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Last Updated : Jun 14, 2019 12:02 PM IST | Source: Moneycontrol.com

Morgan Stanley overweight on 6 stocks which could return 6-49%; do you own any?

In case of banks, Morgan Stanley believes asset quality and loan growth are expected to be strong which will drive their earnings going ahead, especially after facing problem on asset quality front for past several quarters.

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Global brokerage house Morgan Stanley is positive on six stocks which it rated overweight and expects to give a return in the range of 6-49 percent.

These six stocks are Jubilant Foodworks, Axis Bank, Kotak Mahindra Bank, ICICI Bank, Voltas and Larsen & Toubro, which gained 6-16 percent in last one month following the positive market trend started around election results time.

In the case of banks, Morgan Stanley expects asset quality and loan growth are to be strong and drive earnings going ahead, especially after facing problem on asset quality front for the past several quarters.


However, the brokerage is negative on HCL Technologies and neutral on TCS, Infosys and HDFC Life.

Here is the list of stocks where brokerage shared its views:

Jubilant Foodworks: Overweight | Target: Rs 1,525 | Return: 15%

We have an overweight call on the stock with a target price at Rs 1,525 as the Domino's Pizza maker is optimistic on long-term growth potential for quick service industry and aims to use technology and efficiency to keep cost inflation in check.

Management is excited about the growth opportunity in Bangladesh.

Axis Bank: Overweight | Target: Rs 1,100 | Return: 34%

We have an overweight rating on the private sector lender with a target price at Rs 1,100 as we expect domestic growth to remain strong at 15-18 percent and feel cost ratio improvement is on track.

Management expects good improvement in cost ratio over next few years and continues to guide for strong return on equity improvement over 3 years.

Kotak Mahindra Bank: Overweight | Target: Rs 1,600 | Return: 6%

The bank reiterated its more than 20 percent loan growth target for FY20 and is open to acquisition of non-core assets.

We expect its asset quality to remain strong. We have overweight call on the stock with a price target at Rs 1,600.

Voltas: Overweight | Target: Rs 705 | Return: 15%

We are overweight on the air conditioner maker with a target price at Rs 705 as the company is setting up manufacturing facility in Southern India where it has lower presence and plans increasing its sourcing from the domestic market.

ICICI Bank: Overweight | Target: Rs 625 | Return: 49%

The bank sounded confident of its asset quality position and is confident of achieving FY20 credit cost guidance of 120 bps.

Its loan growth will improve in FY20 and its focus remains on retail & granular lending corporate banking space. Bank expects cost growth to remain in the mid-teens.

Larsen & Toubro: Overweight | Target: Rs 1,786 | Return: L&T

The country's largest infrastructure company has enough headroom to grow and faces very minimal client overlap. Company believes there will be revenue and cost synergies from Mindtree.

L&T increased its stake in the Bengaluru-based IT firm to 28.9 percent and its open offer to buy a further 31 percent share will open during June 17-28.

TCS: Equal-weight | Target: Rs 1,980 | Return: (-12%)

Company's deal pipeline is robust and order book is better compared to past few quarters. The country's largest IT company believes deal wins provide confidence to sustain double-digit growth and is positive on retail but highlighted weakness within BFSI.

Infosys: Equal-weight | Target: Rs 700 | Return: (-6%)

We are not seeing any delays or hold back on spending despite global uncertainties. Large deal wins & ABN AMRO’s Stater acquisition provides visibility for growth in the company.

Its Q1FY20 & Q2 margins will be soft owing to wage hikes, visa costs.

HCL Technologies: Underweight | Target: Rs 1,000 | Return: (-9%)

Management cited healthy growth in manufacturing as new deals ramp up.

BFSI has two client-specific issues but that is baked into the guidance. Ex-client Issues, BFSI will grow in-line with company average.

Digital margin could be flattish YoY in FY20 as investments may continue. Traditional business margin is weakening due to investments and productivity benefits being passed on.

HDFC Life: Equal-weight | Target: Rs 380 | Return: (-16%)

Company expects to sustain premium growth above industry and sees margin improving given an increase in protection & annuity mix.

We feel protection premium growth would remain strong.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jun 14, 2019 12:02 pm