Domestic brokerages have give fresh updates on a handful of stocks that they track. Among them are Vedanta, LTIMindtree, Hindustan Zinc, Axis Bank & Hindustan Unilever. While Vedanta, Axis Bank and HUL are a 'Buy', a brokerage is ‘Neutral’ on LTIMindtree. Following the recent upside in the shares of Hindustan Zinc, a domestic brokerage has suggested 'Reduce' on the counter.
Vedanta | Nuvama | Buy | Target Rs 374
Nuvama Institutional Equities interacted with Vedanta to get an update on its ongoing expansion plans, parent’s deleveraging target and more. Nuvama said FY24 is the year of commissioning of Vedanta's ongoing expansion in zinc, aluminium, alumina, coal. The company, it said, suggested that high dividend payout will continue in FY24 and FY25. The focus will remain on curbing carbon emissions at the forefront.
"Vedanta's low cost status in zinc and efforts to reduce its aluminium CoP below $1,500 per tonne on a sustainable-basis (likely by FY26) will be a long-term positive. The expectation of reopening of China (demand to improve) will help base metal prices to sustain higher, providing a cushion to our financial numbers. Besides, we expect Vedanta to pay dividend per share (DPS) of Rs 48 and Rs 45 in FY24E/25E, implying a dividend yield of 15 per cent at CMP," Nuvama said.
The brokerage has increased itsb FY23-25 EPS estimates by 2-5 per cent to factor in higher zinc prices. It expects Ebitda CAGR of 15 per cent during FY23-25E amid lower aluminium CoP, higher volume in aluminium, zinc and steel. It has maintained a ‘BUY’ with a revised target of Rs 374 from Rs 355 earlier.
LTIMindtree | Motilal Oswal Securities | Neutral
Motilal Oswal in its latest report noted that the merger formalities of L&T Infotech and Mindtree were concluded on November 14 and LTIMindtree started trading from December 5. The integration of both entities has gone off smoothly, with a few changes in terms of responsibility and without any attrition at the senior management level, the brokerage said,..
The combined entity has a greater diversification in terms of verticals and strong revenue synergies, it said. The larger scale will help it gain direct access to the board room, which should improve its ability to tap deals of over $100 million. The minimum client overlap provides strong cross-selling and up-selling opportunities, it said.
"For the merged entity, the management aims to achieve $5 billion in revenue by FY24. Scale from the merger, rationalisation of a common infrastructure pool, and G&A expenses provide a good margin upside potential. We value the stock at 25 times FY24E EPS (similar multiple assigned to the erstwhile LTI) and ascribe a Neutral rating, with a target of Rs 4,950, as the current market price fairly factors in revenue synergies and other benefits from being a larger entity,"
Hindustan Zinc | Nuvama | Reduce | Target Rs 289
Nuvama said Hindustan Zinc (HZ) Ebitda is expected to peak out in FY23 with zinc prices likely scaling down from the FY23-average with concurrent volume CAGR of 4 per cent over FY23-FY25E to 1.1 million tonnes. Being an efficient producer, CoP is likely to reduce marginally with a fall in coal prices, the brokerage said.
Nuvama said the government intends to offload its 29.5 per cent stake in Hindustan Zinc in tranches via open market, thereby increasing the free float from 5 per cent. The incremental share supply, ambiguity on usage of cash post-dilution of GoI’s holding is likely to put pressure on the stock, it said.
Earlier, the management had evaluated to acquire Zinc International, owned Vedanta.
"We increase our fair value to Rs 292 (earlier Rs 289), based on 6.5 times FY24E EV/Ebitda. However, with the recent uptick in the share price and expectation of GoI’s dilution, we do not see any upside in the stock. We downgrade the stock to ‘REDUCE/SU’" it said.
Hindustan Unilever | Sharekhan | Buy | Target 3,005
Sharekhan said Hindustan Unilever (HUL) is one of the leading consumer goods companies in India with portfolio of over 50 purposeful brands having market leadership in 85 per cent of the portfolio. HUL's revenues and PAT grew at a CAGR of 9 per cent and 13 per cent over the last ten years, with operating profit margin rising 1,000 bps. The company is a big believer in the India growth story with low penetration, lower per capita consumption versus some of the developing countries and rural consumption much lower compared to urban markets providing large opportunities for consumer goods companies to achieve consistent earnings growth, it said.
"With strategies in place, HUL is focusing achieving consistent double digit revenue growth with modest expansion in the OPM in the medium to long term. We expect HUL’s revenues and PAT to grow at CAGR of 14 per cent and 16 per cent respectively over FY2022-25E. HUL remains preferred pick in the consumer good space because of its leading position, gain in market share, expanded distribution reach of 9 million outlets, strong cash flow generation and consistent dividend payout. The stock is trading at 53x/45x its FY2024/25E EPS, which is at discount to its last five-year historical average," Sharekhan said.
Axis Bank | Prabhudas Lilladher| Buy | Target Rs 1,100
Prabhudas Lilladher said its experience of attending the Axis Bank's Analyst Day was positive as there seemed to be a clear priority on profitability and consistency. The management, it said, sounded confident of maintaining operational performance as cushion on NIM would continue while medium term guidance was to reduce opex/assets by end FY25 to 2 per cent (FY22 was 2.18 per cent) by focusing on segments that are opex lighter.
"Loan growth would largely hinge on deposit accretion and as per Axis Bank system deposit growth could remain weak for 2-3 quarters, however, profitability would not be compromised. CITI acquisition may be a bit delayed and could see fruition post Q4FY23. Near term growth would be funded through internal accruals and capital raise would be evaluated only after CITI acquisition. Over medium term, bank would like to deliver on aspirational ROE of 18 per cent," PL said.
For FY24E/25E, the brokerage lowered its opex estimates by 4.5 per cent/6.5 per cent and raised PAT by 5.5 per cent/8 per cent. "Axis Bank remains one of our top picks with compelling valuation at 1.8 times," it said.
Also Read: SGX Nifty sheds 74 points; Asian markets, oil prices, FPI flow trend; Bikaji Foods, PTI India Q2 results & more
L&T Infotech and Mindtree’s integration has gone off smoothly, with a few changes in terms of responsibility and without any attrition at the senior management level, said a brokerage 
Special 
