Moneycontrol
Last Updated : Sep 07, 2018 07:10 PM IST | Source: Moneycontrol.com

Watch out! Brokerages downgraded these 10 stocks in last one month

In the last one month, brokerage houses downgraded several stocks either due to weak corporate earnings, higher valuations or stock-specific news.

Sunil Shankar Matkar

The market was in an upward trajectory since July, but it started correcting in the last few sessions, especially after hitting a record high around 11,760-levels on the Nifty.

The index has corrected around 2.5 percent in the last eight sessions. It had gained around 5 percent each in July and August before this correction started.

Experts say consolidation could continue for a while, maybe till the rupee and global environment get stabilised.

"Yes there could be global pressure on the market, which could lead to mild correction but we don't see big fall as fundamentals are improving and a lot of companies in Nifty50 are already benefitting from rupee fall," Mahesh Patil, Co-Chief Investment Officer, Birla Sun Life Asset Management told CNBC-TV18.

Akash Jain of Ajcon Global believes markets may come under pressure due to sliding rupee and burgeoning fiscal deficit. "We recommend a cautious approach. Going ahead, we believe, the progress of ongoing monsoons, rupee movement against the dollar, volatility in oil prices, trade war tensions, US Fed meeting on rate hike will keep domestic bourses volatile."

In the last one month, brokerage houses have downgraded several stocks either due to weak corporate earnings, higher valuations or stock-specific news.

Here is a list of top 10 stocks which brokerages downgraded in the last one month:

Zee Entertainment

Global brokerage house Morgan Stanley has downgraded the stock to 'Underweight' from 'Overweight' and slashed target price to Rs 410 per share from Rs 610 earlier.

Investments in Zee5 are likely to drag margins in near term. We see a deceleration in EBITDA growth and derating in the valuation multiples.

We also see downside risks to consensus estimates. We expect possible breakeven for Zee5 only by FY25.

Bharat Electronics

Axis Capital downgraded the stock to 'Sell' and also cut target price to Rs 64 from Rs 115 per share earlier as valuations are expensive for a low-growth company with a single customer.

We maintained FY19/20 EPS estimate, as existing order book is grand-fathered but it is difficult to gauge the impact on margin from the new policy at this juncture.

Britannia Industries

Credit Suisse has downgraded Britannia to 'Neutral' but raised target price to Rs 6,900 from Rs 6,000 per share earlier as valuations leave little room for upside.

The company is largely a single-category company and its cash conversion is poor versus HUL/Nestle.

We like the business from a medium-term view.

Hindustan Unilever

Credit Suisse has downgraded HUL to 'Neutral' with a target price at Rs 1,770 per share as we cut FY20/FY21 earnings estimates by 2-4 percent.

Return of normal competitive activity is expected to cap upside and margin expansion in FY20/FY21 may be capped from here on.

For FY19, the margin should expand as the base in Q2/Q3 is favourable.

Marico

Bank of America Merrill Lynch has downgraded the FMCG major to 'Neutral' from 'Buy' and also slashed target price to Rs 410 from Rs 420.

Kerala floods are expected to hinder ongoing softening of copra prices. We expect a potential 10-15 percent increase in bulk copra prices in near term.

Margin revival could be delayed, but medium-term growth levers are intact.

Crompton Greaves Consumer Electricals

Nomura has downgraded the stock to 'Neutral' from 'Buy' and cut target price to Rs 266 from Rs 267 per share earlier.

We cut FY19-21 EPS estimate by 6 percent to account for a weaker outlook. We prefer Havells India over CG Consumer.

Balkrishna Industries

HSBC has downgraded Balkrishna to 'Hold' from 'Buy' and cut target price to Rs 1,370 from Rs 1,410 earlier after the company announced Rs 1,700 crore capex plan over next 3 years.

New capex plan is over and above existing planned capex of Rs 900 crore, which could be return-dilutive, HSBC said.

ICICI Securities also downgraded the stock to 'Hold' with a target price of Rs 1,250 per share.

Investments to the tune of around Rs 700 crore in the US is against Balkrishna's moat of being an export-dominated niche tyre play capitalising upon the cost arbitrage (labour). This is expected to dent core return ratios as the said project will not enjoy a similar margin profile.

Furthermore, with its close peer looking for a major expansion, the competition intensity will heat up in the OHT space thereby creating an overhang on BIL. Incorporating the revised capex outlay disclosed by the company and consequent decline in other income, we change PAT estimates for FY18-20E. We now expect BIL to clock PAT CAGR of 24.4 percent versus 30.3 percent in the past. We also reduce valuation multiple.

LIC Housing Finance

Morgan Stanley downgraded the housing finance company to 'Equal-weight' from 'Overweight' with a target price of Rs 560 per share after Q1FY19 earnings performance.

Retail NPLs doubled during the quarter YoY. Q1 is seasonally weak, but this rise in NPLs is unusually high.

Home loan disbursements were weak and home loan book shrank QoQ. We raised EPS & BVPS forecasts due to accounting changes.

Weak retail asset quality will remain the dominant debate. We cut FY20/21 PBT estimates by 7/13 percent and pre-provisioning operating profit by 10/16 percent.

NBCC

Nomura has downgraded to 'Neutral' from 'Buy' with a target price at Rs 82 per share as execution issues lead to near-term weakness.

Work front availability issues cloud the near-term outlook. We cut FY19/20 EPS estimates by 34/37 percent to account for delayed execution.

Lupin

Credit Suisse has downgraded the pharma company to 'Underperform' from 'Neutral' and also slashed target price to Rs 715 from Rs 770 earlier after June quarter earnings.

The company saw sharp erosion in US sales, which is expected to accelerate with increasing approvals from USFDA.

In the quarter ended June, the company saw no one-offs in the US business and the current weak base is the new normal for Lupin.

Credit Suisse expects earnings to remain subdued for the next two quarters.

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 Sep 7, 2018 11:36 am
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