Two Stocks That Got Upgraded After Third Quarter Earnings

Brokerages upgraded Avenue Supermarts Ltd. and Shriram City Union Finance Ltd. after both the companies reported better-than-expected December quarter earnings.

Earnings Highlight:

Shriram City Union Finance:

• Net interest income up 20 percent at Rs 916 crore.
• Net profit up 43 percent at Rs 225.5 crore

Avenue Supermarts:

• Revenue up 23 percent at Rs 4,095 crore.
• Net profit up 66 percent at Rs 252 crore.
• Earnings before interest, tax,depreciation and amortisation up 47 percent at Rs 422 crore.
• Margins at 10.3 percent versus 8.6 percent.

Here’s what the brokerages had to say:

HSBC On Avenue Supermarts

• Upgraded to ‘Buy’ from ‘Hold’; raised target price to Rs 1,600 from Rs 900 with a potential upside of 38 percent from yesterday’s close.
• Avenue’s December quarter’s profits were significantly ahead of expectations.
• Revenue growth momentum and margin expansion led to beat.
• D-Mart business model is formidable, scalable and a winning proposition.
• Avenue will be able to capture value from structural growth ahead of competition.
• Valuation not ahead of long term fundamentals.

Kotak On Shriram City

• Upgraded to ‘Add’ from ‘Reduce’; raised target price to Rs 2,275 from Rs 2,200 with a potential upside of 11.3 percent from yesterday’s close.
• Signs of turnaround seen after several quarters of weak performance.
• Strong NII and decline in provisions lift net profit.
• Positives: strong growth in business loans, reduction in GNPL ratio and provision and lower borrowing costs.
• Expect business trajectory to improve hereon.
• Expect near-term performance to remain strong.