Phillip Capital has initiated coverage on the defence sector, while Elara Capital continues to remain bullish on the sector. Nuvama's deep dive into realty developers has thrown up interesting results.
JPMorgan initiated coverage on Sagility India with an overweight call, while Morgan Stanley maintains equalweight on SBI Cards.
NDTV Profit tracks what the brokerages are putting out on stocks and sectors. Here are the top calls from analysts you need to know on Tuesday:
Nuvama On Defence Sector
Envisage around $130 billion in defence spending in next five years.
Huge localisation push to reduce dependence on disrupted global supply chains.
This shall unveil a golden pipeline for private defence industry to step up.
Believe 2025 to be pivotal year for India given likely orders for some larger programs.
Trump administration coming into power soon, India-US defence co-operation expected to improve.
Recent stock price correction across defence pack chance to make a lunge.
Top Picks: Bharat Electronics, Data Patterns.
Phillip Capital Initiates Coverage On Defence Stocks
Defence offers multiple growth levers and strong visibility for long-term execution.
Key drivers include:
Robust order books and a healthy pipeline.
Strategic moats driven by government preference and domain expertise.
Cash-rich balance sheets with minimal working capital challenges.
Margins from core defence products expected to expand, driven by operational efficiencies.
Stocks with favourable risk-reward profile:
Initiate 'buy' on Bharat Electronics, with a target price of Rs 3,400, a 32% upside potential.
Initiate 'buy' on Hindustan Aeronautics, with a target price of Rs 5,500, a 31% upside potential.
Initiate 'buy' on Data Patterns, having a target price of Rs 3,400, implying a 32% potential upside.
Initiate 'neutral' on Solar Industries with a target price of Rs 12,000, implying a 22.6% upside potential.
Initiate 'neutral' on Bharat Dynamics, with a target price of Rs 1,400, indicating a 12.9% potential upside.
Elara Capital On Defence
Expect fireworks in the fourth quarter as indigenisation increases.
Cumulative domestic 'Acceptance of Necessity' in 2.75 years has surpassed the past decade’s level by 1.5 times.
Expect a multifold jump in contract awarding over the next 2-3 years.
India’s defence imports drop by 1,100 basis points to 28% in the financial year 2024.
Top Picks:
- Maintain 'buy' on HAL, with a target price of Rs 5,465, potential upside of 30.4%.
- Maintain 'buy' on Bharat Electronics, with a target price of Rs 345, an upside potential of 18.6%.
- Revise Bharat Dynamics to 'accumulate' from 'buy', with a target price of Rs 1,300, indicating potential 5% upside.
- Maintain 'accumulate' on Garden Reach Shipbuilders, having a target price of Rs 1,660, a 6% upside potential.
Nuvama On Realty
Cash Ebitda margins sustained at approximately 40%.
Ten developers enjoyed a negative working capital cycle.
Land-related capital expenditure shot up to 33%.
Despite higher capex spends, net debt reduced for 11 developers.
Average interest outgo (as a percentage of collections) remained at 6% in the first half of the financial year 2024-25.
Sales velocity remained healthy.
Cash flow generation expected to stay healthy.
Top picks: Prestige and Brigade.
JPMorgan On Sagility
Initiate 'overweight' call with a target price of Rs 54, implying a potential upside of 16%.
Sagility is a niche tech ops vendor to US-based healthcare payers and providers.
Should enjoy structural tailwind from increased outsourcing to US healthcare.
Deep domain expertise and client relationships should drive increased mining.
Exposure to non-discretionary spends keeps growth stable.
Co has high structural Ebit margins.
Forecast 50% earnings compound annual growth rate over fiscals 2024 to 2027.
Key risks: high client concentration, in-sourcing from top clients, changes in regulations, potential TAM risk from AI adoption.
Emkay On Gas
Maintains 'add' on Mahanagar Gas, and, 'reduce' on Indraprastha Gas.
CNG players scouting for additional gas to meet volumes amid APM allocation cut.
Rs 5-7/kg price hike still required by IGL & MGL to reach pre-allocation cut margins.
IGL expects new gas allocation, duty restructuring, price hikes to help margin recovery.
Gas under GST could be material trigger for IGL.
Next two quarters expected to be weak for gas stocks in terms of margins.
Gas cos could achieve their guided margins in the next fiscal.
Key recovery triggers: Broader auto-fuel taxation, volume sustenance.
Nomura On Bajaj Auto
Maintains 'neutral' rating with a target price of Rs 11,737 and a potential upside of 34%.
New Bajaj Chetak 35 series will compete with the Ola S1, TVS iQube, and other EVs.
Expect Chetak to get bigger and better with 35 Series.
Product offers more to the customer in terms of technology, features and range.
Chetak became the leader in electric two wheeler segment in Dec. 2024.
Estimate 70% of sales from the lower-priced Chetak variant 2901 at Rs 95,000 (ex showroom).
Stock to perform well due to success in CNG, recovery in exports, success in electric two wheelers and network expansion.
Morgan Stanley on SBI Cards
Maintain 'equalweight' with a target price of Rs 650 per share, implying a potential downside of 6%.
Nov spending market share fell to 14.9% vs 19.6% year-on-year and 15.8% month-on-month.
Impact of spending due to RBI notification on corporate card spending.
Market share in number of cards in force is at 18.7%, down 33 basis points year-on-year, up 15 basis points month-on-month.
Aggregate daily spending up 8% year-on-year so far in December, versus 4% in November and 12% year-on-year in October.
Nuvama On Dhanuka Agritech
Retains 'buy' rating with a target price of Rs 2,136, implying a potential upside of 40%.
Acquisition of two Bayer AG products to push into new geographies.
Projected sales of Rs 224 crore over 2-3 years; margins matching cos average.
Product margins to match cos averages, with payback period of five years.
Acquisition supports long-term goals without altering next two fiscals estimates.
Management expects 16% revenue growth in the second half of the fiscal.
Co aims 100 basis points year-on-year Ebitda margin improvement.
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