Jindal Stainless, Angel One, L&T Finance, Apollo Hospitals, Federal Bank: Analyst views

Amid a busy earnings season, brokerages have come up with updates on many stocks including as Angel One, L&T Finance, Apollo Hospitals, Federal Bank. Among these stocks, L&T Finance, Federal Bank and Jindal Stainless have seen revision in price targets. Motilal Oswal for now maintained a 'Buy' on Angel One and said it will revise its target price on the stock, if any, only after today's earnings call. 

Angel One | Buy

Motilal Oswal said Angel One is a perfect play on the financialisation of savings and digitisation. It demonstrated a strong performance in the December quarter amid volatile market conditions. The management continues to invest in technology to strengthen its position. However, its client addition trajectory and the activation rate have slowed down.

The brokerage noted that Angel One's profit after tax (PAT) surged 39 per cent YoY (16.9 per cent beat) in the December quarter. The profitability was driven by a 6.2 per cent beat in operating revenue, which rose 32 per cent YoY. The key contributor to the outperformance was a 26 per cent beat in net interest income, it said.

Volatility in the equity market led to a decline in the active client ratio to 33.6 per cent from 36.2 per cent in September quarter. The number of orders declined to 22.6 crore from 23 crore in September quarter, it noted. Angel One continued to strengthen its position in the commodity segment as its market share expanded to 52.4 per cent from 51.1 per cent in September quarter, Motilal Oswal said.

L&T Finance | Target: Rs 116

Emkay Global said L&T Finance reported a profit of nearly Rs 450 crore for December quarter, around 3 per cent above its estimates, primarily driven by higher than expected interest income due to change in the asset mix towards retail products. In the seasonally-strong festive quarter, disbursements grew 32.8 per cent YoY, led by the highest-ever quarterly disbursements in the 2W and farm-equipment segments as well as sustained healthy disbursements in home loans and LAP.

 

The key highlight of the December quarter was the one-time gain from the sale of the mutual-fund business (L&T Investment Managers), at Rs 2,160 crore (post-tax), being utilised to shore up provisions on the wholesale portfolio. In order to aid the accelerated reduction in the wholesale portfolio, L&T Finance conducted a fair-value assessment, it said.

While the fair value was close to the held-to-maturity value largely due to earlier provisions taken, the management, in order to aid the accelerated run down, decided to shift from the amortised cost method for valuing wholesale loans to the fair-value method, resulting in a one-time provision of Rs 2,690 crore.

"We roll over our forecasts to March 2024 and retain our BUY rating on the stock, with a March 2024E target of Rs116 (earlier Rs 100), valuing the lending business based on the 'Excess return on Equity' (ERE) method," it said.

Jindal Stainless | Target: Rs 331

Nuvama said it visited Jindal Stainless’ Jajpur, Odisha plant, and that its earnings growth confidence is now stronger. Nuvama said it visualised that the 1mtpa stainless steel expansion is geared to start commercial production from March 2023-end, providing volume growth until FY25. The optionality of capacity growth at low capex exists, keeping return ratios high, it said.

With in-principal approval of NCLT regarding merger with Jindal Stainless Hisar (JSHL), Nuvama expects merger by FY23-end, making JDSL among top-10 stainless steel producers in the world with an installed capacity of 2.9mtpa.

"We now consider JSHL too with NCLT’s nod for the merger. With this, we raise our EV/Ebitda multiple to 6 times (earlier 5.5 times) to give due credit to the market leader of stainless steel , high earning growth (31 per cent profit CAGR during FY23-25E) and a strong balance sheet (FY24E net debt/Ebitda of 0.8 times). Also, we rollover and take the average of FY24E/FY25E earnings to arrive at a target of Rs 331 from Rs 260 earlier," it said.

Apollo Hospitals | Target: Rs 5,600

Motilal Oswal said Apollo Hospitals delivered a phenomenal performance (3.6 times earnings) over the past five years, reporting a 24 per cent Ebitda CAGR and reducing net debt by half, benefiting from a lower tax rate. Accordingly, the stock price has appreciated 3.6 times in the same period.

"Interestingly, over FY23-25E, the outlook on operational parameters for healthcare services also remains promising (17 per cent Ebitda CAGR) on the back of superior execution of APHS and favourable macro factors. The pharmacy outlook is encouraging, too, with the aggressive expansion of offline/online infrastructure and the ability of APHS to provide the entire spectrum of healthcare services to its customers," Motilal Oswal said.

Motilal Oswal has a BUY rating on Apollo Hospital with a price target of Rs 5,600.

It expects a 17 per cent sales CAGR over FY23-25 to Rs 22,700 crore. It estimates Ebitda CAGR of 28 per cent over FY23-25 despite huge ongoing investments in Apollo 24/7.

"We expect Apollo Hospitals to sustain the earnings growth momentum, given the strong execution at the existing sites and planned investments across segments to cater to a higher number of patients and gain wallet share from patients," Motilal Oswal said.

Federal Bank | Target: Rs 185

Emkay said Federal Bank reported a strong beat on PAT mainly led by robust credit growth, sharp margin uptick and continued lower LLP, and partly offset by higher staff costs due to ad hoc provisions for wage revision.

The bank clocked 1.3 per cent RoA (higher than guided), the highest in the past 7 years, and sets its eyes on consistently delivering RoA of over 1.2 per cent, provided it is not hit by major macro dislocations.

Emkay said the bank delivered decent credit growth at 19 per cent YoY, mainly owing to faster growth in corporate/SME and BB, while retail growth moderated due to decline in the gold loan book in turn, due to readjustment with its Fintech partner. Margins threw up a positive surprise, at 3.5 per cent.

"We revise our earnings for FY23-FY25E by 3-5 per cent, factoring-in a better margin trajectory and expect the bank's RoA/RoE at 1.3 per cent/16 per cent by FY25E (without factoring-in capital raise). We retain BUY on the stock, with revised target of Rs 185 per share, valuing the bank at 1.5 times December-2024E ABV and subsidiary  value at Rs 8 per share," Emkay said.

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