This is a start of the new week and earnings season has kickstarted. So what should be your top stock bets? Here is a look at some of the top recommendations from Jefferies-
HDFC Life Insurance
Jefferies sees 28% upside potential in HDFC Life Insurance Company and recommended ‘Buy’ with an upside target of Rs 800 in its report. “Forward-looking trends are more encouraging as wallet share in HDFC Bank has risen to 65% already, sales from agency can improve & other banca partners are growing. This should lift growth in premiums from the 2nd half of FY24 to 17-20% (ex-one time in Mar-23) & can sustain over next 2yrs as well, ” said Jefferries in its report.
The stock price of HDFC Life Insurance Company gained 1.10% in the last five days, fell 4.88% in the last one month, and gained 17.67% in the last six months and 19.80% in the last one year.
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The report further said that, “We tweak estimates and see 19% APE & VNB growth over FY 24-26. We see headroom for healthy returns given the growth and compounding of embedded value (ROEV of 17-18% in FY25). We maintain HDFC Life among our top picks with a target price of Rs 800, based on 3xSep-25E P/ EV.”
Jeffries however cautioned that the slower growth in protection, higher mortality experience, lower APE growth, and any uncontrolled inordinate growth in guaranteed products could act as possible risk.
Avenue Supermarts (DMART)
Jefferies recommended ‘Hold’ on the Avenue Supermarts with a revised target price of Rs 3,850. “We slightly tweak our FY 24-26E earnings and roll over to September 25. Maintain HOLD with a revised Target Price of Rs 3,850 (on roll-over). We see pick-up in store adds and improvement in gross margin and administrative expenses (GM&A) mix as a must for stock performance,” said Jefferies in its report.
The stock price of Avenue Supermarts rose 1.36% in the last five days, 1.06% in the last one month, 9.7% in the last six months, while it fell 7.57% in the last one year.
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The Jefferies’ report further added that, “Second Quarter EBITDA was below our/consensus estimates on lower GMs and higher staff costs. General merchandise & apparel mix remained muted, driving GM pressure and concerns continue if mix deterioration is cyclical or structural – we are unsure on this as of now. On the positive, 1H SSG at 8.6% is respectable, with improving footfalls, evident from higher per-storetransactions. Store adds remained muted but should see a ramp-up. “
Jefferies however, has cautioned the deceleration in store additions, de-rating of valuation multiples. Key upside risks: Accelerated store additions, sharp recovery in the non-FMCG segment may act as key risk factors.
Dalmia Bharat
Jefferies sees 6% upside potential in Dalmia Bharat and recommended ‘Buy’ with an upside target price of Rs 2,440. “Earnings season for the cement sector started on a tad positive note with EBITDA beat for Dalmia Bharat. Co reported 55% YoY growth in EBITDA for 2Q (7% beat) driven by lower costs. Overall cost/T declined 8% YoY (4% beat) largely driven by lower freight and other expenses. Dalmia recorded 6.6% year-on-year growth (impacted by lower growth in east); realisation dipped 1% QoQ quarter-on-quarter(2% miss). Cement capacity now stands at 43.7 million metric tons per annum (MTPA) vs 41.7 MTPA as of 1Q end,” said the Jefferies report.
Dalmia Bharat’s share price has surged 4.64% in the last five days, while it fell 1.15% in the last one month, whereas it soared 14.89% in the last six months and a shopping 54.99% in the last one year.
Jefferies, however, has cautioned that a delay in ramping up new capacities, a higher than expected fight for market share in key eastern regions resulting in sharper than expected price decline, and costs sustaining at higher than expected levels could act as potential risk factors.
