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Last Updated : Jan 10, 2020 09:36 PM IST | Source: Moneycontrol.com

These 10 stocks are likely to more than double their profit in Q3; do you own any?

The net profit in the December quarter is likely to be led by the BFSI segment, followed by the automobile space, and consumer space which is a beneficiary of tax cuts.

 
 
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Indian indices might have hit an all-time high in December but any record high in terms of earnings growth is still some time away. The December quarter earnings will at best be ‘muted’, according to analysts at top brokerage firms.

The Nifty50 hit a record high on December 20 and rose about 12 percent for the year 2019 at a time when economic growth momentum decelerated, and corporate earnings remained tepid.

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“CY19 turned out to be a year where the markets got further polarized in terms of both earnings and performance. While the Nifty delivered 12% returns, the Nifty Midcap-100 and Nifty Smallcap-100 were down 4% and 9%, respectively,” Motilal Oswal said in a report.

“Corporate tax cuts have prevented a further slide in earnings estimates. Nonetheless, the FY20 corporate earnings story is all about financials, with Nifty ex-BFSI earnings expected to decline 2% for the year. The upcoming earnings season will likely mark one more quarter of muted earnings,” it said.

The net profit in the December quarter is likely to be led by the BFSI segment, followed by the automobile space, and consumer space which is a beneficiary of tax cuts.

However, metals as well as oil & gas are likely to drag the performance, given the underlying weak commodity prices. Telecom is expected to sharply reduce losses on a YoY basis, which will support earnings, said a report.

“We expect YoY double-digit growth for most of the sectors except for media, metals & mining (decline in realizations on a YoY basis) and transportation sectors,” Kotak Institutional Equities said in a report.

“We expect net profits of the BSE30 Index to grow 23% YoY while that of Nifty-50 Index to increase 21% YoY. We estimate ‘EPS’ of the BSE-30 Index at Rs 1,746 for FY20 and Rs 2,200 for FY21 and of the Nifty-50 Index at Rs 532 for FY20 and Rs 680 for FY21,” it said.

Here is a list of top 10 stocks that are likely to more than double net profit on a year-on-year (YoY) basis in the December quarter:

Brokerage Firm: Motilal Oswal

Blue Star: PAT likely to grow 626% to Rs 45 cr

Motilal Oswal is of the view that the net profit for Blue Start could well shot up by more than 600 percent on a year-on-year (YoY) basis to Rs 45 cr while sales could rise by more than 12 percent YoY to Rs 1237 cr for the quarter ended December.

The INR appreciation of 1.2 percent YoY against the USD can potentially have a positive impact on earnings of Blue Star due to their reliance on imports of the compressor and indoor units from China, said the report.

Birla Corporation: PAT likely to grow 230% YoY to Rs 90 cr

Motilal Oswal is of the view that the net profit for Birla Corporation could well grow by more than 200 percent on a year-on-year (YoY) basis to Rs 90 cr while sales could rise by more than 6 percent YoY to Rs 1664 cr for the quarter ended December.

Consolidated cement volumes to rise 4 percent on a YoY basis to 3.34mt. Better prices in north and central to be offset by weaker prices in the east.

The brokerage firm expects blended EBITDA/t at INR946. Investors should watch out for an update on capacity expansion/timelines, said the report.

Laurus Labs: PAT likely to grow 157% YoY to Rs 45 cr

Motilal Oswal is of the view that the net profit for Laurus Labs could well grow by more than 150 percent on a year-on-year (YoY) basis to Rs 45 cr while sales could rise by more than 29 percent YoY to Rs 685 cr for the quarter ended December.

Strides Pharma: PAT likely to grow 136% YoY to Rs 56 cr

Motilal Oswal is of the view that the net profit for Strides Pharma could well grow by more than 130 percent on a year-on-year (YoY) basis to Rs 56 cr while sales could contract by more than 3 percent YoY to Rs762 cr for the quarter ended December.

The brokerage firm expects Strides Pharma to maintain momentum in the US business. Superior product mix to drive margins. Growth prospects in Ranitidine for the US market. Investors should watch out for updates on the upcoming ANDA approval pipeline, said the report.

BPCL: PAT likely to grow 124% YoY to Rs 1,111 cr

Motilal Oswal is of the view that the net profit for BPCL could well grow by more than 120 percent on a year-on-year (YoY) basis to Rs 1,111 cr while revenues could contract by more than 19 percent YoY to Rs 64,030 cr for the quarter ended December.

Refinery throughput is estimated at 7.5mmt, lower QoQ due to BS-VI up-gradation shutdown at Mumbai refinery. Motilal Oswal expects poor GRM (core at USD1.4/bbl), with inventory gain (of 0.7/bbl). Despite poor GRMs, marketing margins were healthy (estimated at INR5.0/lt), said the report.

Brokerage Firm: Kotal Institutional Equities

Timken India: PAT likely to grow 182% YoY

Kotak Institutional Equities is of the view that the net profit for Timken India could well grow by more than 180 percent on a year-on-year (YoY) basis while net sales are likely to grow by nearly 10 percent on a YoY basis for the quarter ended December.

Kotak Institutional Equities expect revenues to increase by about 10 percent YoY in 3QFY20 led by (1) strong double-digit growth in industrial, after-market and export segments (growth in exports will be driven by ramp-up of exports from ABC's plants and execution of new order wins from non-US markets) and (2) 50% yoy revenue decline in the CV segment due to decline in industry production (~20% of overall revenues).

It expects EBITDA margin to decline by 30 bps QoQ to 22.1 percent in 3QFY20 but still improve by 770 bps YoY due to price increases from customers, the recent decline in commodity prices and benefit of backward integration.

Bandhan Bank: PAT likely to grow 109% YoY

Kotak Institutional Equities is of the view that the net profit for Bandhan Bank could well grow by more than 100 percent on a year-on-year (YoY) basis while net interest income is likely to grow by 44 percent on a YoY basis for the quarter ended December.

Kotak Institutional Equities expects the loan growth at ~85 percent on a YoY basis (includes the acquisition of Gruh Finance) resulting in strong revenue growth of 45 percent YoY.

The adjusted net interest margin (NIM) is likely to be flat on a QoQ basis. PAT growth higher on account of the lower tax rate.

Kotak expects stable trends on asset quality but the commentary on growth, indebtedness of borrowers, progress of the merger, asset quality (especially on account of rising tensions in the North-East) would be key areas of discussion.

Bank of Baroda: PAT likely to rise 292% YoY

Kotak Institutional Equities is of the view that the net profit for Bank of Baroda could well grow by nearly 300 percent on a year-on-year (YoY) basis while net interest income is likely to grow by over 50 percent on a YoY basis for the quarter ended December.

Kotak Institutional Equities expects a better headline performance on account of lower slippages and stable operating performance.

However, negligible exposure or sale of NPLs in earlier quarters implies that the resolution-led impact on BoB would be the lowest among most public banks.

Karur Vysya Bank: PAT likely to rise 147% YoY

Kotak Institutional Equities is of the view that the net profit for Karur Vysya Bank could well grow by nearly 150 percent on a year-on-year (YoY) basis while net interest income is likely to grow by about 2 percent on a YoY basis for the quarter ended December.

Kotak Institutional Equities expects muted earnings (low base driving high growth) as provisions are likely to remain high while revenue growth is likely to remain muted as seen in recent quarters. Loan growth to remain sluggish at 7 percent YoY.

Punjab National Bank: PAT likely to grow over 400% YoY

Kotak Institutional Equities is of the view that the net profit for Punjab National Bank could well grow by over 400 percent on a year-on-year (YoY) basis while net interest income is likely to grow by about 20 percent on a YoY basis for the quarter ended December.

Kotak Institutional Equities expects the bank to report profits on the back of a recovery in a few large NPL cases. Strong revenue growth is led by improvement in NIM (one-off interest income from Essar Steel) and recovery from written-off loans.

Disclaimer: The views and investment tips expressed by investment experts 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.



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First Published on Jan 10, 2020 09:59 am
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