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Lupin, Sobha, Escorts among top five stock ideas from brokerages
June 27, 2017 – 05:37 am
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(Stock-specific movements…)

NEW DELHI: The December quarter earnings numbers of India Inc were largely mixed, but the market is rewarding stocks that have delivered results in line or higher than expectations.

Individual stocks have done better even though the market plunged about 1 per cent this past week. "The third quarter numbers have been kind of mixed. So it is not going to indicate anything in terms of market direction, " said Piyush Garg, EVP & CIO, ICICI Securities.

"Stock-specific movements are going to continue as companies that have delivered good numbers are good to be rewarded, possibly more than what they deserve. There is a lack of confidence in the market, which makes market movement slightly bigger, " he said.

Here are five stock ideas from different brokerages, which came out with these recommendations in separate notes to their clients last week after the Q3 results:

Lupin: Buy | Price target Rs 2, 162 CLSA has maintained a buy rating on Lupin post Q3 results, but slashed its 12-month target price to Rs 2, 162 from Rs 2, 200 earlier. But the pharma major managed to beat Street estimates on earnings per share (EPS) in Q3 after four quarters of disappointment, the CLSA note said.

US business outperformed on the benefit of price increases in gFortamet taken in Q2FY16. A large part of the other operating income is recurring in nature. "Going forward, new launches, Gavis acquisition is likely to revive US growth in FY17/18. Fortamet, Glumetza and Gavis are the underlying factors for FY17 EPS, " it said.

CLSA said the FY17 EPS could range between Rs 72 on the bearish side and Rs 84 on the bullish side.

Sobha: Buy | Price target Rs 362 CLSA has maintained a buy rating on the stock, but slashed its 12-month target price to Rs 362 from Rs 450 earlier as results were below estimates on revenue recognition mismatches, the CLSA note said.

Net debt fell on a quarterly basis for the first time in seven quarters. The Bengaluru-based mid-income group is driving pre-sales for the realty firm, and big launches in near term will aid sentiment. CLSA slashed its FY16 revenues/earnings outlook by 10%/17% to recognise delays.

Cadila Healthcare: Neutral | Target price Rs 370 BofA-ML has maintained a neutral rating on the stock post Q3 results with a 12-month target price of Rs 370. The successful resolution of Moraiya warning letter or key niche launches is key for the stock.

The company is waiting for approval of key molecule Asacol HD, incremental approvals from SEZ/Baddi. The global investment bank expects moderate growth in the US for next 2-3 quarters until approvals pick up.

Escorts: Buy | Target price Rs 164 AnandRathi has maintained a buy rating on Escorts posts Q3 results with a 12-month target price of Rs 164. The continuous fall in tractor volumes along with disappointing performances in other segments led to a 15 per cent decline in revenues.

From January, however, the stock has slid 21 per cent, leading us to believe that the poor results have been priced in, said the AnandRathi note. They see limited downside from the present price of Rs 123.

The brokerage firm reduces its target multiple for FY18 from 10 times to 9 times. Key risks include lower volumes, which may dent revenues; higher commodity prices may cut into margins.

Neuland Labs: Buy | Target price Rs 1, 156 AnandRathi has maintained a buy rating on Neuland Labs post Q3 results with a 12-month target price of Rs 1, 156. Neuland reported Q3 FY16 results (13.2 per cent YoY revenue growth and a 14.7 per cent Ebitda margin) below estimates. The YoY growth rate, however, appears strong because of the low base in Q3 of FY15.

"Considering the company's strong revenue growth and expanding margins, we are optimistic about its prospects, said the note. The ramp-up in supplies to innovators in its customized manufacturing solutions business would improve profitability, " the brokerage said.

Key risks include a delay in the launch of products and keener-than-expected competition in niche APIs, said the brokerage firm.

(Views and recommendations given in this section are the analysts' own and do not represent those of Please consult your financial adviser before taking any position in the stock/s mentioned.)

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