Stock market tip: Which shares to buy? Check call on these 5 scrips
YES Securities retained L&T's FY20 revenue growth and order inflow guidance at 12-15 percent and 10-12 percent, respectively.
The stock markets again slip into the negative territory today, leaving investors to take hard choices. Many shares have fallen after IL&FS and DHFL failed to repay the dues of their creditors. These events mainly affected NBFCs, banks and mutual funds. However, there was a ripple effect on other stocks. Here are the reports of brokerages on these 5 stocks.
Larsen & Toubro (BUY, 12% upside):
YES Securities report said Larsen & Toubro's order backlog remain strong at Rs 2.94 trillion (up 8.2% YoY; 2.1x trailing twelve months or TTM revenue). Order inflow was up 7 percent YoY at Rs 387 billion, of which Rs 297 billion constituted domestic order (up 11% yoy) while international order inflow came in at Rs 90 billion (down 4% yoy mainly due to deferment of some orders).
The brokerage retained L&T's FY20 revenue growth and order inflow guidance at 12-15 percent and 10-12 percent, respectively. Though infrastructure segment margins remain weak at 5 percent, down 37 bps in Q1FY20, the company has retained its guidance of infrastructure margin recovery in FY20. "L&T anticipates order bidding pipeline of Rs 8.5 trillion in FY20," the report said. The brokerage maintains BUY with a 12 percent upside.
Brokerage Edelweiss said that while pricing/sourcing challenges continue to impact margin recovery, Voltas has maintained its leadership in the air conditioner (AC) market. The company's scale-up in the white goods business is expected to create shareholder value over the long term. "We retain ‘BUY/SO’ with a target price of Rs 660, assigning 38x September 2020E EPS."
Hindustan Unilever (BUY)
Brokerage Edelweiss said it envisaged Hindustan Unilever (HUL) to be the key beneficiary of the anticipated rural recovery and herbal-push, and expected its decent volume growth to sustain. With the push-for-premium sustaining, it expected better earnings growth. "Rolling forward the valuation yields a target price of Rs 2,049 (55x, 12-month forward PE). Maintain ‘BUY/SO’. At CMP, the stock is trading at 43.7x FY21E EPS," it said.
HUL reported Q1FY20 revenue; earnings before interest, tax, depreciation and amortization (EBITDA) (adjusted for IndAS 116) and profit after tax (PAT) growth of 6.6 percent, 13 percent and 10.1 percent year-on-year (YoY), respectively, in line with our estimates, said the brokerage. A soft macroeconomic environment and rural slowdown decelerated volume growth to 5 percent YoY on a base 12 percent (refer to Who moved my volume growth).
Kajaria Ceramics (HOLD)
YES Securities said that rich valuations, multiple headwinds will keep the stock under check. It said that the stock is trading at price/earnings ratio of 32.3/27.8, implying rich valuations with price/earnings to growth (PEG) ratio of 2.3x. "We have bearish view on the stock & retain HOLD rating with revised target price of Rs459 at 25x FY21E EPS."
Kajaria Ceramics (KCL) reported consolidated sales growth of 6.5 perceny year-on-year (YoY) in Q1FY20 as volumes grew by 9.6 percent YoY but realisations dipped by 2.8 percent YoY. Sales volume from own manufacturing/outsourced grew by 3 percent/61 percent YoY, respectively. Gross margin came at 60 percent, down 550 bps YoY, led by unfavorable revenue mix (Outsourced revenue contribution was at 25% in Q1FY20 vs 18% in Q1FY19). However, EBITDA margin improved 40 bps YoY due to 280 bps decrease in power cost as a percentage of manufacturing & jont venture sales. KCL’s working capital has further deteriorated from 58 days in Q4FY19 to 62 days in Q1FY20.
Can Fin Homes( BUY):
Healthy loan growth, portfolio diversification, spread expansion on expected lines, and profitable franchise are the posives for the company, said YES Bank report. The company has seen sustained strong growth in self-employed non- professional (SENP) segment in and outside Karnataka. The company's portfolio diversification continues, as it shifted its exposure towards Tier 2/3 cities and non-South regions. Spread expansion was on expected lines; management expects net interest margin (NIM) to further improve seasonal increase in non-performing loans (NPLs). The report said that credit cost to stay low in the remainder of FY20. The brokerage takes positive stance on the stock.
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