Of the 34 Nifty companies that have announced their earnings, 25 have either met or exceeded consensus estimates on both the PAT and EBITDA front
The December quarter results reported by India Inc. were a mixed bag, but largely on the positive side and that is one reason we have not seen any major knee-jerk reaction in equity market as well.
Of the 34 Nifty companies that have announced their earnings, 25 have either met or exceeded consensus estimates on both the PAT and EBITDA front. The earnings upgrade/downgrade ratio is over 1, Motilal Oswal said in a report.
Among the Nifty constituents, Maruti Suzuki, UltraTech Cement, Yes Bank, SBI, IOC, Bharti Airtel and NTPC missed PAT estimates, while L&T, Axis Bank, ITC, Asian Paints, Bajaj Finance, Reliance Industries and HCL Tech exceeded expectations.
“The December quarter earnings have been a mixed bag. We believe banks (both private and PSU banks) delivered yet another strong QoQ performance with improved asset quality and strong credit growth,” Jayant Manglik, President Religare Broking told Moneycontrol.
“Further, sectors like FMCG, IT and Capital Goods performed largely in-line with estimates with margin pressure witnessed across these sectors. However, the Auto companies’ results so far, have disappointed with pressure witnessed on volume growth as well as on margins,” he said.
Weak margins have impacted earnings for the 52/100 BSE-100 companies that have reported their results for the quarter ended December, Citigroup highlighted in a report.
Earnings expectations for FY19E have seen downgrades on a year-to-date (YTD) and now stand at 12-14% YoY for NIFTY. The global investment bank maintains its Sensex target at 39,000 (16x Mar-20 P/E).
Significantly more companies ‘beat’ earnings than ‘missed’. As many as 28 out of 52 ‘beats’ expectations compared to 14 out of 52 which ‘missed’. Similar trends across Revenue/EBITDA performance as well.
Among sectors, materials (cement, base metals) and energy (better than expected refining performance) sector positively surprised expectations while consumer discretionary (auto) and utilities have disappointed the most, said the Citi report.
Here is a list of 10 stocks where global brokerage firms raised their target price post December quarter results:
IGL: Buy| Target raised to Rs 330 from Rs 315
Deutsche Bank maintained a buy rating on IGL post December quarter results but raised its target price to Rs 330 from Rs 315 earlier.
The global investment bank also increased FY20-21 earnings estimates by 3 percent. It forecast 18 percent CAGR for FY18-20 EPS, driven by a 14 percent CAGR rise in volumes. The company is well placed to benefit from expansion in new areas.
Tech Mahindra: Outperform| Raised target to Rs 950 from Rs 925
Credit Suisse maintained its outperform rating on Tech Mahindra and raised its target price to Rs 950 from Rs 925 earlier.
The IT major reported a 13 percent sequential rise in Q3 profit at Rs 1,203 crore. The company reported 27.5 percent year-on-year (YoY) rise in consolidated net profit.
After many quarters of sluggishness, the mainstay of telecom and communications vertical reported a 2.6 percent growth in revenues during the reporting quarter over the preceding one, while the enterprise segment grew 4 percent.
The telecom story has started to pan out. It is a well-placed stock despite good performance, said the note. The valuations look reasonable at current levels.
Marico: Outperform| Raised target to Rs 400 from Rs 380 earlier.
Credit Suisse maintained its outperform rating on Marico post December quarter results and raised its target price to Rs 400 from Rs 380 earlier.
The FMCG major reported a steady Q3 and looks poised for a strong margin expansion in FY20.In terms of products, Parachute leads growth despite not dropping prices. The gross margin is poised to see a Year-on-year (YoY) expansion in FY20.
Aditya Birla Fashion: Buy| Target raised to Rs 265 from Rs 240 earlier
CLSA maintained its buy on Aditya Birla Fashion but raised target price to Rs 265 from Rs 240 earlier.
Strong Pantaloons same-store-sales (SSS) growth came as a surprise. The Q3 revenue was up 23 percent driven by strong SSS growth. Margin expanded even with a contraction in gross margin and higher A&P spend, said the note. The innerwear business continues to grow rapidly. The global investment bank raised FY19 PAT estimates to Rs 1,73.6 crore from Rs 114.6 crore.
Titan Company Ltd: Outperform| Target raised to Rs 1,175 from Rs 935
Credit Suisse upgraded Titan to outperform from neutral post the earnings and raised target price to Rs 1,175 from Rs 935 earlier.
The global investment bank also raised earnings estimates by 3-10 percent. It sees tailwinds for the stock from a strong wedding season. Higher gold prices aid an already strong growth trajectory, said the note.
State Bank of India: Buy| Target raised to Rs 380 from Rs 370 earlier
CLSA retained its buy call but raised the target price to Rs 380 from Rs 370 earlier.
SBI is the preferred pick among PSUs, said the note from CLSA. The profit was ahead of estimates which was aided by higher treasury gains. The key positive was the decline in slippages.
Dr. Reddy’s Laboratories Ltd: Outperform| Target raised to Rs 3200 from Rs 2850
CLSA retained outperform rating on the company and raised target price to Rs 3,200 from Rs 2,850 earlier.
The cost controls continue to deliver, and a revival in the US growth in FY20 will be a key catalyst. The earnings beat was largely driven by cost-control initiatives.
The US sales improved by 4 percent on a quarter-on-quarter (QoQ) basis and US pricing dynamics remained stable. The global investment bank increased FY19-21 EPS estimates by 2-9 percent.
ICICI Bank: Outperform| Target raised to Rs 460 from Rs 416
Macquarie maintained outperform rating on ICICI Bank and raised the target price to Rs 460 from Rs 416 earlier.
The private sector lender displayed a strong asset quality performance, while other operational parameters were stable. The management foresees FY20 credit costs between 85 bps and 125 bps. It is a preferred play on the ‘normalisation of credit costs’ theme, said the report.
Asian Paints: Outperform| Target raised to Rs 1580 from Rs 1180 earlier
Macquarie upgraded the stock to outperform from neutral earlier and also raised its target to Rs 1,580.
The volume growth picks up significantly, and the volume growth outlook has also improved which is a big positive. The recent price increases with falling input costs will improve margins.
The global investment bank raised FY19-21 EPS estimates by 7-16 percent. However, the full effect of lower GST rates yet to play out.
Havells India: Outperform| Raised target to Rs 775 from Rs 720 earlier
CLSA maintained an outperform rating on Havells India but raised its target price to Rs 775.
The revenue growth surprised across categories. Large channel inventory in the AC industry remains a concern. Revenue from switchgear division was Rs 416.2 crore as against Rs 344.3 crore in the third quarter of the financial year 2017-18.
The cable division revenue grew to Rs 820.3 crore as compared to Rs 625.6 crore in the year-ago period.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.