Despite concerns over valuations of PSUs as a pack, 10 top Nifty 200 constituents with maximum upgrades in consensus FY25 earnings estimates post the June quarter included five state-run companies namely Oil India Ltd, Coal India Ltd, GAIL (India) Ltd, Canara Bank Ltd and Power Finance Corporation Ltd (PFC).
Oil India saw a 17 per cent jump in consensus FY25 earnings per share (EPS) estimate, the maximum among Nifty 200 index constituents post Q1. Following its quarterly results, Emkay Global hiked Oil India's FY25E-26 consolidated EPS estimates by 6-7 per cent each, citing better core outlook. "We lift Sep-25 target price by 31 per cent to Rs 700 on likely gas pricing-led triggers and strong core. We retain BUY," it said.
Barring higher other expenses, Oil India’s Q1 operational results were impressive, said Anand Rathi. "After a sharp run-up in the stock price (up 250 per cent last year), we lower our rating to a Hold, with a higher target price of Rs 644 (Rs 531), 7 times FY26e EV/Ebitda (earlier 5.5x FY26e EV/EBITDA)," Anand Rathi said.
Coal India saw a 14 per cent jump in consensus EPS estimates post June quarter results. PhillipCapital said India energy demand would continue to depend predominantly on fossil fuel and coal would remain the material of choice for energy needs in the medium term.
"Thus, Coal India will continue to fuel the majority of India’s energy needs. Volume growth will strengthen its balance sheet further, and with cash-generation exceeding cash-burn, we expect the dividend yields to remain supportive. We value Coal India by giving equal weight to EV/Ebitda and PE ratio," PhillipCapital said while suggesting a target Rs 621 on Coal India.
Axis Securities values the Coal India stock at six times one-year forward EV/Ebitda. Based on this, it arrived at its target price of Rs 575 per share from Rs 550 per share) earlier.
Among PSUs, GAIL and Canara Bank saw 10 per cent upgrade each in FY25 EPS estimates. Canara Bank reported a mixed quarter with in-line earnings led by lower provisions, thereby offsetting the muted net interest income (NII).
"NIM contracted 17 bps QoQ due to a change in the accounting policy; however, management expects NIM at 2.95 per cent for exit-FY25. Loan growth was led by the retail segment, while deposit growth was modest, with the CASA ratio seeing sequential moderation. We broadly maintain our earnings and estimate Canara Bank to deliver an FY26E RoA/RoE of 1.1 per cent/19.3 per cent. Reiterate Buy with a target of Rs 133 (premised on 1.1 times FY26E ABV)," MOFSL said.
In the case of GAIL, Nuvama has downgraded the stock citing lofty valuations. It believes elevated natural gas marketing earnings are unsustainable given historical volatility; contracting spreads between regional spot LNG and Henry Hub, and contraction of spreads between Brent-linked contracted LNG and Henry Hub-linked contracted LNG due to lower global crude demand growth. Systematix Institutional Equities raised its GAIL target price to Rs 230 from Rs 202 earlier. It suggested a 'Hold' rating on the stock. ICICI Securities, meanwhile, has a 'Buy' rating on GAIL and a target price of Rs 275 on the stock.
PFC saw a consensus EPS upgrade of 9 per cent post Q1 results. A slight near-term downshift in stock multiple is imminent for PFC, said Elara Securities.
"It is due to pangs pertaining to discussions over controversial developer group exposure; growth momentum slowing to 14 per cent. But this may be offset by steady NIM and lower credit costs as chunky account resolutions and effective funding cost management are underway. So, while we factor in overhangs into our estimates, expect a healthy 2.8 per cent RoA and 17 per cent RoE in FY24-26E. We maintain Buy as risk-reward on subsidiary valuation adjusted 1x PABV is favorable," Elara Securities said.