Experts are largely factoring in a strong fourth quarter on the back of a low base due to demonetisation and Goods and Services Tax (GST). Q4 FY18 earnings season has so far been broadly in-line with expectations in terms of revenue, Motilal Oswal said in a report. However, profits have missed estimates, largely dragged by Axis Bank, which reported a significant jump in slippages and provisions.
For the brokerage’s coverage universe, sales, earnings before interest, tax, depreciation and amortisation (EBITDA) and profit after tax (PAT) grew 16.7 percent, 12.2 percent and 2.4 percent YoY, as against expectations of 15.1 percent, 12 percent and 10.3 percent, respectively.
Global brokerage houses have upgraded few of the stocks highlighting robust results. Moneycontrol takes a look at six such stocks which have seen a ratings upgrade.
Brokerage: Nomura | Rating: Upgrade to Buy from Neutral | Target: Rs 890
Nomura said that the stock correction is a buying opportunity, it said, adding that it is expecting turnaround from current lows in power generation and exports. It also observed that outsourcing to group companies has no impact on growth or margins. On valuations, it said that the stock is trading at a discount to the sector despite having better return on equity.
Brokerage: Nomura | Rating: Upgrade to Buy | Target: Rs 2,089
The brokerage house said that the stock fall is factoring in concerns on Daman unit. It has cut earnings per share (EPS) estimates by 13 and 9 percent for current and next financial years to factor in lower US sales. It also said that the positive stance is driven by high contribution from India.
Brokerage: Deutsche Bank Markets Research | Rating: Upgrade to Buy from Hold | Target: Rs 1,280
The global research firm observed that growth momentum is improving and its liability strategy is paying off. Further, it said that the bank is moving to a high loan growth phase of 20 percent and higher. Further, it observed that growing customer base coupled with diversified product portfolio will be a benefit. In terms of valuations, it said that they are expensive, but justified as growth is returning.
Brokerage: HSBC | Rating: Upgrade to Buy from Hold | Target: Raised to Rs 4,200
HSBC said that the recent correction in stock price warrants a positive stance. With revival in rural markets, Hero to remain the key beneficiary, it said adding that the operational parameters are among the best in sector. The stock, it said, is relatively cheap, while risk reward is favourable.
Brokerage: CLSA | Rating: Upgrade to Buy | Target: Rs 450
CLSA said that improving India outlook and strong US pipeline will drive earnings. Improvement in new launches in US expected in 2018, it said, adding that biosimilars, vaccines and novel research products are long-term growth drivers. It further said that Cadila to look for more product details in the specialty space from FY18 cash flows. It also expects 16 percent earnings CAGR over FY18-20.
Brokerage: Macquarie | Rating: Upgrade to Outperform | Target: Rs 650
The brokerage house said that embracing JD/JV model to add land parcels is in favour of growth. Further, it expects presales momentum to pick up in near-term due to new schemes.
