CLSA has maintained a sell call on Gas Authority of India Limited’s (GAIL) as it finds the valuation unsustainable. It sees progress in stabilization of petrochemical plant at Pata. The plant is operating at 70 percent capacity and the team there feels it should ramp up to 100 percent capacity utilization in first quarter of next fiscal. The brokerage house feels that the stock is ignoring large risk for US LNG contracts.
Meanwhile, JPMorgan has an underweight rating on the stock with a target price of Rs 410 per share. The research firm believes that the firm’s polymer production capacity has almost doubled after expansion of Pata plant. The firm would also utilize 100 percent of Pata-1 and 80 percent of Pata-2 plant in FY18 to meet targets. Overall, JPMorgan estimates petrochemical volumes to grow 60 percent in FY17 and 40 percent in FY18 YOY.
Bank of America Merrill Lynch has maintained its buy call on Yes Bank with increased target price at Rs 1,820 (from Rs 1,600), saying it is a top pick as growth visibility of the bank is strong and margins will have tailwinds.
According to the brokerage house, asset quality is likely to be as comfortable as it has been and retail side can see acceleration of timeline.
BoAML believes capital is not an issue in near-term for 'faster growth leg'. It sees return on equity rising to 23 percent by FY18 on rising return on assets and not just leverage.
CLSA believes that valuation multiples of auto component firms have improved over the past three years. On tyre companies, it feels that they deserve lower multiples due to high competition. However, it also finds it overly harsh that such stocks trade at valuations lower than commodity firms. CLSA believes it is possible that the tyre segment could see a re-rating.
CLSA has a buy call on Adani Ports with an increased target price to Rs 390 from Rs 375. It cites that the management is confident about the firm’s core strategy being a profitable one. The management stated that sweating of assets and repricing of debt shall improve profitability.
Credit Suisse believes that pressure on PSU banks will intensify. The comments come on the backdrop of a historic low loan growth of 4.1 percent as of March 2017. The industry segment’s loan growth is the weakest at -5 percent YoY as of January, while sub-5 percent loan growth skews in favour of private banks.
PharmaceuticalsNomura has maintained neutral calls on Cadila and Lupin. The brokerage house highlighted that Cadila gained 10 percent market share in Tamiflu capsule, while Lupin gained 18 percent market share within two weeks of Pristiq launch.