Moneycontrol
Feb 15, 2017 04:34 PM IST | Source: Moneycontrol.com

Buy, sell, hold: How to trade 6 key stocks post Q3 results?

Nomura cut FY17 earnings estimates for Sun Pharma by 9 percent, FY18 by 5 percent & FY19 by 3 percent after Q3 earnings missed analysts' expectations. It sees 11 percent revenue growth & 10 percent earnings growth over next 2 years.

 
 
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Moneycontrol Bureau


Tata Motors


CLSA has downgraded Tata Motors to sell and slashed target price to Rs 405 from Rs 650 after cutting FY18-19 EPS estimates by 25-31 percent due to dismal performance in Q3FY17. Management commentary on JLR margins has weakened significantly, it says, adding hedging losses are likely to continue at high levels for longer.


JPMorgan also reduced its target price on the stock to Rs 570 from Rs 610 after cutting FY17/18 JLR EBIT estimates by 26 percent/17 percent and consolidated earnings estimates by 33 percent/23 percent. It advises buying on dip as margin miss was not as bad as it seems.


The commercial vehicle and luxury car maker's third quarter profit on consolidated basis fell sharply by 96 percent year-on-year to Rs 112 crore, impacted by big loss in domestic business and operational weakness in JLR.


However, other brokerage houses also cut target price, though they retained their rating on the stock.


Credit Suisse has maintained outperform rating on the stock, with reduced target price at Rs 630 from Rs 680 after cutting FY17/FY18/FY19 EPS estimates by 26 percent/15 percent/12 percent. The brokerage house has built in slightly lower margins to account for higher incentives. It expects moderating forex losses from June onwards and sees progressive reduction in hedging losses.


Macquarie also retained outperform rating but cut target to Rs 575 from Rs 630 after lowering FY17/18/19 consolidated EBITDA estimates by 20 percent/10 percent/7.0 percent.


Most negative factors that impacted Q3 earnings are transitory, it feels. It expects stronger sales growth & margin for JLR in FY18.


Deutsche Bank, which has a buy call on Tata Motors with reduced target at Rs 535 from Rs 575, says currency gains remained elusive but management looks upbeat on new models. It expects margin to normalise in medium term.


Bank of America Merrill Lynch also retained buy call but cut target price to Rs 560 from Rs 575. The brokerage house forecasts consolidated EPS CAGR of 41 percent over FY16-19. It feels weaker GBP will remain a tailwind to margins in FY18/19 and pre-buy for commercial vehicles should help margins in Q4.


Citi says correction in stock price is a buying opportunity as its feels details reveal a brighter picture, though headline is weak. JLR's favourable FS trends should aid in healthy volume growth, it believes. The research firm has a buy call on the stock, with a target price at Rs 660.


Sun Pharma


Nomura cut FY17 earnings estimates for Sun Pharma by 9 percent, FY18 by 5 percent & FY19 by 3 percent after Q3 earnings missed analysts' expectations. It sees 11 percent revenue growth & 10 percent earnings growth over next 2 years.


Return on equities will fall another 200 bps to 18 percent and dividend payouts will be anaemic at 10 percent, it feels. Downside may be limited, it says.


Citi has a buy call on Sun Pharma, with reduced target price at Rs 900 from Rs 970. The brokerage house raised FY17 EPS estimates by 4 percent but cut FY18/19 estimates by 7 percent/5 percent. According to the research firm, delay in fresh approvals from Halol plant would remain overhangs.


After unclear earnings trajectory, Morgan Stanley retained its equal-weight rating on the stock, with reduced target price at Rs 690 from Rs 762. FY17, FY18 & FY19 EPS estimates cut buy 5.4 percent, 5.4 percent & 4.1 percent, it says.


CLSA feels near-term outlook for Sun Pharma looks challenging but valuations are reasonable. The brokerage house has maintained a buy call on the stock but lowered target price to Rs 790 from Rs 800 after cutting FY17-19 EPS estimates by 1-4 percent.


JPMorgan says Sun Pharma's EBITDA (earnings before interest, tax, depreciation and amortisation) miss was due to lower ex-Taro gross margins. Halol & ex-Taro performance are key drivers, it feels. The research firm is overweight on the stock, with reduced target at Rs 750 from Rs 775.


Goldman Sachs has maintained buy rating on a favourable risk-reward on Sun Pharma but lowered target price to Rs 824 from Rs 836. It expects 14 percent EBITDA CAGR over FY16-19.


Adani Ports


While assigning a buy call on Adani Ports, with a target price of Rs 375, CLSA says strategic asset should deliver 54 percent growth in port EBITDA over FY16-19 and new corporate structure could lower taxes & boost EPS growth.


Bank of America Merrill Lynch says Adani Ports' Q3 beat was led by higher realisation & SEZ income. The research firm has a buy call on the stock, with increased target price at Rs 350 from Rs 330.


Credit Suisse feels valuations are reasonable at 16x. Hence, it maintained outperform rating on the stock, with target price at Rs 360.


Goldman Sachs raised target price on Adani Ports to Rs 340 from Rs 333 after increasing earnings estimates by 3.6-9.6 percent for FY17-19.


Jindal Steel & Power


Deutsche Bank says Jindal Steel reported a strong & better-than-expected operating performance in October-December quarter and has achieved 71 percent of FY17 EBITDA forecast in 9 months.


However, the research firm has retained sell rating on the stock on elevated risk from high leverage. Visibility on reduction in debt will be a strong stock price driver, it feels.


Voltas


Deutsche Bank has hold rating on Voltas, with a target price at Rs 365 after Q3 earnings.


Cost controls offset weak revenues, Deutsche feels while Goldman Sachs says strong electro-mechanical projects margins drove bottomline beat in October-December quarter.


SpiceJet

CLSA has retained a sell call on SpiceJet. Fair value for the stock is Rs 35, it says.

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