Buy, Sell, Hold: 2 stocks are on analysts' radar on April 16, 2018

Brokerage: Kotak Sec | Rating: Retain Add | Target: Rs 1,250

The brokerage observed that Infosys had a steady Q4 with stable operating metrics and impressive margin defence. Further, revenue growth guidance of 6-8 percent is consistent with our expectations, it said, adding that strategic priorities have caused cut in margin guidance band to 22-24 percent. The margin reset is also driving 1.1-1.4 percent earnings cut for FY19-20.

Brokerage: B&K | Rating: Underperform | Target: Rs 1,150

The research firm observed that revenue guidance of 6-8 percent in constant currency belies Street’s hopes of growth recovery. Further, disposal of Panaya & Skava may lead to more impairment losses, he said, adding that capital allocation is the only redeeming factor.

Brokerage: Edelweiss Sec | Rating: Buy | target: Cut to Rs 1,419 from Rs 1,475

Edelweiss has maintained the company as a top pick in this space. It said that the margin guidance was cut to 22-24 percent due to digital investment and will help the company gain market share. It also said that deal momentum was strong for the firm.

Brokerage: Elara | Rating: Reduce | Target: Raised to Rs 1,120 from Rs 1,090

The broker observed that limited margin levers going into the next fiscal were expected. In fact, it revised earnings estimates for the upcoming fiscal, with margins rising by 30 basis points, while PAT estimates are seen higher by 2.4 percent and 0.7 percent for FY19 and FY20, respectively.

Brokerage: Emkay | Rating: Reduce | Target: Unchanged at Rs 970

Emkay said that the firm would achieve growth closer to the lower end of guidance. It expects earnings CAGR of over 5.5 percent over FY18-20. Further, the new strategy could help growth but, pressurise profitability.

Brokerage: HDFC Sec | Rating: Buy | Target: Rs 1,300

HDFC Securities said that investments are likely to lead on to quality growth. It reiterated a positive stance on the stock due to scalability & momentum in large accounts. The brokerage also expects revenue/EPS CAGR of 8.6/7.6 percent over FY18-20, while EBIT margin is seen at 23.8/24 percent in FY19/20.

Brokerage: IDFC Sec | Rating: Outperform | Target: Unchanged at Rs 1,250

IDFC Securities said that overall it was an in-line quarter with no surprise on guidance. It believes that soft margin guidance outlook could disappoint the Street. Having said that, it believes valuations are reasonable, with no earnings downgrade despite this modest outlook.

Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 1,330

The equity research firm cut the earnings estimates by 2 percent for FY19/20, and said that the lower end of margin guidance of 22 percent is conservative. It also said that the capital allocation lends valuation support.

Brokerage: PhillipCap | Rating: Buy | Target: Rs 1,300

The brokerage said that FY19 margin guidance was a major disappointment and disposal of Panaya & Skava was a surprise. Going forward, it remains positive on improving metrics and significant valuation gap against TCS.

Brokerage: Prabhudas Lilladher | Rating: Buy | Target: Rs 1,220

Prabhudas Lilladher said that constant currency growth was below estimates & margin was above estimates. It highlighted that tepid growth in developed markets is also a concern.

Brokerage: Axis Cap | Rating: Buy | Target: Rs 1,340

Axis Capital said that the firm’s revenue guidance was in line, while margin guidance cut could accelerate investments. It sees USD 2.5 billion plus capital allocation to cushion downside risk. It recommends buying the stock on declines.

Brokerage: Citi | Rating: Neutral | Target: Cut to Rs 1,195

Citi said that EBIT margin guidance of 22-24 percent a negative surprise. It has revised downwards EBIT estimates for FY19/20 by 2 percent.

Brokerage: Jefferies | Rating: Buy | Target: Raised to Rs 1,340 from Rs 1,000

The global research firm believes that risk reward is favourable in this case, while growth may accelerate over FY19-21. The stock is trading with a reasonable valuation, it added.

Brokerage: Credit Suisse | Rating: Neutral | Target: Rs 1,100

The global research firm said that Q4 revenue growth at 0.6 percent, below our estimate of 1 percent. In fact, the Q4 margin was higher by its expectation of 20 basis points. Having said that, it believes the margin guidance was disappointing.

Brokerage: Macquarie | Rating: Outperform | Target: Rs 1250

Macquarie said that lower-end of margin guidance will help growth in medium term. It has raised target multiple due to capital allocation and revenue outlook. The company becomes one of its top picks in the sector.

Brokerage: Morgan Stanley | Rating: Overweight | Target: Rs 1,300

The brokerage said that negative margin outlook can be partially offset by capital allocation. It expects the stock to pare some gains.

Brokerage: Nomura | Rating: Reduce | Target: Rs 990

Nomura said that cash return of USD 2 billion and above could cushion a fall, but expects the stock to react negatively on margin guidance cut.

Nestle

Brokerage: Credit Suisse | Rating: Outperform | Target: Raised to Rs 9,600 from Rs 9,000

The global research firm observed that volumes grew 11 percent in cy17; highest volume growth in our staples coverage. Maggi volume grew by 19 percent in the previous calendar year, but is still 17 percent below 2014 levels. Meanwhile, Milk & Nutrition saw volume growth for the first time in five years. It also said that there is no need for capex to support this phase of growth. It maintains the company as a top pick in FMCG.

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