Moneycontrol News
CLSA has a buy call on Power Grid Corporation as the stock is trading at 12x FY18 PE. USD 600 million TBCB (tariff-based competitive bidding) project win increased unregulated asset base and this project is very profitable at an equity internal rate of return of 13.5-15 percent, the brokerage house says.
It sees the 14 percent return on equity (RoE) suggested in by Central Electricity Regulatory Commission as no surprise. It reiterated its thesis of strong capitalisation in FY16-18 that will aid earnings (18 percent CAGR) and reduce equity dilution risks.
CLSA forecasts a 50 percent rise in regulated equity in FY16-19.
JPMorgan says FY18/19 model mix should see an improvement. Model cycle looks exciting in 2017-18 with the launch of new Discovery & Velar, it feels.
A 6 percent fall in JLR volumes was largely led by Discovery ahead of new launches in February. The brokerage house is overweight on the stock, with a target price of Rs 570.
Nomura has maintained its buy call on Tata Motors, with a target price of Rs 563.
The research firm says JLR retail sales were marginally ahead of its expectation and it expects wholesale volumes of 56,000 units for the month.
CIMB has maintained hold rating on TCS as it feels valuations are still not attractive enough.
It says FY17 EPS estimates are largely unchanged but it lifted FY18-19 EPS estimates By 1-2 percent. Hence, it has raised target price to Rs 2,580 (from Rs 2,350).
CIMB feels revival in sales growth is an upside risk and continues to believe that transition issues may crop up.
The brokerage house continues to prefer HCL Technologies and Infosys.
Citi says Coal India's interim dividend of Rs 18.75 per share, implying a yield of over 6 percent. It has a buy call on the stock, with a target price of Rs 375.
CLSA has initiated coverage on Astral Poly Technik with a buy call and target price of Rs 545 as it expects company to report 27 percent EPS CAGR in FY16-19.
Backward integration and higher utilisation will help return on capital employed expansion.
While assigning overweight rating to Ambuja Cements with a target price of Rs 250 post company's annual report, JPMorgan says announcement of greenfield expansion stands as a key positive for the company.
ACC-Ambuja restructuring got its FIPB nod and deal conclusion in CY16 is a step forward towards realising potential synergy gains over the medium term, it believes.
JPMorgan estimated ex-south industry growth to be lower at sub 2 percent levels, implying that the market share loss for Ambuja is not as severe as market perception. Capacity utilisation has come down to 71 percent levels thereby providing scope for robust volume growth as industry demand trends recover, it says.
Per Ambuja Cements, it feels CY17 is likely to be yet another challenging year though medium term outlook remains positive on the back of government infra focus and affordable housing policies.
Company's underperformance relative to industry on the volume growth front is a concern and is partly attributable to adverse market exposure. With supply side pressures receding at the margin (limited new capacity additions), JPMorgan thinks competitive intensity and price competition should moderate ahead. This should help arrest the market share loss for the company and bodes well for pricing outlook, it believes.
Banks
While system NPA recognition has picked up pace from FY16, low NPA (non-performing assets) recognition in the power sector has raised investors' concerns as the next source of stress for banks, Nomura says.
The brokerage house says it estimates power stress at around Rs 2.3 lakh crore and this data corroborates with CRISIL's bottom-up assessment of Rs 2.1 lakh crore of power stress, leading to around 35 percent stress levels in power.
While power NPAs at just 7-8 percent of total loans for corporate banks (which are under its coverage) indicate low recognition (only 25 percent of stress recognised), the addition of power stress in restructured/5:25/watch list added up to 40-45 percent stress levels in the power sector for banks (ex-SBI), indicating that power stress is well discounted by the Street, it believes.
It continues to believe that overall stress levels are stabilising and incremental NPA formation for the system will continue to decline. Of the corporate banks, it prefers ICICI Bank (buy call) and SBI (buy call).
While credit related risks are limited, pre-provision operating profit/assets continue to decline for corporate banks and are the key constraint for multiples of corporate banks in the medium term, Nomura says.
The brokerage house estimates SBI's power stress at around 18 percent of power loans, against 40 percent for peers. 60 percent of SBI's power book is to central/state government generation companies, and hence, on a relative basis SBI's stress is half that of peers.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
