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These 13 stocks get an upgrade from brokerages expecting gains of 10-36%

June and March quarter earnings indicated that lot of sectors did not have much impact of COVID-19-led lockdown. As a result, lot of stocks saw an upgrade in rating to buy.

August 11, 2020 / 01:49 PM IST
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The market gained momentum in last 3-4 months, especially after the unlocking process began in June and companies started announcing in-line Q1 earnings in July. It was also backed by global liquidity.

At the end of July, benchmark indices traded with 50 percent gains each from their March 23 lows and had rallied 16 percent each since the beginning of unlock process in June.

Experts feel given the rally in last few months, the market seems fairly valued now and hence the upside looks limited from here on, but the stock-specific action and sector rotation could continue.

"Predicting near term returns is almost impossible. At the current junction, the focus is more on accessing pace of underlying demand recovery as the economy opens more and moreover next quarter or two from the lockdown and its implication for earnings of different sectors and companies," Shridatta Bandwaldar, Head of Equity at Canara Robeco told Moneycontrol.

"Having said that, from the valuation perspective we are trading at 18xFY22, which to us looks fair and thus we see limited upside in the near term at indices levels. But, the sectoral rotation and outperformance will continue as investors get incremental sector and company-specific data points," he said.


June and March quarter earnings indicated that a lot of sectors did not have much impact of COVID-19-led lockdown. As a result, lot of stocks saw an upgrade in rating to buy.

Moneycontrol collated a list of stocks that were upgraded to buy in last one month and brokerages are expecting a return of 10-36 percent in the next one year:


Prabhudas Lillahder upgraded Emami from hold to buy led by 11.8 / 13.3 percent and 21.9 percent upgrade in EPS for FY21/22/23 and improved outlook given 1) Completion of Cement business sale of promoter reduces pledge to 55 percent (Rs 1,100 crore) with target to end pledge by March 21 2) Revival in growth in June and July led by Zandu and Hygiene segment in Boroplus 2) strong rural revival which is 50-55 percent sales 4) Positive margin outlook on benign input costs and 5) Rs 50-60 crore savings from cost rationalization measures in FY21.


The brokerage valued the stock at 25xJune22 EPS to arrive at a price target of Rs 419 (Rs 285 earlier, valuing at 20xFY22EPS).

Divis Labs

Divis Labs posted its best-ever quarter, with revenue/EBITDA beating estimates by 30/70 percent and margins of 40.5 percent. Growth was broadbased and led by volumes, with close to 50 percent growth in Generics/CCS businesses. Margins rose 850bps QoQ, aided by operating leverage.

"Q1 growth is lumpy and may not be representative of the full-year growth. Nonetheless, we believe that the API sector has strong structural tailwinds as most global companies look to reduce their dependence on China and DIVI is the best positioned to benefit from this," Emkay Global said.

Capex of Rs 1,800 crore will be fully commissioned by H2 (of which around Rs 880 crore commissioned in FY20-end) and should drive strong growth over the next 2-3 years. Historically, Divis is known to incur capex only when they have strong growth visibility," it added.

The brokerage increased FY21/22/23E EPS by 27/22/18 percent and upgraded the stock to buy (from hold earlier) with a revised target of Rs 3,500, valuing the stock at 35x September-2022 EPS to factor in the strong structural tailwinds.

Titan Company

Motilal Oswal upgraded Titan to a buy with a target of Rs 1,215. "There has been addition of two new growth engines - digital thrust and lower price point products. This is besides the already identified growth engines in recent years: (a) gold exchange, (b) wedding jewellery, (c) high-value diamond jewellery, (d) middle-India store expansions, (e) the 'Golden Harvest' scheme, and (f) focus on low-market cities. Barring high-value jewellery sales, we note that all of these growth engines are at play in FY21 as well."

"Gains from unorganized and other organized players continued unabated in FY20 and remain promising going forward as well. This is particularly attributable to unorganized and several organized players challenged by: (a) the lack of credit, (b) weakening balance sheets, and (c) the lack of trust," said the brokerage.

"While 1HFY21 is expected to remain weak, we expect recovery in Q3FY21, faster than the company's guidance of Q4FY21. This is attributed to: (a) the bunching up of postponed wedding demand, in addition to traditionally strong demand for wedding jewellery, in Q3 and (b) festive demand," it added.

Mahindra & Mahindra

Prabhudas Lillahder upgrded M&M to buy (versus hold) led by increasing focus on capital allocation, plans for loss-making subsidiaries (exit or turnaround) and preference to rural exposure.

"It’s emhasis placed on the core intensifies with active search of partner for Sangyong, no bid for truck supply contract in US (under MANA), GenZ exit. We believe these are initial steps to fix ROEs with likely more consolidation. Furthermore, FES segment has strong outlook led by healthy farm sentiments whereas widened auto segment losses should improve Q2 onwards. The management also hinted that stake sale in EV business could be an additional catalyst for value unlocking in unlisted subsidiaries," said the brokerage.

With improved rural outlook, the brokerage increased consolidated EPS by 4/8 percent as it expects contribution of high margin FES segment to remain elevated. "This has resulted in 50bp/70bp uprade in FY22/23 margins. Hence, we upgrade the stock to buy with revised SoTP based TP of Rs 703 (from Rs 531)."

Geojit Financial Services

"Geojit remains a small player in terms of clientele with acquisition pace lagging behind large peers. However, in the current scenario witnessing higher volume in cash segment, Geoji remains a clear beneficiary given largest proportion of cash business. Continued focus on targeting middle, upper middle-class customers and engaging in personalised service would enable better stickiness. Continued focus on cash ADTO is seen keeping yields elevated," ICICI Direct said.

"Harnessing client relationship, distribution of financial products remains one of the focus areas seen to garner fee income (expect growth to stay subdued in FY21E due to lockdown). Expect steady growth in ADTO at Rs 2,413 crore coupled with higher proportion of cash business at Rs 613 crore to support traction in revenue. We expect earnings to grow at 24 percent CAGR in FY21-22E to Rs 77.8 crore. Given higher proportion of cash business that is positive in current scenario, we revise target price to Rs 46, valuing the company at 14x FY22E EPS. We upgrade from hold to buy," the brokerage added.

Exide Industries

"We continue to expect market-share loss in two-wheelers and weak OEM sales for Exide. This would have a huge impact on its revenue and earnings this year. However, we expect recovery in its OEM business in FY22 and the low-base effect in the aftermarket to lead to overall growth in FY22. Further, we believe Amara raja will continue to gain market share from Exide in two-wheelers. Given the current valuations, we upgrade the stock to a buy (earlier a hold) at an unrevised TP of Rs 190," Anand Rathi said.

Relaxo Footwears

"Given the dominant presence in non-metro cities and being the market leader in value priced segment (in terms of volumes), Relaxo is well placed to further consolidate its market share. Over the years, Relaxo Footwear has maintained balance sheet prudence with controlled working capital cycle (NWC days: 65 days), healthy asset turns of 2.5x and generating RoCE of over 20 percent. Relaxo, through its strong balance sheet and brand patronage, is expected to tide over the current situation better than small peers," ICICI Direct said.

"We largely maintain our estimates and bake in revenue & EPS CAGR of 10 percent & 18 percent, respectively, in FY20-22E. Given the recent correction in stock price (around 20 percent), we upgrade the stock from hold to buy and maintain our target price of Rs 715 (56.0x FY22E EPS)," the brokerage added.

IndusInd Bank

"Higher margins and treasury income led to a 352bp sequential decrease in cost/income, which improved to 39.4 percent. Asset quality and PCR improved. The portfolio under moratorium sharply declined from 50 percent in Q4 FY20 to 14 percent in Q1 FY21. The run on deposits last quarter reversed, with 5 percent sequential growth. SMA disclosures and management commentary suggest no major risk in asset quality due to the COVID-19-driven slowdown," Anand Rathi said.

"With lower risk on asset quality than envisaged earlier and the arrest on run on deposits, we change our stance on the bank and accordingly upgrade it to a buy, with a target of Rs 615," it added.

Zensar Technologies

Centrum Broking believes steep reduction in contribution of retail vertical to overall revenues could help in revenue stability from 2HFY21 onwards.

"Zensar aims to strengthen BFSI vertical with addition of Nachiketa Mitra (Ex-Cognizant). We believe increasing annuity business component as a percent of overall revenues is key improving revenue trajectory. We also see potential acquisition to further expand vertical and horizontal footprint. While Margin, free cash flow (FCF) stabilization has been delivered, we see potential for improvement in revenue growth led by mix shift in business. We upgraded to buy (versus add earlier)," said the brokerage.


Prabhudas Lilladher said Mphasis' June quarter results were slight better than our estimates on revenue & margin front. The brokerage believes investors' concern of DXC overhang impacting on overall growth will fade as it accounts to just 20 percent of revenues now.

New deal wins in June quarter was highest ever at $259 million, up 29 percent QoQ, up 72 percent YoY. It includes a large deal win of $105 million. In addition, the company signed another large deal of $216 million deals in July, from an existing non-banking client. TTM order intake stood at $823 million versus $715 million in last quarter.

"We have been highlighting Mpahsis investments into sales engine & their focus on scaling the select accounts which is now yielding into strong deal wins. We expect strong deal flow to continue which will provide pivot for growth in FY21/22E. We have increased our estimates by 2.6/1 percent for FY22/23E & now it trades at 15.3x/14x at EPS of Rs.73/80 respectively. We now assign 17X (earlier 13X) (Sep-22) earnings multiple & arrive at changed target of Rs 1,302 (earlier: Rs 943). Upgrade to buy from accumulate," said the brokerage.

Axis Bank

Yes Securities has upgraded its rating on Axis Bank to buy from hold with a target of Rs 550 after Q1 earnings.

"Resilient pre-provision operating profit (PPoP), sizeable provisioning buffer, announced capital raise and reduction in moratorium pool to soften the Covid impact in coming quarters. We expect sharp recovery in RoA/RoE during FY22 as growth and credit cost near normalizes. Core bank trades at 1.3x FY22E P/ABV; valuation more sensitive to FY22 outcomes and not FY21," the brokerage said.

VST Tillers Tractors

"VST possesses a robust balance sheet, which is debt free and cash rich in nature and clocks healthy positive cash flow operations. With volume uptick in the offering as well as recovery of margin profile, earnings are expected to witness a smart recovery, going forward. Consequently, we upgrade VST from hold to buy rating and value the stock at Rs 1,700 i.e. 21x FY22E EPS of Rs 81.2," ICICI Direct said.


Adjusting one-off items, SAIL reported better-than-estimated earnings in Q4. Adjusted EBITDA stood at Rs 3,791 per tonne, better than our estimate of Rs 2,979 per tonne. Demand from Railways shall keep its average NSR higher compared to other long steel players. We believe SAIL will be a key beneficiary of government capex, especially in Railways," Emkay Global said.

"Railways makes up 60 percent of debtors, which should pay in FY22 and help reduce debt. The sale of iron ore fines (old and new) will also help in deleveraging (likely from FY22). SAIL has almost completed its decade-long capex cycle. Volume growth should be new normal," the brokerage added.

Emkay upgraded the stock to buy, with a target of Rs 43 (from Rs 37) at 5.5x FY22 EV/EBITDA estimate. "Key risks include further spread of COVID-19 and SAIL's inability to raise steel prices."

Disclaimer: The views and investment tips expressed by investment expert on are his own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Aug 11, 2020 01:49 pm

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