HDFC Standard Life Insurance Co. Ltd. and Reliance Nippon Asset Management Co. Ltd. were rated favourably by two brokerages, while Chennai-based Ramco Cements Ltd. was downgraded to ‘Hold’ from ‘Buy’ on multiple headwinds.
Here’s what the brokerages had to say:
Deutsche Bank On Ramco Cements
- Downgraded to ‘Hold’ from ‘Buy’; target price cut to Rs 750 from Rs 790.
- Weak demand and prices in south India affects medium-term outlook.
- Rising energy cost to impact margins.
- Cut earnings per share for the financial years through March 2020 by 5-8 percent; expect 9 percent compounded annual growth rate in volume by 9 percent.
- Like longer-term strategy of de-risking business model and expanding in the east.
- Prefer Dalmia Bharat and Shree Cement where risk-reward is more attractive.
- Headwinds: Declining volumes and prices in Tamil Nadu and Kerala and rising competition in the east.
Morgan Stanley On HDFC Standard Life
- Initiated ‘Overweight’ with target price of Rs 425.
- HDFC Standard Life Insurance Co. Ltd. is one of the best plays on India's protection story.
- One of the strongest distribution franchises; Relies heavily on HDFC Bank.
- Specialises in insurance – an underpenetrated and highly profitable segment.
- Superior franchise to drive steady growth.
- Improvement in revenue mix to offset margin pressure.
- Stands out from peers because of well balanced savings product mix, increasing protection mix, profitable distribution model, high technology focus and experienced management.
- Expect protection premiums to grow at a compounded rate of 44 percent by March 2020, and 20 percent between March 2020 and March 2030.
- Expect return on enterprise value to sustain at 20 percent over the next three years.
- Expect value of new business to grow at a compounded rate CAGR of 28 percent by March 2020.
- Near-term upside is limited following strong listing.
- Bull case price target of Rs 580: Strong growth, significant improvement in persistency and stronger-than-expected performance on protection.
CLSA On Reliance Nippon Life AMC
- Initiated ‘Buy’ with target price of Rs 325.
- Mutual funds in a sweet spot with rising penetration.
- Robust earnings growth and high dividend payouts to aid investor returns.
- Expect asset under management, revenue and net profit to grow at a compounded rate of 23 percent, 28 percent and 26 percent respectively by March 2020.
- Dividend yield to rise to 3.1 percent by the next financial year versus 1.6 percent clocked during the previous financial year.
- Reliance Nippon to leverage retail strength.
- Topline growth largely driven by rise in share of equity.
- Equity share in asset under management to rise to 40 percent by March 2020 versus 28 percent in March 2017.
- Cost of operations to remain high.