Brokerage Radar: SBI sees target upgrades; cautious outlook on SRF

Stock Market Trend

Check the brokerage calls and comments on the stocks in action. Today we cover the State Bank of India, SRF, BPCL, and others following their Q4 results.

State Bank of India

Kotak Instl Eq On SBI
Buy Call, Target Raised To `950/Sh
Reported 25% YoY Earnings Growth Led By Operating Profit Growth & Decline In Provisions
Steady Loan Growth Stable NIM & Solid Asset Quality Metrics Were Key Highlights
Macro Environment Continues To Be Fairly Stable For Lenders
Should See Relatively Stable Performance From SBI
SBI Top Pick, Don’t See A Sharp Outperformance From Current Levels

Citi On SBI
Sell Call, Target Raised To `701/Sh
Q4 PAT Boosted By Few One-offs
Q4 Wage Revision Impact Est & Guided At `54,000 Cr Came In Significantly Lower
At Core Level, Spike In Non-Interest Income & Contained Opex Led To PPoP Beat
I-T Refund Interest `1,300 Cr Supported NII Beat
Credit Growth Was Robust At 5% QoQ With Gained Traction In Corp, Besides Retail

Bernstein On SBI
Market Perform, Target `780/Sh
A High RoA & Multiple Surprises
Multi-quarter High RoA Of 1.36% As Key Highlight, Helping Drive Full Year RoA >1%
Rise In NOI Gains & Continuation Of Low Credit Costs Helped Report PAT Growth
NIM Improved Sequentially By 8 bps
Increase In Yield On Advances Outpacing Rise In Cost Of Deposits

HSBC On SBI
Hold Call, Target Raised To `900/Sh
NIM Improvement Was Led By LDR
Opex Was Lower Than Guidance, Led By Reversals In Pension Provisions
Revise EPS By 8.1/12.2/8.6% For FY25e/26e/27e
Upgrade NIM Outlook & Lower Cost Ratio Est
Stock Already Trading At Premium Multiples

Jefferies On SBI
Buy Call, Target `810/Sh
Reported Profit Much Higher Than Est
While NII Growth Of 3% Was A Tad Higher
Majority Of Beat Is Led By Lower Staff Costs, Higher Treasury Gains
Some Of These Tailwinds May Not Be Recurring In Nature
Loan Growth Stays Around 15-16% Mark; Deposits Rose By 11% YoY
Slippages Remain Low & Gross/Net NPLs Are Down Marginally

Incred On SBI
Add Call, Target `1,000/Sh
Posted Superior Q4 PAT, Despite In-Line Operating Performance
NIM Expanded By 8 bps QoQ As SBI Enjoys Ample Liquidity
LDR AT 75% Providing Lending Dominance At Competitive Pricing Across Segments
Consistent Delivery Of +1% RoA/+16% RoE To Command A Valuation Premium

SRF

Kotak Instl Eq On SRF
Downgrade To Add, Target Cut To `2,360/Sh
Q4 Did Improve Significantly QoQ, But Lagged Expectations
Timeline For A Strong Recovery Is Also Pushed Back Amid Intense China Competition
Cut FY2025-26 EPS By 14-18% As Tone Down Expectations, Particularly On Margin Front

Jefferies On SRF
Underperform Call, Target `2,085/Sh
Mgmt Provided An Optimistic Growth Guidance For Chemicals  Despite A Miss In FY24
Refgas Biz Outlook Is Challenged By Lower Exports To The US
See Chinese Competition In RoW
Mgmt Expects Soft PF Margin In FY25
Cut FY24/25 PAT Est By 6%/3%
Valn Doesn't Adequately Discount The Protracted Downcycle In Key Chemicals Segment

MS On SRF
Overweight Call, Target `2,555/Sh
SRF Addressed Concerns Around Demand & Margins In Its Verticals
Co Pointed To A Gradual Improvement Over Course Of FY25
Ops Leverage From Previous Investments
Gradual Greenshoots In Pricing Will Be Key To Support 20% Growth In Its Chem Segment

MOSL On SRF
Neutral, Target `2,100/Sh
Chemical Business Expected To Witness 20% Growth In FY25
Significant Growth Expected In H2FY25
Positive Operating Leverage Can Lead To Margin Expansion In FY25
Expects Packaging Business Margin To Remain Under Pressure
Management Plans To Incur A Total Capex Of`2,200 Cr In FY25

BPCL

Citi on BPCL
Buy Call, Target `760
Reported A Refining-Led Miss In Q4, With QoQ Recovery In EBITDA
Pre-tax Profit Was Correspondingly 20% Below Estimates
Net Income Was 39% Below Due To `1,800  Cr Impairment Of Investment In Arm
Full Year FY24 EPS Was, Nonetheless, Very Strong At `125/Sh
March 2024 BVPS Stood At `350/Sh & FY24 RoE Was 42%

Asian Paints

Citi On Asian Paints
Sell Call, Target `2,600/Sh
Price Cut (2.4% In Q4) Bundled With Downtrading Led To Revenue Decline YoY
While GM Improved By 120 Bps YoY, EBITDA/PBT Declined By 9%/7% YoY
EBITDA/PBT Decline Led By Higher Investment In Brand/Marketing
PAT Flat YoY Due To Lower Tax
Mgmt Expects Double-digit Volume Growth & 18- 20% EBITDA Margin In FY25

Punjab National Bank

MS On PNB
Underweight Call, Target `70/Sh
Core PPoP Missed Est Owing To Higher Employee Related Provisions
Asset Quality Was Steady And Coverage Improved
CET 1 Ratio Increased QoQ
Underweight On Expensive Valuations

Tata Power

HSBC On Tata Power
Downgrade To Reduce, Target Raised To `300/Sh
Reported Earnings Missed Consensus Est
Exceptional Other Income Supported Profitability
Believe Future Earnings Growth Is Dependent On Government Approvals
Future Earnings Growth Dependent On Competitive Intensity & Coal Prices

UBL

BoFA Sec On UBL
Downgrade To Underperform, Target Cut To `1,850/Sh
Trim Earnings Est By 2-7%
Stock Rally/Current Valuation Capture Near-/Mid Term Upside
Expected Earnings Recovery Could Be Protracted Amidst A Volatile Business Environment
Need To Keep Investments Elevated
Base Case Of Low Double-digit/Teens EBITDA Margin Over FY25-27 Est

Kajaria Cements

HSBC On Kajaria
Buy Call, Target `1,450/Sh
FY24 Was A Year Of Margin Recovery Despite Soft Volumes.
Expect Better Volume Growth In FY25 With New Capacities
Three-year plan unveiled, suggesting penetration led by double-digit tile growth

Mahindra & Mahindra Financial Services

GS On M&M FinDowngrade To Sell, Target Cut To `233 From `269/Sh
Downgrade On Back Of Elevated Credit Costs Given Low ECL Coverage
PCR On Stage 3 At An Average Of 63% Which Is Low
See Higher Cost To Income Ratio At 43.5% Vs SHMF At 27.7%
Loan Growth Has Moderated From 25% In FY24 To 17%/15% In FY25/FY26
Cut Earnings By 9%/7% On A/C Of Higher Operating Expenses
Cut Earnings Est On Lower Disbursal Growth & Marginally Higher Credit Costs
Lower-than-guided-RoA Of 2.2% In FY25
Expect Co To Deliver Avg RoAs Of 1.8% Over FY25-FY26
Believe Would Likely De-Rate Further To 11.6x FY25 EPS/1.3x FY25 BVPS

MS On Cyient

Overweight Call, Target `2,250/Sh
Mgmt Cautious, Pragmatic Approach To Back-Ended Guidance For FY25
Mgmt Confidence In Margin Performance In FY25 Regardless Of Quarterly Variations
Consideration Of Tuck-In Acquisitions For White Spaces
Growing Captives, A Sign Of Market Opening

Oil Marketing Companies

MS On OMCs
Indian Fuel Refiners Reported Good Quarterly Earnings
More Importantly, FY24 Earnings Highlights Structural Shift To Higher Profitability
Refinery Hardware Investments Are Fructifying
BPCL Had Best Outperformance In Margin, While HPCL Gained Fuel Market Share