1. Bajaj Finance:
Axis Securities maintains its 'Buy' call on this banking and finance company with a share price target of Rs 9,425. This indicates a potential upside of 32.7%. Analysts Dnyanada Vaidya and Prathamesh Sawant remain positive on the firm despite an RBI’s directive asking Bajaj Finance to stop approving loans for the Insta EMI Card and eCOM due to non-compliance with online lending regulations, particularly in interest rates and repayment methods.
According to the analysts, this regulation is not expected to significantly impact the company's financials, as only 4.1% of Bajaj Finance's total disbursements come from the EMI card segment. However, they caution that prolonged “restrictions would affect the company’s customer acquisition momentum” since the EMI card segment constitutes 18-21% of total new customer acquisitions. They also expect a potential decline in the return on assets in the case of lower fee income, and pressures in the Net Interest Margin (NIM) in H2FY24.
2. Aarti Industries:
Geojit BNP maintains its ‘Buy’ call on this specialty chemicals manufacturer with a target price of Rs 600. This indicates an upside of 15.1%. In Q2FY24, the company’s net profit fell 27.2% YoY, while its revenue dropped by 13.7% YoY.
The revenue was lower than the brokerage’s estimates due to inventory destocking and decreasing realisation. According to analyst Anil R, sequential growth in EBITDA was led by falling input costs and operational expenses.
The company’s management says that the worst impacts were observed in H1FY24, with demand revival in dyes, polymers, additives, and some discretionary categories. Aarti Industries has also planned a capex of Rs 3,000 crore for 40 new value-added products over FY24-25.
The analyst says, “Our confidence is bolstered by the sector's robust growth prospects, Aarti Industries strategic emphasis on portfolio expansion, aggressive capacity expansion, and the anticipated uptick in long-term contracts.” He expects profit to grow by 12% CAGR over FY24-25.
3. Tata Steel:
Bob Capital reiterates its ‘Buy’ call on this steel products manufacturer with a target price of Rs 150, indicating an upside of 18.8%. According to analysts Kirtan Mehta and Yash Thakur, the company’s Q2FY24 performance has been weak but only marginally below their estimates. They suggest a sequential improvement in Q3 is likely, and note that the company’s “profit has bottomed in Q2 as operations in the Netherlands return to breakeven, and India’s H2 demand outlook improves”.
Tata Steel’s cash transition cost assessment of 235 million pounds for redundancies and asset closures aligns broadly with the brokerage’s prior estimate of 250 million pounds for the decarbonisation of its UK operations. The company has planned a similar capex for transitioning the operations in the Netherlands as well. Despite the weak results, the analysts remain confident in Tata Steel’s ability to deliver earnings-accretive growth.
4. KNR Constructions:
HDFC Securities maintains its ‘Buy’ rating on this construction & engineering company with a share price target of Rs 341, implying an upside of 14.3%. In Q2FY24, its net profit grew by 27.8% YoY to Rs 147.4 crore and revenue increased by 8% YoY.
Analysts Parikshit D Kandpal, Nikhil Kanodia and Manoj Rawat note that while KNR’s revenue and profit growth in Q2 were healthy, its EBITDA margin fell YoY due to volatile raw material prices and higher fixed costs. They add that the firm recorded no new orders in H1FY24, leading to a “revised FY24 order inflow target range of Rs 3,000-4,000 crore, down from Rs 4,000-5,000 crore earlier”.
However, the analysts expect the firm to win orders in H2FY24 on the back of diversification into different segments and geographies. Kandpal, Kanodia and Rawat remain optimistic about KNR’s prospects given its healthy balance sheet, strong execution capabilities and order pipeline. They estimate the company’s net profit to grow at a CAGR of 10.4% over FY23-26.
5. Grasim Industries:
Motilal Oswal keeps its ‘Buy’ rating on this cement manufacturer with a target price of Rs 2,380. This implies an upside of 20.4%. In Q2FY24, its net profit rose by 15.3% YoY to Rs 1,163.8 crore and revenue grew by 10% YoY. Analysts Sanjeev Kumar Singh and Mudit Agarwal attribute the growth in net profit to a healthy performance in the viscose staple fibre (VSF) segment. VSF, a man-made biodegradable fibre, is emerging as an alternative to cotton. However, the analysts point out that the firm’s EBITDA was impacted due to cost pressures in the chemical segment.
Singh and Agarwal expect the company’s margins to stabilise in H2FY24 on the back of caustic soda prices improving from their lows. They see the slight rise in VSF prices in China and the launch of its paint business as key positives. They add, “We believe that the firm raising Rs 4,000 crore through a rights issue will ease pressure on the balance sheet and support its growth plans.” The analysts expect the company’s revenue to grow at a CAGR of 9.5% over FY23-25.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
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