Benchmark indices continued to feel the heat of the coronavirus outbreak as investors are yet to get over the jitters exacerbated by the rising threat of the deadly disease across the globe.
On March 12, both Sensex and Nifty registered their worst fall in absolute terms.
The Indian economy, already battling a prolonged slowdown before the coronavirus outbreak, is unlikely to bounce back with Moody's Investors Service slashing its growth forecast for India to 5.3 percent for 2020 from 5.4 percent estimated earlier.
OECD also lowered its India's GDP growth forecast to 5.1 percent from the earlier projection of 6.2 percent for 2020 on concerns of impact of deadly coronavirus on the domestic as well as the global economy.
FIIs on March 9 net sold Rs 6,595.56 crore worth of shares, the biggest single day outflow since November 3, 2017.
They sold Rs 17,316 crore worth of shares so far in March, in addition to Rs 18,000 crore of selling in previous two months.
Here are the top six picks from brokerages in which they expect xx-xx percent upside in the medium to long term:
Bharti Airtel | Brokerage: Emkay | Rating: Buy | LTP: Rs 464 | Target: Rs 591 | Upside: 27 percent
The INR’s depreciation and the sharp fall in crude will have implications for Bharti but cash generation should be able to offset the impact.
Africa is in a strong position with positive cash flows, and India has the potential to improve cash flows meaningfully with the recent tariff hike, amid a moderation in capex spends.
Emkay maintain its positive view on Bharti as the underlying India business is strong enough to weather any kind of weakness coming from Africa, and it should continue to gain subscriber market share as VIL remains weak.
Orient Refractories | Brokerage: Emkay | Rating: Buy | LTP: Rs 161 | Target: Rs 320 | Upside: 98 percent
The NCLT has disapproved the long-awaited proposed scheme of amalgamation among Orient Refractories, RHI India Pvt. Ltd, RHI Clasil and their respective shareholders
The merger was expected to make Orient Refractories an integrated player, leveraging sales and distribution network and utilizing resources in an optimal manner, backed by the pooling of management, expertise, technologies and other resources.
Despite the setback from NCLT, Emkay continue to maintain its positive view on the standalone business given the recent strategic acquisitions (Manishri Refractories and Intermetal Engineerings) and strong return ratios (RoE/RoCE at 25%/35%).
ABB India | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 1,034 | Target: Rs 1,410 | Upside: 36 percent
ABB has announced the sale of its solar inverter business to the Indian subsidiary of FIMER for INR1b on a slump sale basis.
In the domestic market, Siemens has demonstrated a better performance with domestic revenue CAGR of 10% v/s 4% for ABB.
ABB’s strong exports growth over the past two years demonstrates the increasing emphasis of the parent company on the Indian entity for global sourcing. ABB’s exports for the continued business have increased at 37% CAGR over CY17-19.
Lupin | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 593 | Target: Rs 815 | Upside: 37 percent
With near-term outlook may be subdued, broking house remain positive on the company due to limited price erosion in the base business, robust ANDA pipeline and better-than-industry growth in branded domestic formulation (DF).
It expect 23% earnings CAGR over FY19-22E, led by limited competition products in US generics and improved operating leverage in the DF segment.
However, it reduce the P/E multiple to 20x (from 21x earlier) to factor in regulatory headwinds and arrive at price target of Rs 815.
Tata Motors | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 88 | Target: Rs 178 | Upside: 102 percent
The reduction in China sales resulting from the Coronavirus impact is estimated to reduce JLR's full-year EBIT margin by about 1%, however, free cash flow in 4QFY20 is still expected to be modestly positive.
The spread of the virus to other markets such as South Korea, Japan, and Italy will also impact sales in those markets.
For the UK operations, JLR has visibility of parts availability for 2 weeks or more. The company has managed to avoid potential shortage of parts by working closely with its suppliers and with some increased use of air freight.
Motilal Oswal lowering its EPS estimates for FY20/FY21E to factor in the impact of Coronavirus on the JLR business and weaker-than-expected recovery in the India CV business.
Fairchem Speciality | Brokerage: HDFC Securities | Rating: Buy | LTP: Rs 494 | Target: Rs 690-750 | Upside: 51 percent
The company has been expanding its product range through its in-house R&D facilities. The Company enjoys cost efficiencies as most of its raw materials are derived from waste products.
The market for FSL products is growing by 10-15% p.a. The management expects to grow at 15-20% by gaining market share from others and launching new products.
The company has spare capacity in existing products giving it considerable room to grow. The topline and margins have improved sharply in FY19 and FY20 and broking house expect the growth to continue at a slightly lower pace.
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