BackHDFC Securities says to BUY these 3 stocks next week, post healthy Q1 earnings
Following the Q1FY23 results, the brokerage company HDFC Securities is bullish on the shares of UltraTech Cement, Bandhan Bank, and Mphasis.
PremiumFollowing the Q1FY23 results, the brokerage company HDFC Securities is bullish on the shares of UltraTech Cement, Bandhan Bank, and Mphasis. The brokerage has set a target price of INR 7,295 for UltraTech Cement which implies a potential upside of 13% from the current market price. The brokerage has set a target price of INR 396 for Bandhan Bank, indicating a potential upside of 38% from the current market price. And HDFC Securities has set a target price of INR 2,940 for the shares of Mphasis, representing a potential gain of 29% from the current price.
UltraTech Cement
The brokerage has said that “UTCEM’s Q1FY23 consolidated EBITDA came in ~10/15% ahead of ours/consensus numbers. Due to elevated fuel prices, UTCEM’s consolidated EBITDA/APAT in Q1FY23 fell 6/7% YoY (despite 28% revenue growth). While unitary EBITDA fell 20% YoY, it rebounded 11% QoQ to a healthy INR 1,236/MT. UTCEM cautioned that its fuel cost has not yet peaked out. It will be adding ~40mn MT capacity during FY23-25E, expanding its grey capacity to 154mn MT by the end of FY25E. It also expects to double its green power share to 36% in FY25, vs 18% currently."
“UTCEM guided June-22 exit price is down ~3-5% vs Q1FY23 due to the onset of monsoon. It expects its energy cost to continue to rise QoQ for 2-3 quarters. UTCEM will spend ~INT 60bn in Capex in FY23E, which also includes phase-2 Capex. It plans to add 16.7mn MT capacity by FY23 end and another ~23mn MT (across north, central, east and south by FY25E). It is targeting grey capacity of 154mn MT by FY25. UTCEM is also aggressively expanding its green power capacities with a target of ~36% share by FY25 (Q1FY23 - 19%). We maintain our FY23/24E estimates as well as target price on the stock," said HDFC Securities.
“We maintain BUY on UltraTech (UTCEM) with an unchanged target price of INR 7,295 (16x Mar’24E consolidated EBITDA). We continue to like the company for its strong growth and margin outlook and balance sheet management," said the brokerage.
Bandhan Bank
HDFC Securities has said in a note that “Despite a strong rebound in advances (+20% YoY), Bandhan reported a ~14% miss on account of soft NIMs (8%) and lower other income (-66% YoY). Incremental growth was led by non-EEB businesses, in line with the bank’s strategy to drive portfolio diversification (FY25 targeted Group EEB share of portfolio at 26%). Gross slippages were elevated (~5.4%), stemming from the EEB portfolio due to Assam floods/restructuring resulting in a 79bps QoQ increase in GNPA. We remain watchful of the asset quality and the impact of a shift in portfolio mix on the bank’s steady-state return metrics. We reduce our FY23E /FY24E estimates to factor in lower other income and higher credit costs. Maintain BUY with a revised target price of INR396 (2.7x Mar-24 ABVPS)."
“The bank’s strategy to foray into other retail and commercial banking businesses is on track. While we appreciate the need for loan book diversification for greater franchise stability, we believe this could set a new normal for steady-state return metrics. We are watchful of the repayment trends flowing in from the restructured book to gain incremental confidence on asset quality," added the brokerage.
Mphasis
“Mphasis (MPHL IN) posted lower revenue and in-line margin in Q1. Growth in direct international business (+2.4% QoQ CC) was impacted by softness in the mortgage business unit. MPHL’s growth prospects remain strong, basis (1) healthy deal intake (USD 302mn net-new TCV in Q1FY23, up 18% YoY ex-large deal of USD 250mn won in Q1FY22); (2) trending deal pipeline (up 6% QoQ and 10% YoY); (3) lower revenue contribution of the DXC business (<5% of the revenue); and (4) high growth from account acquisition channel," HDFC Securities has said.
“We expect the softness in the mortgage segment (near-term) and DXC weakness to have a combined impact of 250bps to FY23 growth. While deal conversion in the UK geography may have some impact, USD 60mn+ TCV large cloud transformation deal win and onshore pricing are offsets. Operational margin levers include onshore pricing and improvement in utilisation. Maintain BUY with a TP of INR 2,940, valuing MPHL at 28x FY24E EPS, supported by an industry-best large client mining engine, consistency in large deal wins, and stable operating metrics," claimed the brokerage.
“We have factored in +14.3/13.1% growth in revenue, based on growth in the direct business at +17.2/14.5% and DXC channel at -24.1/-13.1% for FY23/24E respectively; further, we have factored in EBITM at 15.2/15.5% for FY23/24E, resulting in an EPS CAGR of 16% over FY22-24E," shared HDFC Securities as an outlook for the stock.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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