Buy, sell, hold: 11 stocks that analysts are watching out

HPCL

CLSA has downgraded HPCL to sell from outperform, with increased target price at Rs 540 from Rs 480 and EPS for FY17 by 8 percent & by 1-2 percent for FY18-19. Core refining margin was disappointing for third straight quarter, the brokerage house says, adding it relaxed EV/EBITDA multiple to 7.5x from 7x earlier.

It sees low chance of a further large inventory gain to boost profits. Any slowdown in marketing volume growth may question valuation of company, it says. CLSA feels value of stake in Bhatinda refinery increased to USD 1.2 billion as it raised multiple to 2x.

Nomura continued like oil marketing companies and its pecking order is IOC, HPCL and BPCL. The brokerage house has retained buy call on the stock, with target price at Rs 560, though it feels refining was marginally weaker, with reported Q3 gross refining margin at USD 6.4 a barrel.

NMDC

Credit Suisse has maintained underperform rating on NMDC, with target price at Rs 120 (implying 17 percent downside), saying while FY17 EPS is lowered by 3 percent, it incorporated a 1-3 percent rise in FY18/19 EPS.

The company missed Q3 expectations largely on multiple write-offs, but it should benefit from exports as margin may rise due to higher iron ore rates, it feels. Credit Suisse believes the local oversupply would keep rate hikes in check.

As Q4 earnings were in line, Citi has maintained neutral rating on NMDC, but increased target price to Rs 150 from Rs 130 as it raised FY17-19 profit by 11-57 percent on better prices & volumes.

Motherson Sumi

Citi has maintained sell call on Motherson Sumi, with target price at Rs 245 after Q3 results were broadly in-line with estimates. Strong earnings were driven by healthy business and EBITDA included Rs 34.6 crore of forex gain.

SMP missed estimates, where EBITDA was impacted by startup cost of new plants. Growth in standalone revenue was driven new models and higher content per vehicle. There was no immediate impact on orders due to expectation of border tax in US, the brokerage house says.

Citi feels revenue growth target of USD 18 billion for FY20 seems optimistic and priced in. The stock may see potential derating in case of a possible FY20 revenue target miss.

Nomura has retained buy rating on Motherson Sumi, with increased target price at Rs 405 as it expects domestic business to sustain healthy 17 percent FY17-19 revenue CAGR.

It has retained 16.5 percent/18.5 percent revenue CAGR FY17-19 for SMR/SMP led by healthy order wins and expects PKC acquisition to be largely EPS neutral on FY19 estimates, the research firm says.

Overall, Citi lowered its FY18-19 revenue & EPS estimate by over 7 percent, 2 percent post Q3 result and expects stock to perform as it delivers strong 34 percent+ EPS CAGR over FY17-19.

Petronet LNG

After stable Q3 numbers and earnings trajectory is at inflection point, Morgan Stanley has overweight rating on the stock with a target price at Rs 403. Volumes are strong and supported core earnings.

Goldman Sachs feels Petronet LNG's Q3 EBITDA was in-line and net income beat due to lower tax rate. The brokerage house does not expect a major stock price reaction.

Sadbhav Engineering

CLSA says Q3 execution saw a marked pick-up led by roads EPC. It believes financial closure on new roads should drive a rebound in execution and expects an EPS CAGR of 29 percent over FY17-19.

It likes company's focus on roads & tolls in the traffic-rich western corridor. The stock is also a play on mining, it says.

The brokerage house has a buy call on the stock, with a target price of Rs 345.

GSK Consumer

JPMorgan has overweight call on the stock, with a target price at Rs 5,830, though Q3 earnings disappointed on sharp revenue decline.

Tata Motors

According to Deutsche Bank, US tax reforms could be highly disruptive for global auto companies. The brokerage house has a buy call on the stock, with target price at Rs 575.

Hindustan Unilever

While maintaining a buy call on HUL, with target price at Rs 1,000, Bank of America Merrill Lynch says demonetisation-led impact on domestic sales is waning quickly and it is positive about emerging prospects and hence margin goals restated.

Increase in raw material costs is expected to be passed on and GST may cause initial disruptions, but benefits are large, it feels.

AIA Engineering

Nomura feels mining market share gains has been driving growth. Hence, it raised FY18/19 EPS by 4-8 percent on mining market share outlook improved. The brokerage house has a buy call on the stock with increased target price at Rs 1,650 from Rs 1,475.

Godrej Consumer

Bank of America Merrill Lynch has retained buy call on Godrej Consumer, with a target price at Rs 1,665 as demonetisation-led overhang is not as bad as feared.