The earning season for the quarter ended September 2019 has largely remained inline with the street estimates so far. Q2 earnings along with better global, as well as, domestic cues have uplifted market sentiment, taking the Sensex to a new all-time high while the Nifty is also inching towards its record highs.
Positive FIIs flows, better month-on-month auto sales numbers, positive global markets, helped bulls keep control of the market for seven straight sessions up till November 4.
In the seven-day rally, S&P BSE Sensex rallied 3 percent, while Nifty added 2.9 percent. Broader indices including BSE largecap, midcap and smallcap rose 2.8 percent, 2.7 percent and 2.4 percent, respectively.
"Some of the positive factors like decent earnings season so far, better-than-expected festive sales, hopes of stimulus from the government and continued FIIs inflow continue to maintain optimism in the market. On the Global front, as well, markets are continuing their positive movement on the hope of US-China phase 1 trade deal negotiation," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Private Ltd.
"With the absence of any major events, the focus would continue to be on the results season with stock specific action likely over the next few days."
"Nifty has to continue to hold above 11,850 levels to witness an up move towards 12,000 then 12,103 zones while on the downside major support is seen at 11,780 zones,” he added.
Here are 10 buying ideas from different brokerages post their September quarter numbers which could provide 12-70 percent return in the medium to long term:
HDFC | | Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 2,600 | Upside: 19 percent
Housing Development Finance Corporation (HDFC) has registered a 60.5 percent year-on-year (YoY) jump in its standalone Q2 FY20 net profit at Rs 3,961.53 crore on the back of better operating performance.
The company had reported a profit of Rs 2,467.08 crore in the same quarter last year.
Revenue of the company rose 19.9 percent YoY to Rs 13,487.44 crore.
In the current liquidity scenario, well-established companies with a strong parentage would get a clear preference in raising money from debt markets and banks. Hence, HDFC is well placed to capitalise on this, feels Motilal Oswal.
Despite having a Rs 1.2 trillion deposit base, incremental traction is stronger than ever.
Bharat Electronics | Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 138 | Upside: 23 percent
The company's Q2FY20 net profit shed 40.6 percent at Rs 339.5 crore against Rs 571.3 crore, while revenue down 18.9 percent at Rs 2,742.7 crore versus Rs 3,381.4 crore, YoY.
Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 36.2 percent at Rs 545 crore and EBITDA margin was down 540 bps at 19.9 percent, YoY.
Motilal Oswal cut its EPS estimate by 9 percent for FY20 to factor in the earnings miss, but largely maintain it for FY21/22.
Given the current order backlog position, execution timelines and capabilities of the company, we maintain a buy rating on the stock with a target of Rs 138.
The company expects the EBIDTA margin to moderate to 20-21 percent in FY20 from 23.7 percent in the previous year.
JK Lakshmi Cement | Brokerage: Dolat Research | Rating: Buy | Target: Rs 425 | Upside: 38 percent
JK Lakshmi Cement reported a consolidated net profit of Rs 49.72 crore in the second quarter ended on September 30 against a net loss of Rs 5.7 crore in the corresponding quarter of the last fiscal.
Revenue from operations during the quarter under review stood at Rs 1,012.36 crore as against Rs 958.6 crore, YoY.
The company expects 3.6 percent volume growth to 10mt in FY20 as demand to pick up from November 19 and stabilisation in cement prices, said Dolat Research.
The broking house increased its FY20E/ FY21E estimates for revenue by 4%/ 2.9%, EBITDA by 18.8%/ 15.3% and APAT by 23.5%/ 17.4% primarily driven by 6.3%/ 5.2% increase in realisation.
JBM Auto | Brokerage: Dolat Research | Rating: Buy | Target: Rs 385 | Upside: 70 percent
JBM Auto Q2FY20 consolidated net profit fell 22 percent at Rs 16.3 crore and revenue down 14.6 percent at Rs 388.1 crore, YoY.
EBITDA of the company was down 13.3 percent at Rs 47.4 crore and EBITDA margin was up marginally at 12.2 percent.
Given the strong revenue visibility from Bus & Tooling division along with cost control measures, Dolat Research increases its target multiple to 15x.
The management expects a significant ramp-up in the bus division in FY20, as it has won new orders for both EVs and CNG (300 buses), which it has to supply by FY20-end, it added.
CCEA has approved a Rs 100 billion package for the 2nd phase of FAME scheme, which is expected to provide subsidy for 7,000 buses. In the FAME scheme, the government will provide up to Rs 5 mn/bus subsidy. This scheme will likely help JBM Auto to accelerate its bus volume and make this segment profitable.
NOCIL | Brokerage: Prabhudas Lilladher | Rating: Buy | Target: Rs 174 | Upside: 58 percent
NOCIL has posted a 3.9 percent jump in its consolidated net profit at Rs 54.9 crore against Rs 52.9 crore, while revenue was down 22.9 percent at Rs 209.7 crore versus Rs 272 crore.
EBITDA of the company was down 39.2 percent at Rs 48.5 crore, while EBITDA margin was down at 23.1 percent.
The company has benefitted from better product mix and benign raw material prices especially benzene and aniline for which the company has entered into a long-term agreement.
We expect Nocil to focus more on volumes going ahead at the cost of value as they look to ramp up sales. Even as near term demand uncertainty persist given slowing global auto sales, we believe at current prices, Nocil offers value, said Prabhudas Lilladher.
The company's management expects higher volumes from existing US tyre majors and also for their plants in Russia, while domestic tyre demand is likely to ride on higher auto sale.
M&M Financial Services | Brokerage: Geojit Research | Rating: Buy | Target: Rs 412 | Upside: 18 percent
The profit after tax (PAT) stood at Rs 252 crore during the quarter ended September 30, against Rs 381 crore, a decline of 34 percent over the year-ago period.
The total income increased by 18 percent at Rs 2,541 crore against Rs 2,145 crore, YoY.
In Q2FY20 gross NPA ratio improved 180bps YoY to 7.2 percent, and the net NPA ratio improved 20bps YoY to 5.7 percent.
Geojit Research believes that an extensive branch network, diversified product portfolio, coupled with strong business tie-ups with OEM’s and a strong parentage will help the company.
Despite the liquidity crunch in the NBFC sector as a whole, the company maintained positive liquidity gaps in all the buckets.
The company's management expects AUM growth to be in the range of 15-20 percent in FY20.
ICICI Prudential Life Insurance | Brokerage: Geojit Research | Rating: Buy | Target: Rs 572 | Upside: 12 percent
ICICI Prudential Life Insurance reported almost flat standalone net profit at Rs 301 crore for the second quarter ended September 30. However, the company's total income during the quarter fell to Rs 8,027 crore from Rs 8,990 crore a year ago.
The board has approved an interim dividend of Rs 0.80 per equity share for the first half of the current financial year.
According to Geojit Research, company has registered strong results with robust growth in new business despite the market volatility.
The company’s focus on premium growth, while maintaining its solvency levels should be the key for the upcoming few quarters.
The company will continue to focus on annuity and protection business, it added
Petronet LNG | Brokerage: Geojit Research | Rating: Buy | Target: Rs 352 | Upside: 23 percent
The company's QoQ net profit saw a jump of 96 percent at Rs 1,103.1 crore against Rs 560.3 crore. Its revenue was up 8.7 percent at Rs 9,361.4 crore against Rs 8,613.4 crore, QoQ.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 13.4 percent at Rs 1,160.6 crore, while EBITDA margin was up at 12.4 percent.
The company has achieved highest ever throughput in Dahej terminal after capacity expansion from 15 to 17.5 MMTPA and utilisation rate has been 108 percent of the total capacity. Overall LNG volume processed by the company increased 15.2 percent YoY to 250 TBTUs in Q2FY20.
Geojit Research expects the capacity expansion and increases in utilisation to further boost earnings in future and forecast earnings to grow at 23.8 percent CAGR over FY19-21E.
Hawkins Cooker | Brokerage: ICICIdirect | Rating: Buy | Target: Rs 4,600 | Upside: 18 percent
Hawkins Cooker Q2FY20 net profit rose 53.3 percent at Rs 27 crore against Rs 17.6 crore, while revenue was up 11.5 percent at Rs 192.6 crore versus Rs 172.2 crore, YoY.
Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 29.6 percent at Rs 35.8 crore, while EBITDA margin was up 260 bps at 18.6 percent.
According to ICICIdirect, the recent cut in corporate tax rate is a big positive for Hawkins as it was hitherto a full tax-paying company.
Over the years, the company has consistently maintained healthy dividend payouts with an average ratio of 75 percent. With minimal capex requirements, we expect the benefit of the tax cut to be passed on to shareholders through higher dividend payouts, it added.
A revival in revenue growth with expansion in margin profile augurs well for the company and given the robust balance sheet, good promoter pedigree, we reiterate buy rating on the stock with a target price of Rs 4,600 per share, said ICICIdirect.
Karur Vysya Bank | Brokerage: AnandRathi | Rating: Buy | Target: Rs 82 | Upside: 41 percent
Karur Vysya Bank has reported 24.3 percent YoY fall in its Q2 net profit at Rs 63.3 crore against Rs 83.7 crore, while its net interest income (NII) rose 3 percent at Rs 596.3 crore versus Rs 579.1 crore.
The company's Gross NPA was down at 8.89 percent, while net NPA fell at 4.50 percent, QoQ.
The company's provisions have increased to Rs 365.2 crore against Rs 330 crore, while the provision coverage ratio was up at 61.82 percent, QoQ.
According to AnandRathi, a weak operating performance following slower business growth and higher credit cost led to the company's weaker earnings in Q2.
With most of the stress on the corporate book realised and asset quality expected to improve, the broking firm expects credit cost to moderate from current levels and profitably to sharply improve from Q1FY21.
The company's management expects better recovery from the slippages due to SARFAESI and recoveries from a few accounts admitted to the NCLT by end-FY20 and expecting 10 percent growth in the total advance book in FY20.
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