Expect good results from ITC, Cadila, Axis Bank: Sharekhan

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Expect good results from ITC, Cadila, Axis Bank: Sharekhan

From the companies that are to come out with numbers, Hemang Jani of Sharekhan says expectations are very positive for ITC, Cadila Healthcare, Axis Bank, Divis Laboratories and Ultratech Cement.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

Expecting Sensex companies to report the slowest of the last two years at 7.6%, in an interview to CNBC-TV18, Hemang Jani of Sharekhan also says that the year long earnings expectations of 21-22% is now down at about 10-12%.

From the earnings reported until now, he likes the numbers of Infosys, HDFC Bank and Indusind Bank . In terms of the companies which may come out with numbers, Jani says the expectations are very positive for ITC , Cadila Healthcare , Axis Bank , Divis Laboratories and UltraTech Cement . "We think that the numbers in these companies are going to be much better than generally the street expectations, so we have a positive bias there," he says.

Below is an edited transcript of Hemang Jani's interview to CNBC-TV18. Also watch the accompanying video.

Q: Are there any midcap stock that has impressed you by the results?

A: Overall, we expect Sensex companies to report a growth of about 7.6%, which is the slowest that we have seen in the last two years. The earnings expectations of about a year back of 21-22% is now looking at about 10-12%. So, from that perspective we think that the earning downgrades cycle that we have seen, we may see it continuing even after this quarterly numbers are out.

From the set of numbers which have come out so far what we have really liked are the Infosys, HDFC Bank and Indusind Bank - these are the three companies where the numbers have been pretty positive. And, in terms of the companies which may come out with numbers where our expectations are very positive are ITC, Cadila Healthcare, Axis Bank, Divis Laboratories and Ultratech Cement, where we think that the numbers are going to be much better than generally the street expectations, so we have a positive bias there.

Q: Which were the clear-cut misses according to you in the earnings which have come through and where there is still some scope for some stock price reduction?

A: We think that in case of the Crompton Greaves definitely the numbers were pretty disappointing and there is a scope for some more downside. Also in case of HCL Tech, we think that the numbers were below expectations and that the stock may react another about 5-7%.

TCS numbers were bad compared to the street expectations. The stock has already reacted so we think that somewhere around current levels one can actually accumulate TCS because it looks pretty impressive and in case of Reliance too the numbers were weaker than the general expectations.

Q: You took us through some of the stocks that you are positive on. One by one if you can take what kind of a price target you have for instance on UltraTech?

A: UltraTech we are looking at about 18-25% appreciation in the stock price over the next one year. We feel that overall the cement prices have remained quite stable but the overall dispatch growth has been quite weak. Once we see the input cost softening we think that the operating profit margin per ton would be very good for some of the companies. So, from that perspective UltraTech is looking quite interesting.

Q: Many housing finance companies like LIC Housing Finance are down about 6% on the back of what the NHP have to say. After this kind of fall, how would you approach companies like these?

A: LIC Housing Finance is not under our coverage but we continue to like HDFC and it came out with a good set of numbers and we like their business model and in fact we are of the view that the company which has the ability to withstand the interest rate volatility and still continue to maintain a decent growth of about 20-22%. We think that from that perspective, HDFC which is also incidentally down today about 4% is looking quite attractive.

Q: Do you think you are at least close to the bottom for Crompton Greaves or is there another quarter or two of pain to go?

A: They are going to sell out their aircraft but what is more important is that we had a sector which is not doing so well and when you have a back to back two quarterly disappointments in a major way then, obviously, people start raising doubts about their capability to achieve the guidance. There are lot of other interesting opportunities to look at. So, until we see some kind of clear growth possibility coming in from Crompton the stock is going to be a laggard. The stock can correct another probably 7-10%.

Disclosure: It will be safe to presume that I personally, and my company have interest in the stocks that I have talked about.