SBI, Titan, Berger Paints, JK Cement, Kansai Nerolac, Home First Finance, Route Mobile Q2 Results Review

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HDFC Securities Institutional Equities

SBI - Productivity gains essential for earnings reflation

State Bank of India’s Q2 FY26 earnings reflected a mixed performance, as healthy growth on both sides of the balance sheet, stable margins and one-off gain (~Rs 46 billion) from stake sale in Yes Bank, were offset by higher opex intensity and lower trading gains. Loan growth (~13% YoY) outpaced the system, driven by SME and retail businesses, while corporate credit remained muted.

Deposit growth (+9% YoY) was relatively soft, while the CASA ratio improved to 38% (+20bps QoQ), with continued traction in CA balances. While credit costs and gross slippages trended lower, SBIN made additional standard provision (Rs 5.5 billion) towards project finance exposures.

We believe sustained productivity and efficiency gains, coupled with stable asset quality, are critical to drive SBI’s earnings reflation.

We believe SBI’s traditional strengths and newly-added moats are likely to translate into RoAs sustaining over 1.1%.

We maintain Buy with a SOTP-based revised target price of Rs 1,100 (standalone bank at 1.3x Sep-27 adjusted book value per share); reiterate SBI as the top pick in our banking coverage universe.

Titan - Margins beat expectation

Titan Company Ltd.'s consolidated jewelry sales (ex-bullion and digi gold sales) grew 20.7% YoY to Rs 141 billion (our estimate: Rs 142.5 billion), driven by ticket size growth. Domestic jewelry (ex-bullion and digi gold sales) grew 18.9% YoY (consolidated topline growth stood at 28.8% YoY at Rs 187.2 billion; our estimate: 175.3 billion). Jewelry Ebitm (consolidated) expanded by 234 bps to 10.7% (our estimate: 9.6%) on a low base (note: Q2 FY25 had an impact of Rs 2.9 billion, led by a custom duty cut).

Adjusted jewelry Ebit grew ~13% YoY. Non-jewelry segment beat expectations; growing 24.7% YoY to Rs 22.5 billion (our estimate: 20.9 billion).

In response to unprecedented gold price inflation and sustained competition, management is focusing on driving footfalls through initiatives such as gold exchange programs, gold price-led offers, and promoting lower caratage jewelry.

We revise our FY27/28 EPS estimates upward by ~2/3% respectively; however, we maintain Reduce with a DCF-based target price of Rs 3,450/share (implying 50 times Sep-27 P/E).

Berger Paints - Extended monsoon impacts demand; margins disappoint

Berger Paints India Ltd.'s revenue growth was muted due to an extended monsoon and sustained competitive intensity. Consolidated revenue grew 1.9% YoY to Rs 28.3 billion (our estimate: Rs 28.8 billion). Volume/value growth stood at 8.8/1.1%. Volume-value gap is likely to persist, given the higher contribution from low-value products like tile adhesives, admix and putty and lower sales from high-value products like exterior emulsion and roof coat.

Gross margin contracted 14bps YoY to 41.6% (in-line) due to lower sale of exterior emulsion and downtrading to the economy emulsion. Ebitdam contracted by 319bps YoY to 12.5% (our estimate: 15.5%), owing to negative operating leverage and higher A&P and manpower investments in urban markets.

However, management has maintained FY26 Ebitdam guidance of 15-17%. Ebitda/APAT declined 18.9/23.5% YoY to Rs 3.52/2.06 billion (our estimate: Rs 4.46/2.81 billion).

We have cut our EPS estimates by ~4/3% for FY27/28 respectively to account for lower margins but retain Add with a DCF-based target price of Rs 570/share (implying 43x Sep-27 P/E).

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