Analysts Losing Faith In State-Owned Lenders, Non-Banking Financial Firms
Six of the top 10 stocks at the receiving end of analysts’ target price downgrades after March quarter earnings were state-run lenders and non-banking financial companies.
The biggest cut was seen in Punjab National Bank Ltd. Its price target was more than halved after the lender reported its highest ever quarterly loss – also the most in the Indian banking industry. Union Bank and Bank of India followed with target price cuts of more than 30 percent each.
Most public sector banks and NBFCs reported huge losses and a surge in provisions against bad loans surged in the fourth quarter after the Reserve Bank of India in a Feb. 12 circular, had withdrawn existing stressed asset schemes and asked banks to re-classify these accounts as bad loans if the implementation of these schemes was not yet complete.
The other four non-financials on the list were Idea Cellular, Granules India, DB Corp and Somany Ceramics were analysts lowered their 12-month target price by 22 to 27 percent each.
Analysts lowered Idea Cellular’s target price after the company reported losses for the sixth consecutive quarter. The target price was lowered due to tariff aggression and expected slower recovery in revenues.
Analysts lowered Granules India’s target price after the company reported a sharp fall in its margins due to higher raw material prices. The target price was lowered due to margin related headwinds which weighed on earnings.
DB Corp’s revenue grew 10 percent, but the operational numbers were weak as expenses rose after the company’s new circulation expansion strategy. The target price was lowered as analysts factored in higher newsprint prices which would limit earnings growth.
The tile-maker reported muted March quarter results on the back of sluggish volume growth. Though 16 out of the 17 analyst tracking the stock have a buy rating on the stock, the target price was cut to adjust for lower tile prices and higher input costs.
Only companies which are tracked by 10 or more analysts have been considered for this analysis.