Hot stocks: Brokerage view on HDFC Bank, M&M Finance and Avenue Supermarts

03/07/2024

Brokerage firms like Jefferies and UBS have buy ratings on HDFC Bank. Jefferies also maintains a buy rating on M&M Finance, while Citi remains neutral on M&M Finance. UBS reaffirms its buy rating on HDFC Bank. Additionally, Citi rates Avenue Supermarts as neutral, while Morgan Stanley rates it as overweight, with sell ratings from both Citi and Morgan Stanley respectively.

We have collated a list of recommendations from top brokerage firms from ETNow and other sources:

Jefferies on HDFC Bank: Buy | Target: Rs 1,880Jefferies has maintained a buy rating on HDFC Bank with a target price of R 1,880.

Foreign shareholding in the bank has dropped to 54.8%, which may help with MSCI's review. The drop aids in MSCI's threshold to raise the Foreign Inclusion Factor (FIF) from 50% now to 100%. Further, the bank may be eligible for a jump in index weight at the next review in August 2024, which could be a positive near-term catalyst in stock.

In the medium term, strong deposit growth & improving NIMs should be key drivers.

UBS on HDFC Bank: Buy | Target: Rs 1,900UBS has maintained a buy call on HDFC Bank with a target price of Rs 1,900.

Foreign headroom for the bank is higher than the Index cut-off of 25%, which makes it eligible for an MSCI Index weight increase. This could also lead to an estimated $3-6.5 billion buying in the stock, partly factored in the recent rally.

Jefferies on M&M Finance: Buy | Target: Rs 294Jefferies has maintained a hold rating for the stock with a target price of Rs 294.

This is due to the company’s Q1 pre-quarter update on the loan growth moderation, stage 2 and 3 assets rising QoQ. They believe that there is a need for better visibility around ROA expansion to drive re-rating.

Citi on M&M Finance: Neutral | Target: Rs 310Citi maintained a neutral rating on the stock with a target price of Rs 310.

M&M Finance’s Q1 business update on growth was broadly in line with the estimates, while with the seasonality, Q1 witnessed an increase in GS3 to 3.6% from 3.4% as of FY24, albeit lower-than-expectation.

NIMs, which surprised positively in Q4, are anticipated to moderate from a high base.

Citi on Avenue Supermarts: Sell | Target: Rs 3,400Citi maintained a sell rating on Avenue Supermarts with a target price of Rs 3,400.

The Q1 update showed no sign of growth acceleration, however, one must watch out for margin trajectory. Citi believes that revenue per sq. ft. continues to be impacted due to adverse product mix and new store additions in smaller towns.

Q1 is seasonally the strongest quarter in terms of margin. Citi remains cautious given risks around store additions, earnings, and the P/E multiple.

Morgan Stanley on Avenue Supermarts: Overweight | Target: Rs 5,123Morgan Stanley maintained an overweight rating on the stock with a price target of Rs 5,123. For the Q1 update, growth was below expectations, but operational metrics continue to improve. Q1 revenue growth came in at 18% YoY (5-year CAGR 19%), which was below estimates.

Efficiency metrics (revenue per store, revenue per sq. ft.) continue to improve, while net additions were six stores - in line with the average store additions in the same quarter over FY19-F24.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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