This week we take a look at the stock picks from analysts with YoY growth in net profit during Q3FY24.
1. Route Mobile:
HDFC Securities maintains its ‘Buy’ rating on this internet software and services company with a target price of Rs 1,950, indicating an upside of 24.2%. In Q3FY24, the company's net profit grew by 28.3% YoY to Rs 105.7 crore, with revenue of Rs 1,043.8 crore. Analyst Amit Chandra says, “Route reported muted revenue growth in a seasonally strong quarter due to a slowdown in ILD (International Long Distance) volumes and a delay in deal ramp-up.”
Chandra believes that ILD billable transactions were affected for two months in Q3FY24 due to cost-saving initiatives by large e-commerce and OTT players. But according to the analyst, Vodafone Idea’s (VI) SMS firewall deal holds a revenue potential of $100 million. He believes that the management has revised the growth guidance for FY24 down to 15-20% from the initial 20-25% due to the ILD slowdown and a shift in VI’s deal timelines (from Q3FY24 to Q1FY25).
Chandra also expects a revival in ILD volume, new wins in the domestic market, and contributions from the VI deal to aid growth in FY25. He estimates the company to report a revenue CAGR of 10% over FY24-26.
2. IDFC First Bank:
Axis Direct maintains its ‘Buy’ call on this bank with a target price of Rs 100, indicating an upside of 19.8%. In Q3FY24, the bank’s net profit grew 18.4% YoY to Rs 715.7 crore, while net interest income improved 30% YoY. Analysts Bhavya Shah and Dnyanada Vaidya say, “The bank reported robust loan growth momentum (up 25% YoY) in Q3FY24, driven by consumer and auto loans, and rural finance, with significant growth across segments.”
They note that IDFC First Bank’s deposits growth of 43% YoY was driven by retail deposits, which supported asset growth and repayment of legacy borrowings. The analysts expect the deposits to remain healthy and continue to outpace the growth in advances. They expect opex to remain high in the near term due to the management’s focus on branch expansion, digitalisation and marketing investments.
Shah and Vaidya forecast stable margins and expect the bank to maintain its growth momentum. They predict a credit and deposit growth of 24% and 33% CAGR respectively, over FY24-26.
3. ICICI Bank:
KR Choksey maintains its ‘Buy’ call on this bank with a target price of Rs 1,250. This indicates an upside of 23%. The bank’s net profit grew 25.7% YoY to Rs 11,052.6 crore in Q3FY24, while its net interest income increased by 13.4% YoY to Rs 18,678.6 crore in line with the brokerage’s estimates. Analyst Karan Kamdar says, “The bank maintained resilient performance in Q3FY24, with healthy credit offtake across all segments.”
Kamdar believes that the net interest margins have been contracting and predicts this trend to continue for the next two to three quarters on the back of an increase in the cost of funds, led by the transmission lag impact. ICICI Bank’s management expects the mortgage, corporate, and auto segments to drive growth in the coming quarters.
The analyst projects an 18.7% CAGR in profits, 18.1% CAGR in advances, and 16.8% growth in operating profits over FY24-26. He remains optimistic about the company, citing healthy business momentum that is expected to yield healthy earnings growth and superior return ratios.
4. PNB Housing Finance:
Motilal Oswal maintains its ‘Buy’ rating on this housing finance company with a target price of Rs 1,025, implying an upside of 29.5%. In Q3FY24, the firm’s net profit grew by 25.8% YoY to Rs 338.4 crore (15% below the brokerage’s estimate), while net interest income (NII) declined 19% YoY to Rs 595 crore (11% below the brokerage’s estimate). Analysts Abhijit Tibrewal, Gautam Rawtani, and Nitin Aggarwal attribute the NII decrease to a gradual shift towards retail business. The firm’s net interest margin also fell by 45 bps to 3.5% YoY in Q3FY24. The analysts expect borrowing costs to decline and margins to improve after the credit rating upgrade.
The analysts anticipate recoveries from the written-off pool of loans “in both wholesale as well as retail segments, and expect write-backs to continue for the next three to four quarters starting from Q4FY24.” They expect margins to improve through higher yields and lower borrowing costs and see credit costs remaining flat at 35 bps. The company is projected to deliver a profit CAGR of 28% over FY24-FY26.
5. Rossari Biotech:
Edelweiss maintains its ‘Buy’ rating on this specialty chemicals company with a target price of Rs 926, indicating an upside of 21.5%. In Q3FY24, its net profit grew by 33.9% YoY to Rs 34.4 crore, with revenue of Rs 467.3 crore. Analyst T Ranvir Singh says, “Rossari Biotech’s overall earnings were lower than our estimate due to weaker sales.”
Singh expects the company’s investment to increase Dahej’s capacity by 60.6% to 53,000 mtpa, which will boost revenue from the home, personal care and performance chemicals (HPCC) segment. The HPCC segment contributed 77% to total revenue in Q3FY24. He also sees growth opportunities in Rossari Biotech’s ventures in agrochemicals, oil and gas, chemicals, and silicon oils.
The analyst expects margins to remain stable in Q4FY24 and expand in FY25 and FY26 on the back of softer raw material prices in the near term, and the introduction of high-margin value-added products. He expects a revenue CAGR of 16% over FY24-26.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
