Buy, sell, hold: 6 stocks analysts are watching out

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ICICI Prudential Life Insurance

Kotak has initiated coverage on ICICI Prudential with add rating and target price of Rs 380 as it expects company to deliver 17 percent operating RoEV (return on embedded value) over the medium-term due to 39 percent CAGR on high ULIPs and margin protection policies.

It feels current valuations priced in most of the positives. The brokerage house values company at Rs 54,000 crore (Rs 380 per share).

It believes inflows in life insurance to grow at 18-20 percent CAGR between FY2016-20 and also believes ULIP inflows will be higher than that of traditional policies.

Kotak sees huge potential for pure protection segment over the medium-term.

Industrials

Jefferies says Siemens' 39 percent outperformance over ABB in the last 2 years (January 2015-March 2017) has been driven by the sharp margin improvement from cost initiatives.

ABB's CY16 margin recovery was impacted by its investment with the parent. The brokerage house has lowered company's CY17-18 EPS estimates by 6-9 percent factoring some of this to continue and revised target price to Rs 1,540 from Rs 1700 earlier.

However, as margin recovery plays out into CY17-18, Jefferies believes it will bridge this outperformance gap.

"Barring the one-off investments with the parent in its export facilities, margins would have 9-9.5 percent against reported 8.6 percent for CY16. CY17-18 is expected to see far lower investments, and hence, we believe this margin recovery surprise will play out in CY17-18 for ABB," it explains.

Jefferies says Siemens' margin recovery story has played out into its Q1FY17 also, and hence it believes limited surprise scope potential leaves limited room for upside.

Bharti Airtel

Deutsche Bank says Bharti Airtel's deal with Millicom to combine operations in Ghana reflected continued progress on African restructuring. Hence, the brokerage house assigned buy rating on the stock, with a target price at Rs 400.

GAIL

Nomura says GAIL is its top pick in oil & gas space and hence, maintained a buy call on the stock with a target price at Rs 620. Time-swap deal with Gunvor should further ease market concerns, it believes.

However, Bank of America Merrill Lynch has reiterated underperform rating on the stock, with a target price at Rs 422 as it feels sluggish domestic demand is a key risk.

It says Gunvor deal would be incrementally positive but concerns on selling rest of the volume could present a downside. Earnings momentum is intact, but risk/reward is unfavourable, BoAML feels.

Reliance Industries

Credit Suisse has neutral rating on Reliance Industries as it believes the stock is already pricing in Jio transitioning to a top-2 telecom player (25 percent market share). However, it increased target price to Rs 1,200 from Rs 1,020.

The brokerage house expects two-pronged strategy from Reliance Jio. "One is for higher ARPU customers, retain data rates lower than incumbents, beyond March 2017, to encourage switching; and  second for others (primarily voice), launch an affordable 4G smart feature phone, with upfront payment and nominal monthly payments; in addition, tariffs for the current Rs 149 plan (which incumbents nearly match) may need a re-look as well," it explains.

As this high-competition scenario plays out, Jio can make rapid gains in market share, Credit Suisse says.

It expects aggregate industry average revenue per user for next 2 years to stay below FY17 level.

Credit Suisse says RIL's refining/petchem projects should commission over the next two quarters, adding USD 3.2 billion to EBITDA at peak. Given FY18 telecom capex and USD 7.8 billion in vendor payables, Reliance (consolidated) turns free cash flow positive in second half of FY19.

Disclosure: Reliance Industries, the parent company of Reliance Jio, owns Network 18 that publishes Moneycontrol.com.