Monday, 29 May 2017

Buy, Sell, Hold: 7 stocks that analysts are watching today

Sun Pharma, Tech Mahindra, and Indian Hotels, among others are being tracked by investors today.

Sun Pharma

Brokerage: JPMorgan | Rating: Neutral | Target: Rs 550

The global research firm observed that the company’s revenue decline guidance highlights increasing uncertainty in FY18. Further, it believes that uncertainty on regulatory issues as well as earnings will keep the stock under pressure. Having said that, JPMorgan believes that headwinds could give better entry point to focus on upside from specialty pharma and is well-positioned to transition into specialty pharma over the medium term.

Brokerage: Jefferies | Rating: Outperform | Target: Rs 680

The company’s Q4 performance was significantly below par, driven by weak US sales, it observed. The next 4-6 quarters look like a perfect storm with an uncertainty over approval.

Tech Mahindra

Brokerage: JPMorgan | Rating: Neutral | Target: Rs 410

JPMorgan said that the company’s near term outlook on margins seems uncertain and any sign of improvement in it will be evident only in second half of this fiscal. Further, it added that there is a need to see how the firm plans to address its profitability.

Brokerage: Morgan Stanley | Rating: Equalweight | Target: Rs 455

The global investment bank believes that a margin miss in the fourth quarter is driving the sharp cut in earnings per share (EPS) estimates. In fact, a recovery in margin is likely to be only gradual. On the estimates, it feels that steep cut in estimates would be reflected in the stock price. A sharp correction in the stock may offer opportunity for long-term investors, the brokerage added.

Indian Hotels

Brokerage: JPMorgan | Rating: Overweight | Target: Rs 140

The brokerage said that operating leverage thesis may sustain over FY18/19. Further, it said, CEO change as well as GST are key negatives for the stock.

Brokerage: Morgan Stanley | Rating: Overweight | Target: Rs 152

The weak results mask the positives and that the pricing growth was a key positive in the earnings. A 300 basis points EBITDA margin expansion in FY17 demonstrated the deep operating leverage.

Cadila

Brokerage: JPMorgan

JPMorgan said that the company’s operating performance was better than expected and a pick-up in approvals was the key in FY18. Simultaneously, it said, that improved earnings visibility is factored into the sharp re-rating.

Brokerage: Jefferies | Rating: Outperform | Target: Rs 525

Jefferies observed that Q4 growth was largely broad-based across geographies, barring Europe. The US business is now at an inflection point with several key launches anticipated. The increasing US contribution to sales could be a key lever, it added. Increasing US Contribution To Sales To Be A Key Lever

ITC

Brokerage: Macquarie | Rating: Outperform | Target: Rs 340

Speaking on the company’s Q4 results, it said that the flat cigarette volume growth was ahead of its estimates. Further, it added that ITC remained its top pick in the Indian consumer space.

Brokerage: Goldman Sachs | Target: Rs 320

The global brokerage firm remains positive on the firm’s potential to gain market share in tobacco. Having said that, it lowered FY18-20 EPS estimates by 6-7 percent to reflect higher down-trading.

HPCL

Brokerage: Macquarie | Rating: Buy | Target: Rs 650

The company beat our top-of-consensus estimates on strong refining margin. It added that the firm witnessed a sharp improvement in profits for the subsidiary.

Mphasis

Brokerage: Macquarie | Rating: Neutral | Target: Rs 520

The brokerage observed that the medium term growth drivers are falling in place. The soft outlook for HP & Digital risk will keep overall revenue growth below the industry level, it added.

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