smartmoney financial services: Broker Radar of stocks on Dec 8

Brokerage firms have updated their recommendations.

Credit Suisse on HDFC Bank:

Maintained ‘Outperform’; raised price target to Rs 2,075 from Rs 1,955.
Bank's CET1 at 12.2 %, similar to the levels seen in the financial year-ended March 2015.
Expects bank to undertake next capital raise in in the next financial year.
If $3 billion raised, then expect 4% dilution and increase in capital base by 20%.
$3 billion enough to support growth for next 3-4 years, if loan growth at 23-25%.
Stock does well around capital raise as P/B premium moderates.
An equity raise can equalise P/B multiples of HDFC Bank and Kotak.

Citi on JSW Energy:

Maintained ‘Buy’; raised price target to Rs 93 from Rs 75.
Signing of new power purchase agreements increases comfort.
Strong cash flows despite untied capacity.
Low visibility on PPA for Vijaynagar, but several other potential positives in making.
Raised price target on the back of new PPA, improvement in cash flow and decline in net debt.

Morgan Stanley on Cyient:

Maintained ‘Overweight’ with price target of Rs 620.
Potential hiccups in communication vertical, but company reiterates outlook for the current financial year.
Any delays in fibre rollout in Australia to have an impact on Cyient's business.
Worst case impact to be 5-6% on the next financial year’s earnings estimates.
Still believes Cyient is cheap relative to many mid-cap peers.

Morgan Stanley on Indian Telecom:

Smaller operators’ merger or exit mean top incumbents/Jio could gain 10% market share in next 12 months.
Tower companies to see near-term headwinds on consolidation, but rising data usage augers well.
Remain constructive on tower companies over the medium term.
TRAI’s recommendation to raise limit for overall spectrum holdings could be favorable for the top incumbent operators/Jio to augment their holdings if the spectrum is sold or auctioned.

Jefferies on Bharat Petroleum:

Maintained ‘Underperform’ with price target of Rs 425.
Fuel margins should rebound but refining headwinds loom.
Less confident of margin momentum into the busy election calendar in the next financial year.
Current quarter tracking to be a weak quarter with core earning per share down 25% on a sequential basis.
Expect refining margins to rise to $8.5/bbl once Kochi stabilizes by the second half of next financial year.

Morgan Stanley on Future Consumer:

Initiated ‘Overweight’ rating with price targetr of Rs 95; implying a potential upside of 61% from yesterday’s close.
Expect Future Consumer to be India's fifth-largest FMCG Company by March 2021.
Future Group’s retail ecosystem yields a unique competitive advantage.
FCL can launch innovative products with a disruptive go-to-market strategy.
Expect Future Retail to contribute over 90% of financial year-ending March 2020’s revenues, compared to 74% in the next financial year.
Expect revenues to jump 3.2 times by March 2020; margins to expand by 470 basis points by March 2020.
Scale-driven efficiencies, better fixed-cost absorption and product mix improvement to drive margin expansion.
Bull Case price target Rs 194: Faster ramp-up of small format stores by FRL, and higher contribution of FCL brands.

HSBC on Escorts:

Initiated ‘Buy’ rating with price target of Rs 835, implying a potential upside of 26 percent from yesterday’s close.
Brand and profit growth back on track.
New products to boost market share, margins, and profits.
Expect Tractor volumes, revenue, EBIT and net profit to grow at a compounded rate of 10%, 13%, 33% and 45% respectively by March 2020.
Cost cutting, improved product mix and increased capacity utilization to drive profits.
Construction equipment to break even in the current financial year.
Return on capital employed to improve to 23% by March 2020, compared to 11%, clocked in previous financial year.
Positives: improved demand, favorable monsoons, increasing farm mechanisation and improving farming income.

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