HPCL — Buy
Recommendation by Centrum Broking
HPCL recurring EBITDA/PAT for Q2 at Rs36/25bn (+55/135% yoy) was significantly ahead of estimates of Rs20.5bn/11bn respectively, led by higher marketing volumes, stronger GRMs (supported by US$2.4/bbl inventory gains) and lower other expenses, offset marginally by lower refining thruput. H1FY21 EBITDA/PAT of Rs56.5/39.6bn have grown at an impressive 43/92% yoy, aided by higher inventory gains, strong marketing margins and lower opex. Additionally, Rs12.6 inventory gains in marketing nd Rs5.2bn forex gains supported earnings. The company announced a Rs25bn buyback plan for shares @maximum price of Rs250/sh (~20% higher than today’s CMP) which will not see any promoter participation, thus supporting prices in near term.
Dabur India — Buy
Dabur’s Q2FY21 print surpassed our estimates. Consol. revenue/ EBITDA/ APAT grew 13.7%/16.3%/8.8% YoY. The domestic business reported solid growth of 19.8% driven robust volume growth of 16.8%, while International (26% of sales) grew 3.5% (CC). We note, superlative efforts undertaken by Dabur are leading to transformation in its performance in past few quarters banking on healthcare opportunities established by COVID crises. Management cited its power brand strategy and focus on rural coverage resulted in resilient performance. Further, volume growth was fuelled by 40% rise in ad-spend, yet Dabur aspire to spend 10-12% of sales on ASP in-line with the industry. Considering sharp focus on Health/ hygiene segment we have increased estimates and retain our Buy rating with DCF-based revised TP of Rs590, implying 52.5x FY22E EPS.
City Union Bank — Buy
City Union Bank (CUBK) earnings were positive on all fronts. NII was a beat driven by better NIM (led by lower deposit cost) while loan growth (+6.3% YoY) was a tad higher. Other income too outperformed led by better fee income and recoveries. Provisions rose as Rs1.15bn was further provided to strengthen the balance sheet. Activity levels are recovering faster than expected and have reached 85% barring a few stressed sectors. 4% of loans could enter restructuring and collection efficiency reached 90% in Sept-20. Management guidance for FY21E is 3.0-3.3% in case of slippages and 1.0-1.25% of RoA (our est. of RoA is 0.9%). Tier-1 is strong at 16.3%. Raise multiple/TP to 2.5x FY22E ABV and Rs190. BUY.
Indian Oil Corporation — Buy
IOCL reported EBITDA/Adj. PAT at Rs94.3/Rs62.2bn, up 2.6x/20x yoy, ahead of CenE EBITDA/PAT of Rs62/Rs25bn, driven by stronger refining margins, lower other expenses and higher marketing volumes qoq. Reported gross margins at Rs199bn (+31% yoy), beat CenE Rs178.7bn due to aforementioned factors. Reported GRMs at $8.6/bbl were well above CenE $3.4/bbl, supporting earnings. However, core GRMs of –US$1/bbl were disappointing and it was via sharply higher inventory gains of US$9.6/bbl that company benefited. H1FY21 EBITDA/PAT of Rs149/81bn have grown 32/2.2x yoy and the earnings were also supported by sharply lower other opex of 83.7bn (-14% yoy) well below Rs94bn estimated.
State Bank of India — Buy
Recommendation by LKP Securities
We expect the bank to post a ROA/ROE of 0.5%/8.9% by FY22E led by healthy balance sheet growth along with higher PCR and stable asset quality. We value the standalone bank at PBV of 0.7xFY22E Adj. BVPS of ?255 and value of subsidiaries per share of ?112 to arrive at price target of ?290. We recommend a BUY with potential upside of 41%.
Zee Entertainment — Buy
Recommendation by LKP Securities
Q2 witnessed a good sequential recovery though on a yoy basis the numbers were down. Loss of viewership share in some key markets is a cause of concern as competition is getting aggressive, however launch of new content should take care of this in the ensuing quarter. Ad business recovery is getting delayed and may lead to a sharp 25% decline in FY 21 growth, but an equal magnitude of bounce back is expected in FY 22E.
Competition from global and local OTT payers remains a constant risk to the industry. However, we expect a full blown recovery in Q4 and FY22 with revival in the Ad industry and Zee5 losses reduction with voluminous launch of quality content. Positive FCF during pandemic times in challenging operational environment is creditable. Probable opening up of multiplexes will surely lead to a better movie business as well. On valuations, the stock is looking quite attractive at 12x FY 22E earnings. Based on FY 22E we maintain our BUY rating on Zee, however prune down our target price from ?268 to ?235 (15x FY 22E).
Hero MotoCorp — Buy
Recommendation by Geojit Financial Services
As expected, company benefited primarily from improved demand from the rural areas, while growth rates remained on the lower side in semi-urban and urban areas. Nonetheless, company’s YTD sales figures look encouraging and should improve further with the festive season. At current price levels, the valuation looks attractive. Hence, we upgrade our rating on the stock to BUY with a revised target price of Rs. 3,345 based on 19x FY22E adj. EPS.
BPCL — Buy
Given the very impressive H1 performance (PAT up 2.2x yoy), we revise our EPS estimates upwards by 30/17% for FY21/22E to factor stronger marketing margins, higher volumes and lower opex which is offset to some extent by lower GRMs and higher capex in FY22E. Our estimates factor in GRMs of US$3/bbl in FY21E and US$5.3/bbl (unchanged) for FY22E, marketing volume decline of 12.3% (vs 13% decline earlier) in FY21E (growth of 4.5% in FY22E). Given these metrics, valuations of 8x FY22E EPS/ 7x EV/EBITDA and P/BV of 1.8x remain attractive. Maintain Buy with target price at Rs490, upside of 43%.
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