MARKET WRAP: Indices end in the green but witness worst July in 17 years
Weak corporate earnings, economic slowdown and tax issues continued to weigh down investment sentiment.
 "BSE, Markets")
Photo: Kamlesh Pednekar
8:25 AM
Anand Rathi Shares and Stock Brokers on Eris Life sciences
Recommendation: BUY
We believe the strong revenue growth, healthy EBITDA margin and low capex required, together with strong profit growth, would continue to result in healthy free-cash-flow generation. We maintain our Buy rating on the stock, though with a lower target price of `614, based on 20x FY21e EPS. However, we lower our target multiple to 20x (from 24x earlier) on account of the market-wide contraction in valuation multiples owing to altered risk perceptions. Risks: More products under the NLEM, delay in execution, competition risk.
We believe the strong revenue growth, healthy EBITDA margin and low capex required, together with strong profit growth, would continue to result in healthy free-cash-flow generation. We maintain our Buy rating on the stock, though with a lower target price of `614, based on 20x FY21e EPS. However, we lower our target multiple to 20x (from 24x earlier) on account of the market-wide contraction in valuation multiples owing to altered risk perceptions. Risks: More products under the NLEM, delay in execution, competition risk.
8:24 AM
Kotak Securities on KPIT Technologies
Recommendation: ADD
TP: Rs.86
We expect KPIT Technology to report an EPS of Rs.6.2/share in FY20E and an EPS of Rs.8.2/share in FY21E supported by growth in Passenger Cars, Commercial vehicles and New Mobility vertical. The company has maintained its guidance of CC revenue growth in the range of 16-18% with EBITDA margins in the 14-15% range in FY20 supported by good growth across geographies such as the U.S., Europe and Asia. The company also expects ROE to be above 16% in FY20 and 20% plus in the medium term. On a conservative note, we recommend ADD on KPIT with a target price of Rs.86
TP: Rs.86
We expect KPIT Technology to report an EPS of Rs.6.2/share in FY20E and an EPS of Rs.8.2/share in FY21E supported by growth in Passenger Cars, Commercial vehicles and New Mobility vertical. The company has maintained its guidance of CC revenue growth in the range of 16-18% with EBITDA margins in the 14-15% range in FY20 supported by good growth across geographies such as the U.S., Europe and Asia. The company also expects ROE to be above 16% in FY20 and 20% plus in the medium term. On a conservative note, we recommend ADD on KPIT with a target price of Rs.86
8:23 AM
Kotak Securities on GHCL
Recommendation: ADD
TP: Rs.240
GHCL is confident about the prospects for the Soda Ash segment, supported by healthy demand from India, which is likely to sustain over the next year. The soda ash market is expected to grow at 4% in India, however, incremental supply can weigh on prices. Given the benefit of brownfield expansion, we expect soda ash segment to continue to deliver strong performance going ahead, at the same time the segment margin is expected to decline in the coming quarters from the levels of 30%. In addition, near term headwinds in the textile segment is likely to weigh on overall earnings. At CMP, the stock is trading at 6.1x/5.5x FY19E/FY20E earnings. We continue to maintain ADD rating on the stock, with a target price of Rs242 (earlier Rs265), valuing at its last four years average multiple of 6x.
TP: Rs.240
GHCL is confident about the prospects for the Soda Ash segment, supported by healthy demand from India, which is likely to sustain over the next year. The soda ash market is expected to grow at 4% in India, however, incremental supply can weigh on prices. Given the benefit of brownfield expansion, we expect soda ash segment to continue to deliver strong performance going ahead, at the same time the segment margin is expected to decline in the coming quarters from the levels of 30%. In addition, near term headwinds in the textile segment is likely to weigh on overall earnings. At CMP, the stock is trading at 6.1x/5.5x FY19E/FY20E earnings. We continue to maintain ADD rating on the stock, with a target price of Rs242 (earlier Rs265), valuing at its last four years average multiple of 6x.
8:22 AM
Kotak Securities on Kansai Nerolac
Recommendation: ADD
TP: Rs.470
TP: Rs.470
KNPL experienced a good double-digit volume and value growth, which helped offset the huge effect of the unprecedented slow-down in the automotive segment where the company has a significant exposure. Raw material situation was also benign in the quarter which helped the EBIDTA margins. Outlook is healthy in the decorative segment, while weakness in the automotive segment has got factored in the share price. Recommend ADD (from Reduce) with a TP of Rs 470 (from Rs 425) at 40x FY21E earnings.
8:21 AM
Derivative pick by Anand Rathi Shares and Stock Brokers
8:20 AM
Motilal Oswal Financial Services on Bharat Electronics
Recommendation: BUY
CMP: Rs 98
TP: Rs130,
Upside: 32%
Given the current order backlog position, execution timelines and capabilities of the company, we maintain a Buy rating on the stock with TP of INR130 (16x Mar'21E EPS, in line with its 10-year average P/E multiple of 16.8x).
CMP: Rs 98
TP: Rs130,
Upside: 32%
Given the current order backlog position, execution timelines and capabilities of the company, we maintain a Buy rating on the stock with TP of INR130 (16x Mar'21E EPS, in line with its 10-year average P/E multiple of 16.8x).
8:19 AM
Motilal Oswal Financial Services on Hero MotoCorp
Recommendation: Neutral
CMP: Rs 2259
TP: Rs 2525
Upside: 12%
We cut our FY21 EPS estimate by ~4% to factor in our reduced volume/margin assumptions. Near-term demand uncertainty, BS6 transition and increasing threat of electrification are likely to keep earnings and valuations under check. The stock trades at 14.5x/13.3x FY20/21 EPS, which is a fair reflection of flat EPS over FY19-21. Maintain Neutral with a target price of INR2,525 (~14x Mar'21 EPS + INR140/share for Hero FinCorp)
CMP: Rs 2259
TP: Rs 2525
Upside: 12%
We cut our FY21 EPS estimate by ~4% to factor in our reduced volume/margin assumptions. Near-term demand uncertainty, BS6 transition and increasing threat of electrification are likely to keep earnings and valuations under check. The stock trades at 14.5x/13.3x FY20/21 EPS, which is a fair reflection of flat EPS over FY19-21. Maintain Neutral with a target price of INR2,525 (~14x Mar'21 EPS + INR140/share for Hero FinCorp)
8:17 AM
Motilal Oswal Financial Services on Tech Mahindra
Recommendation: BUY
CMP: Rs 640
TP: Rs 770
Upside: 20%
We cut our EPS estimates for FY20/FY21 by 11% / 8%, which follows 200bp/160bp cut in EBIT margins. After a sluggish start to the year the earnings growth outlook for FY20 has muted, but revenue growth remains crucial to both recovery in margins and uptick in valuation multiple. Deal wins and a healthy pipeline drive our expectation of acceleration in revenue growth for the remainder of the year. Over FY19-21, we expect USD revenue CAGR of 6.4% and earnings CAGR of 7.1%. Our TP of INR770 (20% upside) discounts forward earnings by 14x, the average multiple over the last five years. Maintain Buy.
CMP: Rs 640
TP: Rs 770
Upside: 20%
We cut our EPS estimates for FY20/FY21 by 11% / 8%, which follows 200bp/160bp cut in EBIT margins. After a sluggish start to the year the earnings growth outlook for FY20 has muted, but revenue growth remains crucial to both recovery in margins and uptick in valuation multiple. Deal wins and a healthy pipeline drive our expectation of acceleration in revenue growth for the remainder of the year. Over FY19-21, we expect USD revenue CAGR of 6.4% and earnings CAGR of 7.1%. Our TP of INR770 (20% upside) discounts forward earnings by 14x, the average multiple over the last five years. Maintain Buy.
8:15 AM
NEWS ALERT | Cafe Coffee Day founder V G Siddhartha's body found from river: Report
The body of Cafe Coffee Day founder V G Siddhartha has been found from the Nethravathi river, according to TV reports on Wednesday.
Siddhartha's body was found on the banks of the river near the Hoige Bazaar in Mangaluru, according to news agency ANI. READ MORE
8:13 AM
Weekly stock picks by Religare Broking: Buy HDFC Bk, Sell ACC Aug Futures
HDFC Bank
Recommendation: Buy
Last Close: Rs 2,252.25
Initiation range: Rs 2,235-2,245
Target: Rs 2,340
Stop loss: Rs 2,200
In line with the others, HDFC Bank has witnessed decent correction from its record high and has tested its crucial support zone of the long term moving average (200 EMA) on the daily chart of late. Indications are in the favor of some consolidation around the current levels, followed by a steady recovery. READ MORE
8:11 AM
Technical calls from HDFC Securities: Sell IndusInd Bank, RIL
Nifty View
By closing below 11,100, the Nifty has breached the crucial support of its simple 200 DMA, placed at 11,140 and the previous bottom of 11,108 on the daily charts. Next possible downside target for Nifty is seen at 10,806, which happens to be 61.8 per cent retracement of the entire upswing seen from 10,004(26 Oct Bottom) to 12,103 (all-time high registered on June 3). Resistance is shifted downward to 11,310 in Nifty. READ MORE
8:08 AM
FII/FPI & DII trading activity on NSE, BSE and MSEI
8:06 AM
Oil Check
Oil prices rose for a fifth day on Wednesday, buoyed by a bigger than expected drop in US inventories and as investors awaited a widely expected cut in interest rates by the Federal Reserve, the first in more than 10 years.
At 08:03 am, Brent Crude Futures were at $65.17 per barrel.
At 08:03 am, Brent Crude Futures were at $65.17 per barrel.
8:03 AM
Rupee Check
Source: Bloomberg
Topics : Markets MARKET WRAP
Don't miss the most important news and views of the day. Get them on our Telegram channel
First Published: Jul 31 2019 | 7:13 AM IST
