Brokerage: Bank of America Merrill Lynch | Rating: Buy | Target: Rs 390
The global financial services firm highlighted the development of Central Board of Excise and Customs (CBEC) removing excise and additional excise duty on cigarettes, while National Calamity Contingent Duty (NCCD) stayed. The firm believes that this development could result in lower tax incidence on cigarettes by 6 percent. Meanwhile, bidis will face rise in taxes and hence there could be more working capital needs and compliance cost. Further, BofA-ML sees potential for 50 percent price hikes by the company based on channel checks.
Brokerage: Credit Suisse | Rating: Outperform | Target: Rs 400
The brokerage firm sees ITC getting back to high teens earnings trajectory as tailwind on the back of GST is confirmed. It expects FY18 cigarette sales to grow over 15 percent with 8-10 percent increase in realisations from GST. It also foresees operating estimates increasing 5-6 percent, while earnings CAGR moves from 14 percent to over 17 percent.
Brokerage: Morgan Stanley | Rating: Overweight | Target: Rs 310
Morgan Stanley said that its calculations suggest that there could be an over 4 percent reduction in cigarette taxes and offer 2 percent price flexibility for the company. Having said that, the tax incidence on the supply chain under GST would rise. It sees the stock to react positively based on the taxation development.
Brokerage: Deutsche Bank | Rating: Buy | Target: Rs 390
Deutsche Bank expects the stock to rally in the near term as uncertainty around taxes in transition to GST is over now. This predictability could now drive volume growth and better mix management, the research firm wrote in its report. Further, it said that an opportunity to launch lower-priced cigarette could drive growth in the organised sector.
Brokerage: Macquarie | Rating: Outperform | Target: Rs 385
Macquarie has increased FY18/19 earnings by 5 percent. The company is the top pick in the Indian consumer sector for the research firm. In fact, it is a Macquarie marquee recommended stock.
Brokerage: CLSA | Rating: Buy | Target: Rs 417
CLSA too said that the tax reduction was a positive sign for the company. Having said that, anti-profiteering rules could apply and that the company will have to cut cigarette prices.
Brokerage: JPMorgan | Rating: Overweight | Target: Rs 350
Post the tax reduction, the research firm sees upside risks to cigarette EBIT growth.
Brokerage: JPMorgan | Rating: Neutral | Target: Rs 1,030
JPMorgan sees significant with respect to the company’s margin growth over FY18/19 due to GST. It also sees risk to the optimism as there is an expectation for the company to pass on much of the gains to consumers. Lack of uptrading may weigh on gross margin expansion opportunity for the company. It sees advertising and promotion spends to be higher. High valuation and stiff competitive activity keep us on the sidelines, the brokerage said in a report.
Brokerage: Deutsche Bank | Rating: Buy | Target: Rs 985
The research firm said that Naukri.com was not affected by perceived slowdown in IT services sector. In fact, it highlighted that the management said 15-20% YoY FY18 revenue growth in recruitment business can drive operating leverage. Meanwhile, its realty business is likely to face short term disruption with the implementation of RERA.
Brokerage: Morgan Stanley
Morgan Stanley sees an opportunity for over 2 times returns on the stock over the next three years. It forecasts acceleration in revenue growth led by rapid market share gains. Moreover, it is factoring in 22% jewellery revenue CAGR in FY17-20 and 27% earnings CAGR. It sees the company’s market share rising 2.5 times over FY17-20 to 7.7 percent of the jewellery market.
Brokerage: CLSA | Target: Rs 1,900
CLSA said that HDFC’s annual report highlighted the new initiatives on lending and funding side. Wider fix-floating gap may add volatility to spreads, it added. Furthermore, the subsidiaries were growing well and among the most profitable franchises. It sees 16% Profit CAGR over FY17-20 with high core return on equity.
Brokerage: Nomura | Rating: Neutral | Target: Rs 396
The brokerage house said that the outlook has improved but the stock is reasonably valued. A resilient business model will keep earnings outlook sanguine, it added.
Brokerage: JPMorgan | Rating: Overweight | Target: Rs 7,200
The brokerage house said that de-stocking ahead of GST rollout has hit domestic volumes for June. It expects inventory in the channel to be low due to maintenance in June.
Autos
Brokerage: Nomura
Nomura said that Maruti and Mahindra & Mahindra surprised on volume in June, while M&HCV Sales disappointed. It is factoring in 13% Growth For Maruti, which implies over 1.53 lakh units per month. Ex-showroom rates reduce by up to 3% depending on states post GST rollout, the brokerage added in its report. Further, it highlighted that Hero MotoCorp passed on GST benefits by reducing rates by Rs 400-1,800. It believes that lower prices will boost demand across segments. Telecom
Brokerage: Morgan Stanley
Extension of Rel Jio promo offer as well as launch of 4g phone key events to watch. Its borrowings stood at USD 18 billion, up 40 percent year on year, while equity as at USD 11 billion.
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