Jefferies has an underperform rating on the stock as risk rewards do not look favourable and a further buyback by Diageo is another risk to this rating. It said that the liquor ban in Madhya Pradesh may be incrementally disruptive after the Supreme Court order. Moreover, the anti-liquor rhetoric could increase in other states as well. They could use populist measures to attract social activists’ attention. MP contributed 3 percent to the firm’s volume, Jefferies said. It valued the firm using a 12-month forward P/E target multiple of 50 times and a target at Rs 1,812.
Goldman Sachs is neutral on the stock with a target price of Rs 1,857. It observed that MP was not a significant contributor to USL’s volumes. If the ban is implemented, MP will be the third state to have a complete liquor ban after Kerala and Tamil Nadu, which are shutting shops in a phased manner. This will also increase investor concerns around prohibition in additional states increasing too. The upside risks to the stock are USL franchising out popular volumes and stake increase by Diageo.
Credit Suisse expected Jindal Steel’s EBITDA to be largely stable at USD 120/tonne for domestic steel business. Power EBITDA should likely moderate to Rs 240 crore as generation fell 6 percent quarter on quarter. Meanwhile, global ventures should continue to show operational improvement.
Credit Suisse expected domestic EBITDA to moderate a bit, but lesser than the peers. It has built in a modest USD 50 per tonne EBITDA for EU operations. There are upside risks to the estimate, given the sharp improvement in spot spread. It expected the management to provide further clarity on Kalinganagar expansion plan.
Credit Suisse expects JSW Steel’s EBITDA per tonne to moderate to USD 98 against USD 109 in Q3. It did not expect any meaningful drag outside of the standalone operations. Investors would be keenly watching out for a likely formal capex announcement.
Credit Suisse is not building any rise in prices for coal procured through Coal India. A bigger disappointment in sales volumes is likely down 9 percent YoY.
Credit Suisse said that EBITDA should scale another all-time in Q4 on higher commodity prices. The firm could see some external concentrate sales too, it said. The research firm expects sales of 210 KT for Zinc, 44 KT for Lead and 138 T for Silver. Other income could likely be lower on falling rates, the research firm said.
Credit Suisse sees ramp-up at two plants, higher cost to result in 24 percent rise in Alumina EBITDA. It said that higher availability at TSPL should aid power EBITDA and expects steady profitability at both copper and iron ore businesses. Zinc international business could be a spot of weakness for the firm, the research firm said.
Credit Suisse expects a healthy USD 276 million EBITDA for Novelis due to metal cost lag gain. Q4 sales of 327 KT would likely be in excess of production of 320 KT. It also expects copper profitability to improve sequentially.
Credit Suisse highlighted that given full backward integration, the firm could see a strong Q4. The company’s EBITDA could be the highest in eight quarters.
Credit Suisse expected blended ASP to rise 4 percent quarter on quarter. EBITDA estimates remain very sensitive to FSA price assumptions, the research firm said.
Higher lumps, fine prices and steady cost may result in strong EBITDA generation, Credit Suisse has said in its report.
Power
Lower AT&C losses and cut in thermal power cost may drive discoms’ profitability, CLSA has said in its report. However, delay in tariff hikes and rise in cost are key challenges to demand recovery. Likely restoration of discom viability by FY20 is positive for utilities, it said. Power Grid remains its top utility pick and has a buy call on the stock. The research firm also has a buy call on CESC, outperform on NTPC and sell call on JSW Energy and Adani Power.
Oil & Gas
CLSA observed that oil demand witnessed third straight month of decline in March and for FY17, it ended at 5.2 percent YoY. This was compared to 11.5 percent YoY growth in FY16. It said that petcoke was the largest contributor to the oil demand growth and that a disappointments in volume growth of OMCs could lead to a re-rating. It has sell calls on HPCL and BPCL in this sector.
Credit Suisse sees Q4 of FY17 and Q1 of FY18 to be weak quarters for OMC earnings. Post that, it sees a strong recovery in Q2 of FY18 and beyond that. The research firm continues to prefer BPCL and IOC with targets of Rs 815 and Rs 455, respectively.
Telecom
Credit Suisse expects telecom to have another quarter of revenue and decline in EBITDA (earnings before interest, taxes, depreciation and amortisation) for incumbents.
The research firm would closely track commentary on further stake sale in Bharti Infra and look for commentary from Idea on strategic options for tower assets. For Bharti Infra, it expects another robust quarter with net tenancy additions of 5,100.
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