Month: July 2021

Buy Tata Motors with a price target of Rs 430

Sharekhan expects the stock of Tata Motors to hit at least Rs 430 as against the current market price of Rs 291.30.

The brokerage believes that the Q1FY22 results were weak, as indicated by the management earlier this month, due to chips shortage impacting JLR business and lockdown restrictions, impacting commercial vehicles and passenger vehicles businesses.

Sharekhan sees a number of positives for Tata Motors. According to the broking firm, the JLR management maintained medium to long-term targets and continued to execute reimagine strategy. Commercial vehicles and passenger vehicles sales to recover in India, led by expected normalisation of economic activities and preference for personal mobility amid COVID-19.

“We expect all-round improvement in Tata Motors’ business and expect earnings to turn positive in FY2022 and rise by 69.1% in FY2023E, driven by a 16.7% Compounded Annual Growth Rate in revenue during FY2021-FY2023E and a 130 bps rise in EBITDA margin,” the brokerage has said. Sharekhan says to buy the stock with a target price of Rs 430 in the future.

Buy JSW Steel for a price target of Rs 850: Sharekhan

The broking firm has set a price target of Rs 850 on the stock of JSW Steel as against the current market price of Rs 710.

The company sees many positives on the stock, including a noticeable decline in net debt to EBITDA 1.9x in Q1FY2022 versus 2.6x in Q4FY202

The firm has also said that the sharp 22% beat in consolidated EBITDA margin at Rs. 29,608/tonne (up 42% q-o-q) were led by strong realisations. Financial performance of overseas subsidiaries improved as they clocked positive EBITDA of Rs. 282 crore (versus an EBITDA loss of Rs.322 crore in Q4FY2021).

“We believe that JSW Steel is one of best bets in the Indian steel space given strong volume/margin led earnings growth outlook and potential long-term value creation from recently acquired Bhushan Power and Steel Ltd. Hence, we maintain our Buy rating on JSW Steel with a revised price target of Rs. 850. At the current market price, the stock is trading at 8x its FY2022E EV/EBITDA and 6.9x FY2023E EV/EBITDA,” the brokerage firm has said.

Persistent Systems

Sharekhan also has a buy call on the shares of Persistent Systems a mid level IT company. The brokerage has set a target of Rs 3,600 on the stock as against the current market price of Rs 3,161.

According to the broking firm, there was a strong beat in revenue growth. “Q1FY2022 witnessed higher billing rates, healthy deal TCVs, aggressive employee addition and strong client additions. EBIT margin improved 39 bps q-o-q to 13.5%,” the brokerage firm has said.

According to Sharekhan strong US Dollar revenue growth of 27.3% y-o-y, robust client additions (four clients in the over $5 mn category on q-o-q) and Strong growth in healthcare & life science (up 32.5% y-o-y) vertical and India business (up 57.9% y-o-y) were the key positives.

“Given strong earnings growth potential, strong balance sheet and M&A opportunities, we retain a Buy on the stock with a revised target price of Rs. 3,600,” the brokerage has said.

Disclaimer

The stock recommendations are picked from the brokerage report of Sharekhan. However, neither the author, nor the brokerage, nor Greynium Information Technologies should be held responsible for decisions taken and losses incurred based on the above article. Investors should understand that there are inherent risks involved when investing in the markets. They should hence exercise due caution.

Should you buy or sell the shares of Yes Bank?

Emkay Global has a sell rating on the stock of Yes Bank. In fact, the firm sees a solid 25% downside risk on the stock of Yes Bank. It believes the stock could slide to levels of as low as Rs 10, from the current levels of Rs 13, which means a fall of 24.8%, which can be huge. In any case, the markets are at near peak levels and given that the shares of Yes Bank are highly volatile, only brave investors could be buying.

According to Emkay Global, after a heavy loss in Q4FY21, Yes Bank returned to profitability in Q1FY22 with a profit of Rs 2.1 billion, mainly led by higher other income and lower provisions. The brokerage firm is of the opinion that the bank should prefer upfront stress recognition and a higher provision cover instead of token profits. This is a good key concern that Emkay Global has pointed out as far as the bank is concerned.

Credit growth remains weak, margins sub-par

According to the brokerage the credit growth was weak at Rs 1.7 trillion (down 0.5% yoy/2% qoq) mainly due to corporate drag. Retail growth was high at 31% yoy due to a low base.

“Yes Bank expects 20% growth in retail in FY22; however, asset quality remains a concern in this portfolio. Deposit growth was high at 39% yoy (Rs1.6 trilllion) due to a low base after last year’s scare. Current and Savings Account stood at 27%, but it was still far from its peak (38%). In our view, the road ahead will be challenging since even larger private banks are facing challenges on the CA front. The bank has also cut SA rates recently, which may impact SA mobilisation. Net Interest Margins improved by 50 bps qoq to 2.1% due to lower interest reversal on NPAs/interest waiver, but remained sub-par vs. past trends. The bank has guided for 15% credit growth and expects margins at 2.8%, which looks optimistic,” the brokerage has said.

Elevated asset quality risk remains for Yes Bank

According to Emkay Global, fresh slippages remained high at Rs 22 billion (5.4% of loans), mainly from corporate (Rs 12.5 billion) and retail (Rs7.6 billion).

Emkay Global expects the bank’s RoA trajectory to remain sub-par at 0.5-0.8% over FY23-24E vs. management expectation of 1-1.5%. “We retain Sell with a target price of Rs 10 (0.9x Sep’23E ABV) amid persistent concerns over its asset quality, sub-par return ratios, and unfavorable risk-reward ratio with higher valuations. Although the current management with regulatory/investor support has been able to avert bank failure, we believe that reorienting Yes Bank to a sustainable retail bank will require differentiated private banking management,” the brokerage has said,

Disclaimer:

The stock recommendation of Yes Bank, is picked from the brokerage report of Emkay Global Financials. However, neither the author, nor the brokerage, nor Greynium Information Technologies should be held responsible for decisions taken and losses incurred based on the above article. Investors should understand that there are inherent risks involved when investing in the markets. They should hence exercise due caution.

GoodReturns.in