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In Pictures: Brokerages maintain 'buy' on 10 stocks with 9-23% upside

Updated : 2020-01-29 06:26:16

Here are top 10 companies in which brokerages have maintained a buy call after the Q3 FY20 earnings. (Text: Moneycontrol)

 Axis Bank  | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 737 | Target: Rs 835 | Upside: 13 percent: The company turned profitable in the quarter ended December 2019 and reported a 4.5 percent year-on-year gain in net profit at Rs 1,757 crore. Higher provisions and high base in Q3FY19 due to recovery in the steel sector supported profitability. The bank had reported a loss of Rs 112.08 crore in the previous quarter. The bank has reported steady loan growth amid the economic slowdown, led by continued momentum in the retail business. However, the slippage trajectory remains elevated with BB and below pool driving most of the corporate slippages, the brokerage said. Motilal Oswal estimate near-term credit cost to stay elevated as bank shores up its coverage ratio before reaching normalized levels of 1.2 percent for FY22 and cut FY21/22 earnings by 4 percent/5 percent and estimate bank to deliver RoA/RoE of 1.6 percent/16.6 percent in FY22.
Axis Bank | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 737 | Target: Rs 835 | Upside: 13 percent: The company turned profitable in the quarter ended December 2019 and reported a 4.5 percent year-on-year gain in net profit at Rs 1,757 crore. Higher provisions and high base in Q3FY19 due to recovery in the steel sector supported profitability. The bank had reported a loss of Rs 112.08 crore in the previous quarter. The bank has reported steady loan growth amid the economic slowdown, led by continued momentum in the retail business. However, the slippage trajectory remains elevated with BB and below pool driving most of the corporate slippages, the brokerage said. Motilal Oswal estimate near-term credit cost to stay elevated as bank shores up its coverage ratio before reaching normalized levels of 1.2 percent for FY22 and cut FY21/22 earnings by 4 percent/5 percent and estimate bank to deliver RoA/RoE of 1.6 percent/16.6 percent in FY22.
 Larsen & Toubro  | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,359 | Target: Rs 1,680 | Upside: 23 percent: The company reported profit growth of 15.15 percent year-on-year (YoY) to Rs 2,352 crore in the quarter ended December 2019. It had reported Rs 2,041.62 crore of profit for the same quarter last year. Revenue from operations in Q3FY20 grew 5.9 percent to Rs 36,242.68 crore YoY impacted by execution in the infrastructure business. Motilal Oswal forecast consolidated revenue/EBITDA/PAT CAGR of 13.2 percent/ 17.3 percent/20.4 percent over FY20-22 and for the core business, it forecasts revenue/EBIDTA/PAT CAGR of 12.9 percent/17.7 percent/20.7 percent over the same period. With no major capex and aversion to capital allocation in the asset business, there is a high likelihood that L&T may announce special dividend to return excess cash to shareholders, especially as the new tax rules for buyback have made it redundant for the company to choose between the two options.
Larsen & Toubro | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,359 | Target: Rs 1,680 | Upside: 23 percent: The company reported profit growth of 15.15 percent year-on-year (YoY) to Rs 2,352 crore in the quarter ended December 2019. It had reported Rs 2,041.62 crore of profit for the same quarter last year. Revenue from operations in Q3FY20 grew 5.9 percent to Rs 36,242.68 crore YoY impacted by execution in the infrastructure business. Motilal Oswal forecast consolidated revenue/EBITDA/PAT CAGR of 13.2 percent/ 17.3 percent/20.4 percent over FY20-22 and for the core business, it forecasts revenue/EBIDTA/PAT CAGR of 12.9 percent/17.7 percent/20.7 percent over the same period. With no major capex and aversion to capital allocation in the asset business, there is a high likelihood that L&T may announce special dividend to return excess cash to shareholders, especially as the new tax rules for buyback have made it redundant for the company to choose between the two options.
 Havells India  | Brokerage: ICICI Securities | Rating: Buy | LTP: Rs 622 | Target: Rs 691 | Upside: 11 percent: The company's Q3FY20 consolidated net profit rose 7.4 percent at Rs 201.2 crore versus Rs 195.7 crore, while revenue was down 9.9 percent at Rs 2,273.3 crore versus Rs 2,523.8 crore YoY. The brokerage believes that current valuations are attractive considering growth optionalities, execution track record and return profile of the company. Expanding distribution, upgrade of Lloyd from low-priced channels to premium outlets, and improvement in supply chain and costs through in-house production of Lloyds are the three business drivers for the company that should enable higher earnings growth over FY21E /FY22E.
Havells India | Brokerage: ICICI Securities | Rating: Buy | LTP: Rs 622 | Target: Rs 691 | Upside: 11 percent: The company's Q3FY20 consolidated net profit rose 7.4 percent at Rs 201.2 crore versus Rs 195.7 crore, while revenue was down 9.9 percent at Rs 2,273.3 crore versus Rs 2,523.8 crore YoY. The brokerage believes that current valuations are attractive considering growth optionalities, execution track record and return profile of the company. Expanding distribution, upgrade of Lloyd from low-priced channels to premium outlets, and improvement in supply chain and costs through in-house production of Lloyds are the three business drivers for the company that should enable higher earnings growth over FY21E /FY22E.
 Granules India  | Brokerage: KRChoksey | Rating: Buy | LTP: Rs 154 | Target: Rs 180 | Upside: 17 percent: The company's Q3 consolidated net profit jumped 6.1 percent at Rs 64 crore versus Rs 60.3 crore and revenue was up 11.4 percent at Rs 704 crore versus Rs 631.8 crore YoY. KRChoksey expects the company to post revenue growth of 18.1 percent/27.1 percent in FY20E/FY21E on the back of new launches in the US with company’s focus on higher value and higher margin business segment of finished dosage form, gain in market share in the existing products & commercialisation of high-value API plant (Unit IV). This will result in EBITDA margin improvement in the range of 18 percent-19 percent over FY20/21 and subsequent increase in the US contribution will add 1 percent to the EBITDA.
Granules India | Brokerage: KRChoksey | Rating: Buy | LTP: Rs 154 | Target: Rs 180 | Upside: 17 percent: The company's Q3 consolidated net profit jumped 6.1 percent at Rs 64 crore versus Rs 60.3 crore and revenue was up 11.4 percent at Rs 704 crore versus Rs 631.8 crore YoY. KRChoksey expects the company to post revenue growth of 18.1 percent/27.1 percent in FY20E/FY21E on the back of new launches in the US with company’s focus on higher value and higher margin business segment of finished dosage form, gain in market share in the existing products & commercialisation of high-value API plant (Unit IV). This will result in EBITDA margin improvement in the range of 18 percent-19 percent over FY20/21 and subsequent increase in the US contribution will add 1 percent to the EBITDA.
 SBI Life  Insurance | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 999 | Target: Rs 1,127 | Upside: 13 percent: The company posted a 47.5 percent year-on-year (YoY) increase in its December quarter (Q3) net profit at Rs 389.77 crore versus Rs 264.28 crore. The assets under management (AUM) grew by 22 percent YoY to reach Rs 1.64 lakh crore at the end of December 2019. The bank's Protection business growth moderated to 36 percent YoY as individual protection de-grew 8 percent sequentially as an aberration on the push to higher ticket size products, though the management maintains the core focus remains to ramp up protection. Overall operating metrics like persistency, margins, cost have been improving while growth has remained steady which will continue to do so ahead.
SBI Life Insurance | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 999 | Target: Rs 1,127 | Upside: 13 percent: The company posted a 47.5 percent year-on-year (YoY) increase in its December quarter (Q3) net profit at Rs 389.77 crore versus Rs 264.28 crore. The assets under management (AUM) grew by 22 percent YoY to reach Rs 1.64 lakh crore at the end of December 2019. The bank's Protection business growth moderated to 36 percent YoY as individual protection de-grew 8 percent sequentially as an aberration on the push to higher ticket size products, though the management maintains the core focus remains to ramp up protection. Overall operating metrics like persistency, margins, cost have been improving while growth has remained steady which will continue to do so ahead.
 Zee Entertainment  | Brokerage: ICICI Direct | Rating: Buy | LTP: Rs 280 | Target: Rs 345 | Upside: 23 percent: Zee Entertainment Enterprises' third quarter (October-December) consolidated net profit fell sharply by 37.9 percent year-on-year to Rs 349.4 crore, from Rs 562.4 crore in the same period last year. Revenue from operations in Q3 dropped 5.5 percent to Rs 2,048.7 crore YoY, dented by lower advertising revenue. Receivables declined by Rs 86 crore QoQ to Rs 2332 crore, of which, Rs 750 crore pertains to Dish TV and Siti Networks. The company has come to an agreement with them on a recovery plan and expect the overall amount to be recovered in 12-24 months. Going ahead, the company expects ad growth revival from FY21 wherein the industry (ex-sports) is expected to witness low double-digit growth with Zee striving to beat the same. With a possible recovery in FY21 on a low base, broking house upgrade our rating from hold to buy, with a revised target price of Rs 345 per share.
Zee Entertainment | Brokerage: ICICI Direct | Rating: Buy | LTP: Rs 280 | Target: Rs 345 | Upside: 23 percent: Zee Entertainment Enterprises' third quarter (October-December) consolidated net profit fell sharply by 37.9 percent year-on-year to Rs 349.4 crore, from Rs 562.4 crore in the same period last year. Revenue from operations in Q3 dropped 5.5 percent to Rs 2,048.7 crore YoY, dented by lower advertising revenue. Receivables declined by Rs 86 crore QoQ to Rs 2332 crore, of which, Rs 750 crore pertains to Dish TV and Siti Networks. The company has come to an agreement with them on a recovery plan and expect the overall amount to be recovered in 12-24 months. Going ahead, the company expects ad growth revival from FY21 wherein the industry (ex-sports) is expected to witness low double-digit growth with Zee striving to beat the same. With a possible recovery in FY21 on a low base, broking house upgrade our rating from hold to buy, with a revised target price of Rs 345 per share.
 Hindustan Zinc  | Brokerage: ICICI direct | Rating: Buy | LTP: Rs 207 | Target: Rs 245 | Upside: 18 percent: The company's Q3 net profit declined 26.7 percent at Rs 1,620 crore versus Rs 2,211 crore, and revenue was down 15.7 percent at Rs 4,672 crore against Rs 5,540 crore, YoY. Going forward, broking house expects domestic zinc demand to pick up on the back of incremental demand from key user industries, especially railways. Indian Railways is setting targets to lay zinc-coated rails and has fitted stations with galvanised roofs to replace asbestos sheets, which augurs well for domestic zinc demand. Additionally, the recent uptick in zinc and lead prices on the LME augurs well.
Hindustan Zinc | Brokerage: ICICI direct | Rating: Buy | LTP: Rs 207 | Target: Rs 245 | Upside: 18 percent: The company's Q3 net profit declined 26.7 percent at Rs 1,620 crore versus Rs 2,211 crore, and revenue was down 15.7 percent at Rs 4,672 crore against Rs 5,540 crore, YoY. Going forward, broking house expects domestic zinc demand to pick up on the back of incremental demand from key user industries, especially railways. Indian Railways is setting targets to lay zinc-coated rails and has fitted stations with galvanised roofs to replace asbestos sheets, which augurs well for domestic zinc demand. Additionally, the recent uptick in zinc and lead prices on the LME augurs well.
 Polycab India  | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 1,019 | Target: Rs 1,201 | Upside: 17 percent:  The company's consolidated Q3 net profit rose 14.4 percent at Rs 221 crore versus Rs 194 crore and revenue was up 23.8 percent at Rs 2,507 crore versus Rs 2,024.8 crore, YoY. AnandRathi raises FY20e-22e PAT by 3 percent each and expect a 30 percent CAGR over FY19-22. The company aspires to be a large B2C brand through FMEG, focusing on branding, product innovation/quality/availability and after-sales service. According to the broking house, strong FCF generation and rising return ratios support a further re-rating.
Polycab India | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 1,019 | Target: Rs 1,201 | Upside: 17 percent:  The company's consolidated Q3 net profit rose 14.4 percent at Rs 221 crore versus Rs 194 crore and revenue was up 23.8 percent at Rs 2,507 crore versus Rs 2,024.8 crore, YoY. AnandRathi raises FY20e-22e PAT by 3 percent each and expect a 30 percent CAGR over FY19-22. The company aspires to be a large B2C brand through FMEG, focusing on branding, product innovation/quality/availability and after-sales service. According to the broking house, strong FCF generation and rising return ratios support a further re-rating.
 Gateway Distriparks  | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 132 | Target: Rs 150 | Upside: 13 percent: Gateway Distriparks Q3 net profit shed 2.6 percent at Rs 16.5 crore versus Rs 17 crore and revenue was down 8.1 percent at Rs 298.9 crore against Rs 325.1 crore, QoQ. Sharekhan lowered the earnings estimate for FY2020-FY2021 factoring lower volume and OPM for its CFS business. Sharekhan believes that in the current sluggish trade environment, the company's focus on deleveraging and maintaining profitability in CFS and Rail verticals should gradually drive net earnings growth going ahead. The current valuation at 6.1x EV/EBITDA and 1.1x P/B over FY2022E earnings provide comfort.
Gateway Distriparks | Brokerage: Sharekhan | Rating: Buy | LTP: Rs 132 | Target: Rs 150 | Upside: 13 percent: Gateway Distriparks Q3 net profit shed 2.6 percent at Rs 16.5 crore versus Rs 17 crore and revenue was down 8.1 percent at Rs 298.9 crore against Rs 325.1 crore, QoQ. Sharekhan lowered the earnings estimate for FY2020-FY2021 factoring lower volume and OPM for its CFS business. Sharekhan believes that in the current sluggish trade environment, the company's focus on deleveraging and maintaining profitability in CFS and Rail verticals should gradually drive net earnings growth going ahead. The current valuation at 6.1x EV/EBITDA and 1.1x P/B over FY2022E earnings provide comfort.
 Cholamandalam Investment  | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 323 | Target: Rs 353 | Upside: 9 percent: Research house slightly tweak its AUM CAGR to 18 percent CAGR versus earlier 17 percent for FY20-22E as company stands poised to overshoot the FY20 estimates. Despite robust business traction, Stage 3 assets deteriorated slightly from 3.18 percent in Q2FY20 to 3.3 percent in Q3FY20 and in spite of modest deterioration, provisions spiked 42-43 percent YoY/QoQ.
Cholamandalam Investment | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 323 | Target: Rs 353 | Upside: 9 percent: Research house slightly tweak its AUM CAGR to 18 percent CAGR versus earlier 17 percent for FY20-22E as company stands poised to overshoot the FY20 estimates. Despite robust business traction, Stage 3 assets deteriorated slightly from 3.18 percent in Q2FY20 to 3.3 percent in Q3FY20 and in spite of modest deterioration, provisions spiked 42-43 percent YoY/QoQ.
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