RIL, HDFC Bank, TCS: Which Nifty stock looks attractive post Q2 result? Here’s what analysts say

As many as 29 Nifty 50 firms have announced their financial results so far for the quarter ended September 30, 2023, (Q2). According to ICICI Securities, the ongoing earnings season to date has not provided any major negative surprises with cyclicals driving profit growth, while defensives lag. Data showed that the consolidated net profit of Nifty firms has jumped 35 per cent so far, while gross sales have increased by over 9 per cent on a year-on-year basis. Brokerages are bullish on a couple of blue chips post Q2 results.

Index heavyweight Reliance Industries (RIL) reported a 27.37 per cent rise in consolidated net profit at Rs 17,394 crore in Q2FY24. On the other hand, gross sales of India’s most valued company grew 1.2 per cent YoY to Rs 2.56 lakh crore during the quarter under review.

While upgrading RIL to ‘Buy’ post Q2 results, Systematix Institutional Equities in a report on October 29 said, “RIL reported healthy results during Q2FY24 but largely in line with our estimates. We keep our forecast unchanged and expect earnings to remain tepid at 6.4 per cent CAGR during FY23-FY25E on the back of weak O2C and slower growth in consumer businesses. However, the stock has corrected around 11 per cent since we downgraded the stock post-Q1FY24 result. Hence, we upgrade the stock to a ‘Buy’ which gives an upside of 13 per cent. Potential tariff hike post-election and revival in petchem margins in H2FY24 are a few upside triggers.”

Other index heavyweight Tata Consultancy Services (TCS) posted 8.7 per cent YoY growth in net profit for the quarter ended September 30. Kotak Institutional Equities believes that IT companies have adequate levers to improve margins over the medium term. “We build in a 60-110 basis points margin expansion over FY2024-26E for TCS, Infosys and HCL Technologies,” the brokerage said. Infosys and HCL Technologies posted 3.2 per cent YoY and 9.8 per cent YoY, respectively, growth in Q2 net profit.

Kotak has set a target price of Rs 3,760 for TCS, Rs 1,700 for Infosys and Rs 1,410 for HCL Technologies. Shares of TCS, Infosys and HCL Technologies traded at Rs 3,356, Rs 1,365 and Rs 1,267, respectively, in the afternoon trade on October 31.

Among the key performers, Maruti Suzuki, UltraTech Cement and Asian Paints also posted over 50 per cent YoY growth in their respective bottom lines during the quarter under review. SMIFS Ltd set a target price of Rs 12,432 for Maruti Suzuki post-Q2 results. Shares of the auto major traded at Rs 10,400 in Tuesday’s afternoon trade.

“Our long-term view on Maruti Suzuki remains positive as the company is committed to launching 10-11 new models (including six EVs) by FY31 with 4 million units capacity, around 800K exports and backward integration/localization in EVs with the support of Suzuki Corp. All these steps are positive to gain market share and remain Numero Uno,” SMIFS said.

India’s largest private sector bank HDFC Bank posted a net profit of Rs 16,811 crore in Q2 against Rs 11,125 crore in the same quarter last year. The bank presented for the first time its Q2FY24 results after the merger with one of the largest housing finance lenders, HDFC, on July 1 2023.

According to BP Wealth, HDFC Bank came out with decent numbers, beating street estimates for net profit in Q2FY24. However, due to the merger effect, the numbers were not comparable on an apple-to-apple basis.

Net profit of FMCG major Nestle and ITC grew 37.3 per cent and 6 per cent, respectively, on a YoY basis. On the other hand, the net profit growth of HUL stood almost flat at Rs 2,656 crore during the quarter under review.

Sharing its view on Nestle India, IIFL Securities in a report said, “Nestle India has executed its distribution strategy well, which resulted in robust 11.3 per cent sales CAGR over the past four years (2018-22). In the past few quarters, Nestle’s growth has been largely driven by a higher pricing growth that is expected to rise in the coming quarters. Moreover, with nearly 0.2mn villages covered, distribution seems to have limited scope for growth.” The brokerage has set a target price of Rs 25,000 for Nestle India.

On the other hand, KRChoksey Shares and Securities is positive on ITC with a target price of Rs 533 (Rs 540 earlier). “ITC has continued to see strong performance in the key segments of cigarettes (39.1 per cent of gross revenue in Q2FY24) and FMCG-others (24.9 per cent of gross revenue in Q2FY24) and from the smaller segment of hotels (3.2 per cent of gross revenue in Q2FY24),” KRChoksey Shares said in a report.

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