1. Axis Bank:
HDFC Securities maintains its 'Buy' rating on this bank with a target price of Rs 1,150, indicating an upside of 13%. In Q2FY24, the company reported a revenue growth of 32% YoY to Rs 27,417.5 crore, while its net profit increased by 10.5% YoY. Analysts Krishnan ASV, Neelam Bhatia, and Akshay Badlani are optimistic about its improved deposit quality and aggressive credit card rollout following the Citi acquisition.
Analysts believe that the bank is investing in technology, using initiatives like Siddhi and Sparsh to improve branch productivity and consumer engagement. These efforts are expected to reach full potential in 7-8 quarters, putting the bank in line with its peers. Deposits have shown a steady improvement, with a 550 bps reduction in outflow rates over the past two years. In the past six quarters, the bank has increased lendable deposits by 34% while reducing non-lendable deposits by 17%.
After the acquisition of Citi's wealth business, Axis Bank now holds the third-largest wealth management franchise, with AUM exceeding Rs 4.5 trillion. With a dominant position in merchant acquisition (19% market share in PoS terminals), the bank is expected to maintain steady performance and deliver an RoE of 16-17% over the next few years, according to the analysts.
2. Coal India:
Motilal Oswal maintains its 'Buy' rating on this coal company with a target price of Rs 380, indicating an upside of 12.3%. In Q2FY24, its net profit increased by 12.5% YoY to Rs 6,799.7 crore and revenue increased by 9.9% YoY. Analysts Alok Deora and Parthiv Deepak Jhonsa are confident in the company's ability to achieve its production target of 780 million tonnes in FY24, driven by robust consumption demand.
Deora and Jhonsa expect Coal India’s e-auction premiums to remain stable at 85-90%, reflecting its goal to produce 1 billion metric tonnes within the next three years. With an expected 7.2% growth in domestic power generation to 1,750 billion units in FY24, analysts foresee increased demand for coal. The company is also diversifying its portfolio by investing Rs 150 billion in setting up 3 GW of solar capacity by FY26.
Deora and Jhonsa believe that the company is well-positioned to capitalise on future growth opportunities. They add that any post-election rise in fuel supply agreement prices could further boost the company's financial performance.
3. Devyani International:
KRChoksey maintains its ‘Buy’ rating on this quick service restaurant with a target price of Rs 230, implying an upside of 28.7%. In Q2FY24, the firm’s net profit fell by 43.2% YoY to Rs 33.4 crore and revenue increased by 9.6% YoY. Analyst Unnati Jadhav believes that the company faced seasonal weakness and a challenging macroeconomic environment in Q2, leading to lower same-store sales growth (SSSG) and average daily sales (ADS), impacting profitability. However, she notes that its revenue has grown on the back of new store additions, despite unfavourable market conditions.
Jadhav expects consumer sentiment to improve in the coming quarters and believes that Devyani is well-placed to benefit from this through its aggressive store expansion plans. She adds, “The brand contribution margin should improve going forward due to operating leverage and new store stabilisation.” She also believes that the firm is on track to meet its target of 2,000 stores by 2026. The analyst sees the firm’s expansion into non-metro cities in India as a key positive. She expects Devyani’s revenue to grow at a CAGR of 22.5% over FY23-25.
4. The Ramco Cements:
Geojit BNP Paribas maintains its ‘Buy’ rating on this cement products manufacturer with a target price of Rs 1,119. This indicates an upside of 16.2%. In Q2FY24, the company’s net profit surged to Rs 72 crore (up 23x YoY), while its revenue increased by 30.6% YoY. Analyst Vincent Andrews cites strong volumes and margin improvements in the quarter for the rating. The company has guided for a 20% volume growth in FY24.
According to the analyst, the firm’s EBITDA margin has sharply improved by 680 bps YoY to 17.1%, mainly due to lower input costs and higher volumes. He notes that despite high capex during FY19-24 (Rs 5,000 crore as against Rs 1,030 crore in FY19), resulting in increased debt, the net debt-to-EBITDA ratio has improved to 3.3x from 4.5x in the last capex cycle. Andrews concludes, “The Ramco Cements’ capacity expansions, coupled with government push on infra and housing, will help future volumes. Lower input costs and a focus on deleveraging post FY24 will support valuation.”
5. Finolex Cables:
Sharekhan maintains its ‘Buy’ rating on this electrical equipment company with a target price of Rs 1,100, indicating an upside of 15.7%. In Q2FY24, the company’s net profit grew by 21% YoY to Rs 165 crore, while its revenue was up by 8.9% YoY at Rs 1,187 crore.
Despite challenges like unseasonal rains affecting discretionary spending and the FMCG segment last quarter, the management considers a margin guidance of 14% realistic, provided raw material prices stabilize. It is also planning a capex of Rs 400 crore in the next 12-18 months to expand capacity across various product categories.
Analysts predict long-term growth for the company, driven by demand in key sectors like automotive, construction, and industrials. They also expect the government's Bharat Net program to boost demand for its communication cables. “Its capacity expansion across all product categories and backward integration in the optical fiber cables (OFC) segment will drive volume and margin growth in the long run,” say the analysts.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
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