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These are the top 10 stock picks by Motilal Oswal post March-quarter earnings

Updated : 2019-06-07 15:23:51

The March-quarter corporate earnings were mostly in line with expectations. Nifty companies reported a 15.8 percent rise in profit against Motilal Oswal's (MOSL) expectations of 16.8 percent.According to the brokerage, sales growth for the Nifty stocks was the slowest since December 16, dragged mainly by commodities such as metals and oil and gas. Going ahead, the brokerage said positive sentiment, expectations of reforms and a potential revival in domestic flows could keep valuations rich. Five stocks including UPL, State Bank of India (SBI), Tata Motors, and Tata Steel have seen EPS (earnings per share) upgrades by the brokerages, while, Asian Paints, Hindalco, Sun Pharma and Bharti Infratel saw EPS downgrades for FY20. MOSL's top largecap picks include SBI, ICICI Bank, Maruti, L&T, Infosys, Bharti Airtel, Coal India, Titan, Ultratech, and HDFC Life.

State Bank of India: The public sector bank's loan growth stood at 13 percent YoY, driven by growth in home loans and corporate book. Further, the bank expects loan growth of 12-14 percent in FY20. Slippages moderated to Rs 7,960 crore in Q4, which, coupled with healthy recoveries and higher write-offs, led to an asset quality improvement. Overall, the bank expects recoveries of Rs 35,000-38,000 crore in FY20.
State Bank of India: The public sector bank's loan growth stood at 13 percent YoY, driven by growth in home loans and corporate book. Further, the bank expects loan growth of 12-14 percent in FY20. Slippages moderated to Rs 7,960 crore in Q4, which, coupled with healthy recoveries and higher write-offs, led to an asset quality improvement. Overall, the bank expects recoveries of Rs 35,000-38,000 crore in FY20.
ICICI Bank: The bank's retail loan mix stands at 60.2 percent in Q4 (up 120 basis points QoQ). Fresh slippages stood at Rs 3,550 crore, but healthy recoveries/upgrades and write-offs drove a 105 bps decline in the gross non-performing ratios to 6.7 percent. ICICI Bank expects credit cost to normalise significantly from FY20. It maintained its consolidated RoE target of 15 percent by June 2020. (stock image)
ICICI Bank: The bank's retail loan mix stands at 60.2 percent in Q4 (up 120 basis points QoQ). Fresh slippages stood at Rs 3,550 crore, but healthy recoveries/upgrades and write-offs drove a 105 bps decline in the gross non-performing ratios to 6.7 percent. ICICI Bank expects credit cost to normalise significantly from FY20. It maintained its consolidated RoE target of 15 percent by June 2020. (stock image)
L&T: Consolidated revenue grew 10.5 percent YoY to Rs 44,900 crore on a strong base of last year, taking full-year revenue growth to 18 percent. EBITDA margin shrank 80 bps YoY on account of one-off provisions in the core E&C (engineering and construction) business. Q4 did not witness any slowdown in execution or order inflow on account of scheduled elections in April-May. LT remains MOSL's top pick in the capital goods sector. (stock image)
L&T: Consolidated revenue grew 10.5 percent YoY to Rs 44,900 crore on a strong base of last year, taking full-year revenue growth to 18 percent. EBITDA margin shrank 80 bps YoY on account of one-off provisions in the core E&C (engineering and construction) business. Q4 did not witness any slowdown in execution or order inflow on account of scheduled elections in April-May. LT remains MOSL's top pick in the capital goods sector. (stock image)
UltraTech Cement: The company stabilised operations of Binani’s assets, which operated at 72 percent utilisation in March 2019. Overall volumes for the company grew 15 percent YoY. The company successfully ramped up profitability of Binani’s assets, which achieved EBITDA per tonne of Rs 830 per tonne, an improvement of Rs 740 per tonne. With various cost-efficiency programmes, cost per tonne for the company declined 2 percent YoY. (REUTERS)
UltraTech Cement: The company stabilised operations of Binani’s assets, which operated at 72 percent utilisation in March 2019. Overall volumes for the company grew 15 percent YoY. The company successfully ramped up profitability of Binani’s assets, which achieved EBITDA per tonne of Rs 830 per tonne, an improvement of Rs 740 per tonne. With various cost-efficiency programmes, cost per tonne for the company declined 2 percent YoY. (REUTERS)
Maruti Suzuki India: The automaker's EBITDA remained under pressure due to factors such as inventory de-stocking at the company, Gujarat plant depreciation and conversion cost inflation. The brokerage said that Maruti will see the full impact of headwinds on both volumes and margins over the first half of FY20. They estimated FY20 volume growth of 6 percent, which will be highly influenced by spread out of monsoon and new product launch. Despite headwinds, EBITDA margin will likely expand by 30 bps to 12.9 percent in FY20, as price increase and lower discounts will partially offset the impact from operating deleverage. (REUTERS)
Maruti Suzuki India: The automaker's EBITDA remained under pressure due to factors such as inventory de-stocking at the company, Gujarat plant depreciation and conversion cost inflation. The brokerage said that Maruti will see the full impact of headwinds on both volumes and margins over the first half of FY20. They estimated FY20 volume growth of 6 percent, which will be highly influenced by spread out of monsoon and new product launch. Despite headwinds, EBITDA margin will likely expand by 30 bps to 12.9 percent in FY20, as price increase and lower discounts will partially offset the impact from operating deleverage. (REUTERS)
Bharti Airtel: India wireless business made a strong comeback with a beat on all fronts – EBITDA grew 32 percent QoQ. Minimum recharge strategy drove ARPU by a steep 19 percent QoQ to Rs 123, while the subscriber base fell by a meager 1 percent. Recent rights issue, impending Africa IPO, Bharti Infratel stake sale and the peak-out of capex intensity should act as a key catalyst in alleviating concerns around burgeoning leverage, the brokerage said.
Bharti Airtel: India wireless business made a strong comeback with a beat on all fronts – EBITDA grew 32 percent QoQ. Minimum recharge strategy drove ARPU by a steep 19 percent QoQ to Rs 123, while the subscriber base fell by a meager 1 percent. Recent rights issue, impending Africa IPO, Bharti Infratel stake sale and the peak-out of capex intensity should act as a key catalyst in alleviating concerns around burgeoning leverage, the brokerage said. "Bharti is well poised to regain momentum. A turnaround in the India wireless business, coupled with a steady uptick in the Africa business, should propel overall growth," it added. (REUTERS)
Coal India: Coal India's Q4 adjusted EBITDA grew 4 percent YoY, driven by higher realisations and volumes, partly offset by a higher wage bill. Excluding the wage bill, cash cost was down 4 percent YoY. The brokerage expects Coal India's cash costs per tonne to decline as it continues implementing productivity measures and shuts down old mines. This, along with 5-6 percent growth in volumes, should drive 8 percent earnings growth over the next two years. (REUTERS)
Coal India: Coal India's Q4 adjusted EBITDA grew 4 percent YoY, driven by higher realisations and volumes, partly offset by a higher wage bill. Excluding the wage bill, cash cost was down 4 percent YoY. The brokerage expects Coal India's cash costs per tonne to decline as it continues implementing productivity measures and shuts down old mines. This, along with 5-6 percent growth in volumes, should drive 8 percent earnings growth over the next two years. (REUTERS)
IndianOil: Led by its highest-ever marketing margins, the company's EBITDA came in 45 percent, above MOSL's estimate. Profit after tax (PAT) exceeded their estimate by 63 percent, driven by higher other income and a lower effective tax rate. No threat of spike in oil prices, combined with continuity in reforms, is likely to result in stable marketing margins. The quality of earnings is likely to improve with the commissioning of the Polypropylene plant at Paradip and the ramp-up of the Ennore LNG terminal. (REUTERS)
IndianOil: Led by its highest-ever marketing margins, the company's EBITDA came in 45 percent, above MOSL's estimate. Profit after tax (PAT) exceeded their estimate by 63 percent, driven by higher other income and a lower effective tax rate. No threat of spike in oil prices, combined with continuity in reforms, is likely to result in stable marketing margins. The quality of earnings is likely to improve with the commissioning of the Polypropylene plant at Paradip and the ramp-up of the Ennore LNG terminal. (REUTERS)
Federal Bank: Fresh slippages moderated to Rs 260 crore, driven by a 32 percent YoY decline in SME slippages and nil corporate slippage. The bank expects the slippages trend to moderate, and thus, guided for 55-60 bps of credit cost for FY20, and continued return on assets (RoA) improvement over FY20-21. (Stock image)
Federal Bank: Fresh slippages moderated to Rs 260 crore, driven by a 32 percent YoY decline in SME slippages and nil corporate slippage. The bank expects the slippages trend to moderate, and thus, guided for 55-60 bps of credit cost for FY20, and continued return on assets (RoA) improvement over FY20-21. (Stock image)
Asian Paints: The company's results were disappointing, with 12 percent sales growth and 2 percent EBITDA and PAT decline. Ongoing top-line slowdown particularly amid massive capacity expansion and a deteriorating mix indicates a weak earnings outlook. Valuations are rich for a company with a weak earnings growth outlook and return on capital employed likely below 20 percent for FY20. The brokerage downgraded the stock to sell.
Asian Paints: The company's results were disappointing, with 12 percent sales growth and 2 percent EBITDA and PAT decline. Ongoing top-line slowdown particularly amid massive capacity expansion and a deteriorating mix indicates a weak earnings outlook. Valuations are rich for a company with a weak earnings growth outlook and return on capital employed likely below 20 percent for FY20. The brokerage downgraded the stock to sell.
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