Brokerage Reports: SBI, Paytm, Tata Motors, LIC HFL, Indigo, UPL, Aurobindo Pharma, etc

Bernstein’s Analysis on SBI:

– Target: 710
– Brokerage Radar: Predicts ~5% YoY Net Interest Income (NII) growth due to deposit repricing.
– RoA Impact: Exceptional item affects Return on Assets (RoA).
– Valuation: SBI valued at 1.3x Price to Book Value (PBV) on a 12-month forward basis.
– Recommendation: Buy

Nuvama on SBI:

– Target: 745
– Earlier Target: 705
– Brokerage Radar: Q3FY24 had a mixed performance; 32% PAT miss due to a one-time exceptional item.
– Financial Overview: Strong growth, low Loan to Deposit Ratio, lower NII and fees, higher wage provisions.
– Projections: FY24 and FY25 targets reduced by 21% and 9% respectively, due to increased provisions.
– Valuation: SBI valued at 1.3x PBV on a 12-month forward basis.
– Recommendation: Buy

Nomura’s Take on SBI:

– Target: Rs 755 (Nomura raised from Rs 665)
– Observations: Strong loan growth, softer NIM than expected.
– Expense Management: Opex controlled, excluding impact of elevated wage revision provisions.
– Liquidity Position: SBI well-positioned amid tight liquidity.
– Recommendation: Maintain Buy

Jefferies’ on SBI:

– Target: Rs 810
– Recommendation: Maintain Buy
– Financial Analysis: Balancing NIMs to achieve NII growth; one-off staff costs impact Pre-Provision Operating Profit (PPOP).
– Loan Growth: Uptick led by corporates; unsecured retail normalizing down.
– Asset Quality: Normalizing, but still trending below Jefferies’ estimates.

Citi Research Analysis on Paytm:

– Target: Rs 550 (Earlier Target: Rs 900)
– Recommendation: Sell
– Brokerage Radar: Cut Adjusted EBITDA forecasts by Rs 4 billion and Rs 6 billion for FY25/26E.
– Valuation Adjustment: Lower the multiple to 30x Mar’25E EV/Adjusted EBITDA due to heightened regulatory concerns.
– Clarity Expectation: Full clarity on the reset lower anticipated in the next 1-2 quarters.

2. Citi Research on Paytm (Additional Insights):
– Estimate Revisions: Lowered estimates for Monthly Transacting Users.
– Churn Concerns: Elevated churn expected in the near term across both customers and merchants.
– Uncertainty Timeline: Uncertainties likely to persist at least until 1QFY25.

Macquarie’s on Tata Motors:

– Recommendation: Maintain Outperform; Target Price increased to Rs 1,028 from Rs 921.
– JLR Performance: JLR margin improvement despite rising Variable Marketing Expense (VME) costs.
– Domestic PV and CV Margins: Positive trends observed in Domestic PV and CV margins, with the latter improving QoQ.
– Guidance: JLR margin guidance for FY24 raised to 8%+, aiming for a net cash balance sheet by FY25.

CLSA’s on Tata Motors:

– Recommendation: Maintain Buy; Target Price raised to Rs 1,061 from Rs 955.
– JLR Strength: JLR positioned strongly.
– CV Business: Margin beat noted in 3QFY24.
– PV Business: EV impacts PV business margins while ICE margins show improvement.

Jefferies’ Analysis on Tata Motors:

– Target: Rs 1,100 (Earlier Target: Rs 950)
– Recommendation: Buy
– Market Position: Remains a preferred buy among 4W OEMs.
– Industry Concerns: Acknowledges industry demand concerns in India in CY24 but optimistic about a strong PV launch pipeline.
– Financial Outlook: Raised FY24-26 EPS by 7-11%, expecting significant growth in Ebitda and EPS by FY26.

Nuvama’s Evaluation of Tata Motors:

– Target: Rs 960 (Earlier Target: Rs 910)
– Recommendation: Hold
– EBITDA Performance: Noteworthy EBITDA outperformance due to improved JLR margins.
– Outlook: Raising FY24-26E EBITDA by 7-8%, cautioning about a potentially adverse JLR mix and subdued volume growth outlook for FY25.

Motilal Oswal’s Perspective on Tata Motors:

– Target: Rs 1,000 (Earlier Target: Not specified)
– Recommendation: Buy
– EPS Upgrade: Consistent EPS upgrade by 23-26% for FY24/25.
– EV Penetration: Management sees no change in JLR’s pace of EV penetration.
– Growth Expectations: Anticipates growth led by JLR, with a target of 9.9% EBIT margin by FY25. Moderate growth expected in India CV and PV businesses in FY25.

Goldman Sachs’ View on Tata Motors:

– Recommendation: Maintain Buy; Target Price increased to Rs 960 from Rs 870.
– Q3 Performance: Beat in Q3 attributed to better Range Rover realization, improving CV mix, and pricing support.
– Capacity Expansion: Sanand-2 capacity easing the path for the next wave of new models.
– Growth Prospects: New models collectively expected to outgrow the broader India car market.

Goldman Sachs’ Analysis on IndiGo:

– Recommendation: Maintain Buy; Target Price raised to Rs 3,500 from Rs 3,080.
– Revenue Drivers: Yields and ancillary revenues contribute to beating expectations.
– Operational Challenges: Groundings increase, but mitigation measures are implemented.
– Market Performance: January domestic traffic trends indicate strength, with yields remaining relatively flat YoY.

Macquarie’s Assessment on Aurobindo Pharma:

– Recommendation: Maintain Outperform; Target Price at Rs 1,300.
– Eugia III Inspection: Inspection concludes with nine observations.
– Plant Significance: Eugia III, Aurobindo’s largest injectable plant with 17 production lines, contributes close to 10% of revenue and mid-teens EBITDA.
– Regulatory Compliance: The plant has undergone six US FDA inspections with no adverse outcomes. Last inspection in Nov’19 resulted in a Form-483 with 14 observations.
– FDA Classifications: Initially classified as VAI in Feb’20, later rescinded, and eventually reclassified as VAI by the US FDA in Apr’20.

Morgan Stanley’s Analysis on LIC HFL:

– Recommendation: Maintain Equal-weight; Target Price at Rs 495.
– NII Performance: Net Interest Income (NII) beat driven by a smaller-than-expected contraction in Net Interest Margin (NIM).
– Disbursement Weakness: Key weak spot remains disbursements, witnessing a 6% YoY decline in Q3.
– Concerns for Stock: P&L volatility and persistent weakening of the franchise are not conducive to a meaningful re-rating in the stock.

Nuvama’s Perspective on UPL:

– Recommendation Change: Downgraded to Reduce from Buy; Target Price reduced to Rs 486 from Rs 718.
– Revenue Challenges: Poor revenues observed across various geographies.
– Margin Pressures: Higher rebates and inventory write-downs have impacted margins negatively.
– Market Challenges:

BofA Securities on Asia Pacific

Bank of America Securities notes that HDFC Bank is likely to grapple with a significant trilemma involving growth, liquidity, and profitability in the next 2-3 years.

The brokerage recommends prioritizing high-dividend-yielding and quality cyclical stocks.

There is caution regarding China due to an oversupply situation in the solar value chain. Furthermore, Bank of America Securities has increased its 2024 targets for TOPIX and Nikkei 225 to 2,715 and 38,500, respectively.