Stocks That Saw The Biggest Upgrades And Downgrades After Q2 Earnings

A majority of the NSE Nifty 50 firms either met or surpassed estimates in the recently concluded earnings season following two straight quarters of muted performance.

In the broader universe of 258 stocks tracked by at least 10 analysts, ‘Buy’ ratings were upgraded for 120 companies since the end of June quarter earnings, according to Bloomberg data. The number of ‘Buy’ ratings was cut—implying a ‘Hold’ or a ‘Sell’ recommendation—for 80 stocks. Analysts kept their calls unchanged for 58.

Selection Criteria

• Stocks tracked by at least 10 analysts.
• Filtered 258 stocks out 5,180 listed companies.

HDFC Ltd.

Analysts turned bullish on the non-bank lender after it reported steady growth in the September quarter, aided by rise in individual home loans. Nomura cited its stable asset quality and favourable risk-reward ratio to upgrade its rating on the stock from ‘Neutral’ to ‘Buy’ and raised its target price on the stock to Rs 2,550 from Rs 2,300 apiece

Shree Cements

The north India-based cement maker’s second quarter results beat estimates on the back of better pricing power, which resulted in realisation growing 9 percent year-on-year. Analysts said the second half of the ongoing fiscal would be better for the company aided by lower operating costs, expected demand recovery and capacity addition.

SRF

Analysts upgraded their recommendation on the company as its high-margin chemical segment grew 25 percent over last year even as its profit was in line with estimates. The company has guided for a 40-50 percent growth in the segment in a call with analysts.

Ultratech Cement

The company met analysts’ estimates in the second quarter and its realisation rose aided by better pricing power in north and west India. Overall reduction in cash costs and higher realisation boosted its operating profit. Analysts also highlighted its measures to strengthen its balance sheet and improve volumes in the second half of the ongoing fiscal.

Aarti Industries

The producer of benzene-based basic and intermediate chemicals’ focus on increasing the share of -added products to overall revenue, lower raw material costs and large multi-year contracts should augur well in the long term, analysts said, as they upgraded the rating on the stock. That came even as the company’s revenue missed estimates in the quarter ended September.

Berger Paints

The paint maker’s profit missed analysts’ estimates led by continued weakness in the industrial segment, increased discounting and a product mix that offset the benefits of lower crude oil prices. According to analysts, the uncertainty in demand due to slowing economic growth leaves limited room for error, given the stock’s premium valuation.

Maruti Suzuki

Analysts remain cautious over the outlook for India’s largest carmaker even as its second-quarter profit beat estimates. Weak consumer sentiment, uncertainty in demand in the near future due to the transition to BS-VI emissions standards and pressure on margins due to higher discounts and sales promotion expenses are some of its key headwinds cited by analysts.

Hero MotoCorp

The company reported strong sales growth and better-than-expected margin on the back of recent price hikes and lower input costs. However, like Maruti, analysts are cautious over demand sustaining after the festive season and competition in the two-wheeler industry.

Nestle India

The maker of Maggie instant noodles’ profit met estimates in the second quarter. Although its domestic sales grew 10.5 percent over the previous year, it was led by the company’s focus on volumes. That resulted in gross margins contracting 170 bps year-on-year as it refrained from implementing price hikes. Additionally, weakness in export markets such as Turkey and rich valuations are reasons behind analysts’ downgrade.

Titan

Analysts turned cautious on India’s largest branded jewellery maker after it lowered the guidance of its mainstay business for the rest of the ongoing fiscal year due to weak consumer sentiment and high gold prices. Titan lowered its jewellery sales growth guidance to 11-13 percent for the second half of 2019-20 from 20 percent earlier.