Five analyst picks this week

SBI Securities maintains its ‘Buy’ rating on this manufacturer of forged components with a target price of Rs 1,338.9, implying an upside of 19.3%. Analysts at the brokerage believe that the stock is well-positioned to benefit from the growing demand for forged steel and aluminium, given its market leadership. They are also positive about the firm’s plans to diversify away from commercial vehicles and enter into the defence & aerospace industry.

Analysts at SBI Securities expect Bharat Forge to gain significantly from the ongoing shift of manufacturing bases from China and Europe to India. Overall, they believe the firm’s healthy growth trajectory will be sustained by a “steady expansion in its order book and effective execution, which can drive revenue growth over the next few years”. The analysts expect the company’s revenue to grow at a CAGR of 15% over FY23-25.

2. HCL Technologies:

Motilal Oswal maintains a 'Buy' rating on this IT consulting and software company with a target price of Rs 1,410, reflecting an upside of 11%. Analysts Mukul Garg, Pritesh Thakkar, and Raj Prakash Bhanushali have a positive outlook, given the company's healthy deal pipeline. This includes a record net-new deal total current value of $3.79 billion, including the Verizon deal. In Q2FY24, HCL Technologies reported a revenue of Rs 26,672 crore, marking an 8% YoY increase, while its net profits rose by 9.8% YoY.

Garg, Thakkar, and Bhanushali highlight the company’s focus on reducing operational expenses as a key positive. They point out that EBIT margins have improved by 150 basis points QoQ to 18.5%, thanks to cost-control measures implemented in H1FY24 and the rationalisation of the employee pyramid. The analysts express confidence in the company achieving margins of 18-19%. They note this is likely because the company has cut over 2,000 jobs for the second consecutive quarter and has also skipped management-level increments, which is a major component of the wage bill.

3. Equitas Small Finance Bank:

Hem Securities recommends a ‘Buy’ call on this bank with a target price of Rs 112, indicating an upside of 14.3%. Analyst Madhur Mandhana says, “Equitas Small Finance Bank provides a suite of products and services tailored to the needs of its customers, including individuals with limited access to formal financing channels, affluent and mass affluent individuals, MSMEs, and corporates.”

According to the analyst, in Q2FY24, the bank’s asset quality was stable and its MFI, new CV, and house financing segments were important growth drivers, with well-distributed disbursements. Mandhana believes new products like credit cards, new vehicle loans, and personal loans will maintain credit growth healthy in the medium term. He also believes that the cost-to-income ratio will likely remain elevated through FY24. He remains optimistic about the bank as its asset quality has improved over the previous year, and the trend of good recoveries and upgrades is projected to continue. He expects the bank to achieve 25-30% loan growth in FY24.

4. State Bank of India (SBI):

HDFC Securities maintains a ‘Buy’ call on this bank with a target price of Rs 790. This indicates an upside of 36.9%. Analysts Krishnan ASV, Neelam Bhatia and Akshay Badlani say, “While SBI has always enjoyed brand recognition and scale, the bank has gradually added other competitive moats in the form of a ‘prolific’ sourcing edge, a YONO-powered digital stack, an unparalleled lean distribution model, and a potent combination of cross-sell focus and competencies.”

The analysts believe that this combination of traditional strengths and newly-added moats has led to higher throughput, sustained efficiency gains, and high-quality new loan origination. This results in structurally lower credit costs and better return ratios. The analysts expect repricing of existing deposits to pick up pace and exert pressure on near-term NIMs, while the loan deposit ratio (at 73%) will support SBI’s growth appetite.

5. JTL Industries:

Axis Direct maintains a ‘Buy’ rating on this iron & steel products manufacturer with a target price of Rs 265, implying an upside of 8.9%. In Q2FY24, the company’s net profit rose by 37.7% YoY and revenue increased by 67.4% YoY. Although the firm’s net profit growth missed the brokerage’s estimates by 4%, analyst Aditya Welekar keeps an optimistic outlook for the stock’s growth prospects.

He remains positive about the firm due to its sales volume growth guidance of 40% YoY in FY24. Welekar adds, “The company aims to exceed the 30% growth target and has guided for 0.33 MT in FY24 compared to 0.24 MT in FY23. This translates to a 40% YoY growth.” He expects healthy growth on the back of higher sales volumes and an increase in the share of value-added products in the coming quarters. The analyst predicts that the net profit for this steel product maker will grow at a CAGR of 51% over FY23-25.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)