revenues and margins were better than expected, but deal wins were soft.
Net revenue was 1% ahead of estimates, with 2.4% growth in constant currency.
The BFSI (banking and financial services) and TMT (technology, media, telecom) segments drove growth.
EBIT margin of 15.4% exceeded the estimate of 15.1%.
Jefferies on Gold Loan Financiers
Gold prices increased by 4% in the past month, while gold NBFC stocks dropped 2-14%.
Higher gold prices should drive loan growth in Q3 despite IIFL restarting its gold business.
Gold NBFCs could benefit from rate cuts, and Jefferies sees healthy growth in earnings and return on equity.
Muthoot is preferred, while Manappuram’s risk-reward is seen as attractive despite concerns over its microfinance business.
Macquarie on Sequent Scientific
After the merger with Viyash, the focus is on expanding R&D and manufacturing for the companion animal business.
Management expects the deal to close in 12-15 months and projects Rs 4000 crore in revenue and 20% EBITDA margins by FY27-28.
UBS on KEI Industries
Buy with a target price of Rs 6150.
Q2 revenue was in line with expectations but margins and profits missed.
The company announced a Rs 20 billion fundraise via equity issuance and maintains full-year revenue growth guidance of 15-17% with EBITDA margins of 10.5-11%.
HSBC on Three-Wheelers
Electric vehicle (EV) penetration in the three-wheeler market has reached 20%, driven by lower total cost of ownership (TCO) and favorable regulations.
Mahindra & Mahindra leads the market with around 40% share, while Bajaj is catching up with 30%.
Macquarie on Zydus Life
Outperform with a target price of Rs 1385.
Unfavorable ruling in a patent case means Zydus may not launch the product before January 2030, leading to a significant downside to FY27 estimates.
IIFL on Indegene
Initiated coverage with an “Add” rating and a target price of Rs 750.
A niche player in life sciences digitization, with 12% revenue and 20% EPS growth expected over FY24-27.
Near-term growth is subdued, but long-term potential remains balanced post-IPO.
CITI on City Gas Distribution (CGD)
Media reports and discussions with CGD companies indicate that the government has reduced the allocation of domestic gas (APM gas) to the CGD industry by 4 mmscmd.
If this continues without any government relief, CGD companies may need to raise CNG prices by Rs 5 per kg to maintain their profit margins.
For companies like IGL and MGL, this would result in a 7% increase in CNG prices.
In MGL’s case, state elections in Maharashtra could make it harder to implement the price hike at the right time.
A price increase could negatively affect the outlook for CNG segment’s volume growth and may create uncertainty about the government’s support for the CGD sector.
Macquarie on Global Strategy: China vs. India
Choosing between investing in China or India is becoming more difficult.
Indian stocks are facing three challenges: slowing GDP growth, high earnings expectations, and historically expensive valuations.
Even though India’s recent performance has slipped, the MSCI India index still shows about 70% outperformance over the last four years.
Investors expect China to launch significant economic stimulus, boosting growth in 2024 and possibly extending into 2025-26.
The Chinese government appears to be focusing more on the economy, potentially reducing emphasis on political, geopolitical, and regulatory issues.
China’s stock valuations are relatively low, after about 35% underperformance over the last four years.
While China’s recent rebound might suggest continued growth, these are unusual times, and global demand is unlikely to significantly boost China’s exports.
The recent policy shifts in China seem more about reducing risks and supporting growth targets, but they aren’t enough to drive strong consumer demand or the real estate market.
India will continue to add labor and capital, improving productivity, and though 8% growth is unlikely, the Indian economy should grow by around 6-7%.
While China may see short-term gains from policy announcements, long-term investment still favors India, as China’s deeper structural issues persist.
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