LIC, Adani Power, SBI among top 15 most profitable firms of June quarter. Should you buy any of these?

State Bank of India, the country’s largest lender by assets, emerged as the most profitable company in the June quarter ahead of energy-to-telecom behemoth Reliance Industries (RIL). The public sector lender reported 153 per cent year-on-year growth in consolidated net profit at Rs 18,536 crore in Q1FY24. On the other hand, the bottom line of Reliance Industries declined 10.83 per cent YoY to Rs 16,011 crore during the quarter.

Brokerage Prabhudas Lilladher is positive on SBI shares with a target price of Rs 770, indicating an upside of over 30 per cent from the current market price of Rs 574.

“The bank sounded confident of achieving a 15 per cent growth in FY24 given excess SLR of Rs 4.0 trillion and current capital can support growth of Rs 7 trillion. The bank would like to maintain domestic NIM at around 3.5 per cent for FY24. Based on the Q1 results, SBI delivered better NII/NIM compared to BoB and given higher CASA and unsecured share, SBI could outperform BoB on NIM in the near term,” Prabhudas Lilladher said in a report.

On the other hand, JM Financial is positive on RIL with a 12-month target price of Rs 2,900. The brokerage in a report said, “We reiterate ‘Buy’ on RIL as we believe concerns on debt are overdone as we expect the company’s net debt to peak in FY24 and then decline gradually as capex will not only moderate but, importantly, also be fully funded by a gradual increase in internal cash generation.”

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Other top firms 

Among the other major profitable companies of the June quarter, Indian Oil Corporation (IOC) and Oil & Natural Gas Corporation (ONGC) are next on the list. IOC reported a consolidated profit of Rs 14,436.96 crore in Q1FY24 against a loss of Rs 279.38 crore in the corresponding quarter last year. On the other hand, net profit of ONGC grew 18.41 per cent YoY to Rs 14,133.91 crore during the quarter under review. Of late, HDFC Securities maintained an ‘Add’ rating on ONGC with a target price of Rs 190.

HDFC Bank is the next player on the list. The public sector lender posted a consolidated net profit of Rs 12,370.38 crore in Q1FY24, up 29.13 per cent YoY. It was followed by IT major Tata Consultancy Services which posted a consolidated net profit of Rs 11,074 crore, posting a growth of 16.84 per cent YoY. Brokerage Kotak Institutional Equities is positive on HDFC Bank with a target price of Rs 1,925.

“We value the bank at 2.4 times book and 15 times FY2024E EPS for RoEs at 15-16 per cent and 15 per cent CAGR (adjusted for merger). The risk of a de-rating on a standalone basis appears to be low, given that the business performance is holding up well. Investors in the bank would need a long-term view, as we work through the medium-term uncertainty of the merger,” Kotak Institutional Equities said.

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Meanwhile, Bharat Petroleum Corporation reported a profit of Rs 10,644.30 crore in Q1FY24 against a loss of Rs 6,147.94 crore in the same quarter last year.

With a net profit of Rs 10,636 crore (up 44 per cent), ICICI Bank emerged as the next player in the list. It was followed by Life Insurance Corporation (up 1,498 per cent YoY at Rs 9,635 crore), Adani Power (up 83 per cent at Rs 8759 crore), Coal India (down 9.75 per cent YoY at Rs 7,971.04 crore), Axis Bank (up 39 per cent at Rs 6,091.35 crore), Infosys (up 10.91 per cent YoY at Rs 5945 crore) and ITC (up 16.29 per cent YoY at Rs 5,104.93 crore). On the other hand, Hindustan Petroleum Corporation (HPCL) reported a profit of Rs 6,765.50 crore in Q1FY24 against a loss of Rs 8557.12 crore in the same quarter last year.

ICICI Securities has a ‘Buy’ rating on Life Insurance Corporation with a target price of Rs 917, showing an upside of around 40 per cent against the current market price.

On the other hand, Geojit Financial Services has a ‘Buy’ call on Axis Bank with a target price of Rs 1,101. Shares of the lender traded at around Rs 955 in the morning trade on August 22.

“The management expects the cost of deposits to increase further in FY24, which might soften NIM in the coming quarters. That said, the bank continues to make structural changes that shall drive the progress of NIM. Moreover, Citi business is expected to be accretive to ROE once the integration phase is completed. Also, the bank’s asset quality should remain stable in the near term. We expect earnings to grow at a healthy 11 per cent CAGR over FY23-25E and hereby reiterate our rating on the stock to ‘Buy’,” Geojit Financial Services said.

 

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