HDFC Securities Says to BUY These 3 Stocks Next Week, Posts Strong Q1 Results

July 24, 2022

Montana Mortgages

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Following Q1FY23 results, brokerage firm HDFC Securities is bullish on shares of UltraTech Cement, Bandhan Bank and Mphasis. The brokerage has set a target price of INR 7,295 for UltraTech Cement, implying 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 Mphasis shares, representing a potential gain of 29% from the current price.

UltraTech Cement

The brokerage said that “UTCEM’s consolidated EBITDA in Q1FY23 came in around 10/15% ahead of ours/consensus numbers. Due to high fuel prices, UTCEM’s consolidated EBITDA/APAT in Q1FY23 fell 6/7% YoY (despite revenue growth of 28%).While EBITDA per unit fell 20% YoY, it rebounded 11% YoQ to reach a healthy level of INR 1,236/MT UTCEM has warned that its fuel cost has not yet peaked, it will add capacity of around 40 million metric tons during fiscal years 23-25E, increasing its gray capacity to 154 million metric tons by the end of FY25. It also plans to double its share of green power to 36% in FY25 from 18% currently.”

“The UTCEM-guided exit price on June 22 is down about 3-5% from Q1FY23 due to the onset of the monsoon. It expects its energy cost to continue to decline. quarter-to-quarter for 2-3 quarters UTCEM will spend ~INT 60 billion in Capex in FY23E, which also includes Phase 2 Capex. 16.7 million metric tons by the end of FY23 and approximately 23 million additional metric tons (North, Central, East and South by the end of FY23) 25e) Targets gray capacity of 154m MT by FY25 UTCEM is also aggressively expanding its green power capacities with a target of around 36% share by FY25 (Q1FY23 – 19%) We maintain our estimates for the 23/24 financial year as well as the target price of the stock,” said HDFC Securities.

“We are maintaining BUY on UltraTech (UTCEM) with an unchanged target price of INR 7,295 (16x Consolidated EBITDA Mar’24E). We continue to like the company for its strong growth, margin outlook and balance sheet management,” the brokerage said.

Bandhan Bank

HDFC Securities said in a note that “Despite a strong rebound in advances (+20% YoY), Bandhan reported a failure of around 14% due to soft NIMs (8%) and lower other income (-66% YoY) Incremental growth was driven by non-EEB business, in line with the bank’s strategy to drive portfolio diversification (FY25 targeted the group’s EEB share in the portfolio at 26%. Gross slippages were high (~5.4%), driven by the EEB portfolio due to Assam floods/restructuring, resulting in a QoQ increase of 79 bps in GNPA. We remain attentive to asset quality and the impact of a shift in portfolio composition on the bank’s stable return metrics We are reducing our FY23E /FY24E estimates to account for lower other income and higher credit costs Maintain BUY with price c revised ible of INR 396 (2.7x Mar-24 ABVPS).”

“The bank’s strategy of foraying into other retail and commercial banking businesses is on track. While we appreciate the need to diversify the loan portfolio for greater franchise stability, we believe this could set a new standard for steady-state performance metrics. We are monitoring redemption trends arising from the restructured portfolio to gain additional confidence in asset quality,” the brokerage added.

Mphase

“Mphasis (MPHL IN) reported lower online revenue and margin in the first quarter. Growth in direct international business (+2.4% T/T CC) was impacted by the weakness of the mortgage credit division. MPHL’s growth outlook remains strong, based on (1) healthy deal volume (USD 302m net new TCV in Q1FY23, up 18% YoY, ex-large deal of 250 million USD won in Q1FY22); (2) trending deal pipeline (up 6% quarter-on-quarter and 10% year-on-year); (3) a lower revenue contribution from the DXC business (

“We expect weakness in the (short-term) mortgage segment and weakness in DXC to have a combined impact of 250 basis points on FY23 growth. UK may have some impact, winning a cloud transformation contract over $60m TCV and onshore pricing is offset Operating margin levers include onshore pricing and improved utilization Maintain BUY with a TP of INR 2,940, valuing MPHL at 28x FY24E EPS, backed by the industry’s best large client mining engine, consistency in large contracts won and stable operating metrics,” the brokerage said.

“We factored in +14.3/13.1% revenue growth, based on direct business growth at +17.2/14.5% and DXC channel growth at -24. .1/-13.1% for FY23/24E respectively; Additionally, we considered an EBITM of 15.2/15.5% for FY23/24E, which translates to an EPS CAGR of 16% on FY22-24E,” HDFC Securities shared as a prospect for the stock.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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