Hindustan Unilever and JSW Steel are on the radar of investors today
Brokerage: Macquarie | Rating: Outperform | | Target: Rs 1,062
The brokerage observed that HUL’s domestic volume growth of 4 percent was supported by re-stocking the trade channel. A higher volume growth also becomes the key catalyst for the stock, it said.
Macquarie also increased earnings by over 2 percent for FY18/19 on higher margin. The rating of outperform is based on recovery prospects in FY18 and margin rise, driven by parent strategy.
Brokerage: Jefferies | Rating: Buy | Target: Rs 1,150
Jefferies said that the FMCG major remains its top pick in the large cap consumer space. Analysing its results, it said that robust growth in sustained refreshments such as tea delivered broad-based, double-digit growth. Meanwhile, modest growth in packaged goods such as Knorr growth was impacted by a strong comparator. Weakness in demand and increase in competition can put pressure on earnings estimates, the brokerage firm added.
Brokerage: Nomura | Rating: Neutral | Target: Rs 1,057
Nomura observed that a sequential improvement in volume growth signifies recovery post demonetisation. It also sees pricing action returning to the portfolio.
The global research firm maintained revenue growth estimates at over 13.5 percent for FY18 and FY19, while margin estimates were increased to build in over 70 basis points improvement in margins to FY19.
Having said that, Nomura sees a challenge in further potential upside from current levels. Its top picks from the sector include Emami and Dabur India.
Brokerage: Citi | Rating: Neutral | Target: Rs 1,050
Citi said that while results were better than other companies, better value was seen in ITC and Emami. It tweaked revenue growth by over 1 percent for FY18 as it dialed back some expected price hikes. The target multiple, Citi said, is pegged to the trailing 3-year average.
Brokerage: Bank of America Merrill Lynch | Rating: Buy | Target: Rs 1,110
Monsoon, buyback or special dividend and GST-linked gains in the second half are key triggers to the stock. Price hikes will support margin. The global investment firm does not expect large valuation de-rating, given the improving earnings growth trajectory.
Brokerage: JPMorgan | Target: Rs 1,025
Broad-based growth witnessed across categories was impacted by high base, JPMorgan observed. The downside risk is on topline growth if the volume growth recovery is slow. It recommends buying into dips.
Brokerage: Morgan Stanley | Rating: Underweight | Target: Rs 795
The global brokerage firm said that an important lever of margin expansion will be brand and marketing investments’ savings. It sees a risk of de-rating if the market doubts volume growth recovery with respect to the company.
Brokerage: Credit Suisse | Rating: Neutral | Target: Rs 1,100
Credit Suisse said that FY18 margin can expand over 100 basis points as the company has many tools to save margin. It sees consumer demand is improving but still subdued. The global brokerage firm also sees a disruption in Q1 on the back of a GST roll out. It raised earnings estimates by over 2 percent on expectation of better margin.
Brokerage: Goldman Sachs | Rating: Neutral | Target: Rs 788
Goldman Sachs increased FY18-20 earnings per share (EPS) estimates by 6-8 percent to reflect higher sales growth and margins. Faster rural recovery, higher GMs are the key upside risks, while high input costs and competition are the key downside risks.
Brokerage: Citi | Rating: Neutral | Target: Rs 225
The global brokerage firm cut earnings before interest, taxes, depreciation and amortisation (EBITDA) 2 percent for FY18 and raised it by 4 percent for FY19. It believes impact on China steel prices is on sentiment than demand.
Brokerage: Credit Suisse | Rating: Outperform | Target: Rs 240
The brokerage firm raised FY18 earnings per share (EPS) by 4 percent given higher sales volume guidance. With coking coal rates stabilising, domestic prices/ export offers are a key for the company.
Brokerage: Morgan Stanley | Rating: Overweight | Target: Rs 220
Morgan Stanley continues to project higher steel prices in FY18 over the previous fiscal. It said that guidance of 5 percent volume growth implies 92 percent utilization in FY18 and muted growth in the next fiscal.
Brokerage: JPMorgan | Rating: Overweight | Target: Rs 225
It expects multiples to hold up even as debt inches up. Expansion by the firm is timely, given the implied profitability protection. Any large acquisition could be negative for the company if funded entirely by debt. Key risks include very weak domestic demand and higher costs.