UBS on IT Services
Indian IT services stocks have seen a sharp sell off (Nifty IT down c13% in past 2 weeks) as investor concerns on long term terminal value have come to forefront, post Anthropic and Palantir events
Market reaction has been driven by concerns that rapid advances in Agentic AI could structurally weaken the traditional IT services model, which has thus far largely been a staff augmentation model.
Current valuations suggest that investors are now pricing in terminal FCF growth of 4-6%, vs 6-7% just a month ago, and FCF yields of c6%, not too far from earlier peaks during cloud and Covid downturns, thus reflecting a growing scepticism
Believe a structural evolution in business model is key (and likely).
Nomura on IT Services
Does AI pose obsolescence risk?
Stocks in value zone
Issue #1: Will Indian IT businesses fade into oblivion in the brave new world of AI?
Three key concerns on the minds of investors are:
1)Antrophic (unlisted) shock and disruption of the Application Development and Maintenance (ADM) market
2) SaaS companies themselves become irrelevant, why won’t their implementers?
3) Margin compression is likely in AI world.
Believe these concerns are oversimplifying role of IT services cos
Issue#2: What is the fair valuation in the range of possible outcomes?
Scenario 1 – Structural decline (current market fear). In this case, revenue growth hover around +2-3% (in best case) to a decline in worst case.
This is predicated on the routine tasks getting highly automated, revenue deflation ranging in 6-7% (or more) for a foreseeable future and the inability of IT companies to find high-value work to replace the loss of business.
In this case, with close to no earnings growth, multiples could fall to 10-12x
Scenario 2 – Data / AI-led pivot by IT cos. In this case, revenue growth inches back to long-term averages
In this case, we see the P/E multiples settling in the early 20 ranges
Scenario 3 – IT companies pivot toward being AI orchestrators
This would involve an entire change in business model from selling effort to selling value & outcomes.
P/E multiples in this case can inch higher than early 20s with nonlinearity in revenues and margins.
Valuations have corrected meaningfully & now trading below last 12-year averages & at 12-39% discount to last 5-year averages
Preferred picks are Infosys & CTSH among large caps, Coforge among mid caps,& eClerx among small caps.
Citi on IT Sector
Concerns due to AI & resulting lightening up in DII positions could result in some valuation gap compression, in our view.
Higher volumes are likely – how much will be done by machines & value capture remains the debate.
View on Indian IT services remains cautious.
Concerns around uncertain spend environment & tech changes, high competitive intensity & fragmentation, faster GCC growth & impact of AI.
Infosys & HCL are relatively preferred in large-cap coverage.
InCred on Hindalco
Downgraded to Reduce from Add; target price cut to ₹631 from ₹785.
Peak aluminium prices don’t bode well for Indian operations.
Higher capex will lead to leveraging of the balance sheet.
EBITDA expected to decline to ₹26,000 cr in FY28F from ₹36,600 cr in FY26.
Peak aluminium: macro-driven rally + rising scrap may drive a 20% price dip, hurting Hindalco Industries’ India business margins.
High capex = higher leverage: stock typically trades at 7.5× EV/EBITDA in such cycles.
Macquarie on L&T
Target: ₹4,620; Recommendation: Outperform
To divest 1.4 GW Nabha Power Plant.
Sale is part of L&T’s long-term Lakshya 2026 strategy to exit non-core and asset-heavy businesses.
Don’t expect the sale to have a material impact on target price.
This transaction along with the planned sale of Hyderabad Metro is expected to help improve the balance sheet and capital allocation.
Company is incrementally looking at investing in new-age businesses.
Goldman Sachs on L&T
L&T to divest Nabha Power to Torrent Power for EV ~₹69 bn.
Transaction aligned with exit from development projects.
Exit simplifies structure and frees capital.
Incrementally positive for core return profile.
JPM on Torrent Power
Neutral, TP Rs 1525
Announced acquisition of Nabha Power (1400MW coal-based power plant in Punjab) from L&T at a FY25 adjusted EV/EBITDA of 5.97x
Plant has 13 years of residual PPA, land and basic infra available for 800MW additional capacity and possibility of renewing PPA for 10-15 years more at mutually agreed terms given solid technical health of equipment
View acquisition as financially incrementally positive for Torrent Power given reasonable valuations and possibility of upside over longer term due to capacity expansion & additional PPA post expiry of current PPA.
CITI on Fortis Healthcare
Buy, TP Rs 1120
Delivered a strong Q3 operating performance, with management confident in sustaining the momentum.
Key highlights include
a) existing hospitals showing strong traction (~14%+ growth) ;
b) strategic brownfield expansions at high-occupancy facilities set to improve margins;
c) newly acquired facilities performing well (Jalandhar: ~25%+ margins, Manesar: breakeven);
d) parent company IHH remaining open to further equity infusion
JPM on Fortis Healthcare
OW, TP Rs 1150
Delivered a strong 3Q, with revenues in line & a notable margin beat
Hospitals saw 19% YoY revenue and 29% YoY EBITDA growth, driven by higher occupied bed days and improved margins.
Diagnostics grew 7% YoY in revenue, but EBITDA surged 76% YoY on margin gains from a greater share of specialized and wellness portfolios.
Bed expansion is on track, with new units ramping up well without creating much drag on occupancy.
Management reiterated IHH’s commitment to Fortis as its “growth engine” for India and outlined plans to increase its stake from 31% after current cooling period ends
JPMorgan India Strategy (Rajiv Batra)
Q3 earnings dissector – healthy top-line growth and broad-based earnings recovery.
Witnessed continuation of improved earnings performance.
Driven by stable demand, operating leverage, and margin expansion across large-cap, mid-cap, and small-cap companies.
Ongoing correction in equity markets, along with recovery in corporate earnings, should help address valuation concerns.
Nine Free Trade Agreements with 38 developed nations, regulatory easing, and supportive fiscal and monetary policies are creating a platform to lift India’s economic and corporate performance in FY27.
Nifty 50 Index year-end target remains 30,000.
Jefferies on Chemicals
Innovators expect low single-digit growth in CY2026 – similar to CY25 growth.
Crop prices are lower year-on-year CYTD26 while farm input costs are higher year-on-year.
Chinese agchem exports are elevated.
India’s HFC exports surged in 9MFY26 with volume and price rising.
Navin’s long-term contracts provide strong visibility on 23% EPS CAGR over FY26–28E with possible upside.
SRF’s valuation is extended with clouded visibility on spec chem recovery.
Worst seems to be in price for PI India.
HSBC on Tata Motors CV
Recommendation: Buy; Target: ₹534, Earlier target: ₹490
Favourable industry backdrop.
Capacity additions by small fleet operators and replacement demand from large transporters are leading M&HCV demand.
Industry tailwinds, introduction of new engines, Iveco stability, and any recovery in LCV positioning are upside risks.
Valuations are still at a discount to Ashok Leyland and PV players.
Citi on Ola Electric
Downgraded to Sell from Buy; target price cut to ₹27 from ₹55.
Persistent headwinds to volume growth.
EV penetration in the Indian 2W sector has been more sluggish than expected.
GST cuts have further slowed electrification.
Ola has lost market share, hampered by service issues, high competition, and adverse customer perception.
Q3 results were below estimates due to negative operating leverage.
Acknowledge impressive gross margin trends; better operating leverage could boost EBITDA.
Management’s efforts to improve product/service quality could take some time to fructify.
Additionally, large negative cash flow could result in investor concerns on balance sheet – net debt.
Nuvama on Ahluwalia Contracts
Maintains Buy rating with revised target price of ₹1,147 (from ₹1,154).
Revenue and margins improve YoY; steady ramp-up in execution on key projects.
Order book remains robust.
Elongated construction ban in NCR due to pollution issues has now virtually become a recurring factor every year.
Trimming FY26E/27E/28E EPS by 5% each.
Citi on Bharat Electronics (BEL)
Maintains Buy rating with target price of ₹525 (unchanged).
BEL signs JV with Safran for HAMMER weapon systems (subject to approvals).
JV to act as CoE for manufacturing, MRO and support; Navy to be anchor customer.
Near-term financial impact limited; long-term recurring revenue optionality positive.
Order pipeline strong (>₹1.7 trn); defence indigenisation remains structural tailwind.
Target price based on ~50× Sep’27E P/E.
Citi on KFin Technologies
Maintains Buy rating with raised target price of ₹1,385 (from ₹1,335).
3Q solid with core PBAT up 12% QoQ (non-Ascent); adjusted EBITDA margin ~42%.
MF yield drag persists due to unfavourable mix.
Lower MF AUM yields led to earnings pressure; MF yields down ~50 bps QoQ.
Non-MF businesses strong: AIF/PMS, MAAM, AUM services and NPS scaling well.
FY26E EPS cut by ~10% to reflect lower MF yields.
FY27–28E largely retained.
HSBC on Metals
Domestic steel prices +16% since Dec’25, yet below import parity, leaving room for further hikes.
Globally, steel stocks outperforming base metals.
Coal and iron ore names strong YTD, indicating relative strength.
CITI on Go Digit
Buy TP Rs 435
Analyst day Key takeaways
1) focus on increasing share of high-quality (ex. non-transactional) channel partners for motor business origination,
2) concerted efforts to increase renewal rates in motor, especially across high-quality partnerships with visible signs of pick up in renewal ratio, YTD, in 9MFY26,
3) segregating channel partnerships based on growth potential and quality of business with quarterly monitoring to devise channel-specific strategies, in motor business,
4) product and service innovation sustains (ex. direct price fetching, DPF, and PAYD has witnessed uptick in adoption rate and initial business metrics are encouraging,
5) demonstrating business agility in the commercial lines with focus on containing concentration risk,
6) increasing granularity of checks in motor TP claims processing to reduce fraudulent claims,
7) multiple tech interventions at various stages of the business ecosystem aimed at improving operational efficiency.
CITI on CE Info
Buy, TP cut to Rs 1900
3Q miss with Revenue / EBITDA at -11%/+5% vs GSe.
While Map-led revenues were lower by -21% vs GSe, EBITDA for Map-led / IOT-led improved +850bps/+250bps vs GSe.
Revenue for quarter declined by -18% most of it driven by Consumer & Enterprise segment decline of -44%. 60-70% of this decline was deferment in government contracts, part of which should come back in 4Q and majority in 1Q27 per management.
Rest of the decline was due to change in customer requirements which required AI infusion which caused a delay in execution.
Elara Capital on CE Info Systems
Maintains Buy rating with revised target price of ₹2,273 (cut from ₹2,551).
3QFY26 weak; revenue down 18% YoY / 18% QoQ due to execution delays.
EBITDA down 36% YoY; margins hit by operating deleverage and IP investments.
PAT down 42% YoY; materially below estimates.
Order book strong at ₹17.7 bn vs ₹15 bn in Mar’25.
Map-led revenues weak but margin profile intact; IoT segment grew 56% YoY.
Revenue estimates cut 4–8% for FY26–28.
EBITDA cut ~9–10%; PAT cut ~10–12%.
Nuvama on NBCC
Buy, TP cut to Rs 139 from Rs146
Q3 revenue of INR30.2bn (up 8% YoY).
Higher other income led to adjusted PAT rising 11% YoY to INR1.3bn.
Order book remains strong at Rs1.3tn (book-to-bill of 9.8x) of which Rs305bn projects are currently under execution
Co won projects worth Rs33bn during quarter
Slowdown in housing volumes has led to concerns about pace of execution, compelling to cut FY26E/27E/28E EPS by 7%/13%/12%
UBS on Fortis Healthcare
Buy, TP Rs 1150
Healthy performance; trend likely to continue
Good quarter; revenue growth of 17.5% YoY and EBITDA up 35% YoY
Potential equity infusion by IHH; capacity expansion to support growth
CLSA on IRB Infra
Maintain Outperform, TP: (Cut To) ₹69
Mumbai-Pune Expressway Toll Rev +6% YoY In Q3 Despite Rains, Other Assets +4% YoY
TP Trimmed Due To Lower EPC Assumptions Amid Fewer Construction-Heavy Wins
Maintains Strong Competitive Position As India’s Leading Toll-Road Platform