A worker picks cherries during harvest in Lodi, California, U.S.,  (Photographer: David Paul Morris/Bloomberg)

Top 10 Stock Picks From Motilal Oswal After First Quarter Earnings

Earnings of most of the companies on the NSE Nifty 50 Index either met or exceeded analyst estimates for end-June quarter results, which concluded last week.

Brokerage house Motilal Oswal has picked top 10 stocks to invest based on their first quarter earnings performance. Here’s the list:

ICICI Bank Ltd.

ICICI Bank is the preferred pick to play the recovery in corporate banks. The brokerage believes that the lender is showing an improvement in operating environment and overcoming the transitory management and regulatory issues. Near-term loan growth would be driven by the retail business. With a gradual decline in credit cost and a pick-up in revenue growth, the bank is expected to report around 1.2 percent return on assets over financial year 2020.

  • Target price: Rs 355.
  • Bloomberg analysts’ consensus target price: Rs 369.
  • Most bullish target price: Rs 460 by Morgan Stanley.
  • Most bearish target price: Rs 305 by JP Morgan.

Bloomberg consensus recommendation: Buy: 46, Hold: 4 and Sell: 1.

Hindalco Industries Ltd.

The brokerage believes that the company’s U.S. subsidiary is reaping the benefit of the $2-billion investment made in auto lines and recycling facilities across the world a few years ago, and the recent acquisition of Aleris strengthens that position. The acquisition also gives Hindalco access to aerospace and Chinese markets. Meanwhile, the Indian smelting business continues to benefit from bauxite and coal mines and plans to grow through value addition.

  • Motilal Oswal’s target price: Rs 331.
  • Bloomberg analysts’ consensus target price: Rs 297.
  • Most bullish target price: Rs 355 by JP Morgan.
  • Most bearish target: Rs 216 by ICICI Securities.

Bloomberg consensus recommendation: Buy: 27, Hold: 1 and Sell: 2.

Petronet LNG Ltd.

Dahej terminal’s over utilisation despite doubling LNG prices over last year is a positive for Petronet LNG and the trend is likely to continue, the report said. Kochi terminal’s utilization would increase as Kochi refinery stabilises and Kochi-Mangalore pipeline gets completed. The next trigger will be Dahej terminal’s expansion next year.

  • Motilal Oswal’s target price: Rs 312.
  • Bloomberg analysts’ consensus target price: Rs 270.
  • Most bullish target price: Rs 330 by BoB Capital.
  • Most bearish target price: Rs 190 by Goldman Sachs.

Bloomberg consensus recommendation: Buy: 31, Hold: 6 and Sell: 3.

ACC Ltd.

Higher proportion of premium sales and sales from its new cost-efficient units of Jamul and Sindri led to the first quarter earnings beat estimates. ACC has managed to limit the cost increase driven by its higher proportion of linkage coal, lower lead distance and route optimisation. The company has also made efforts toward cost rationalisation of fixed costs, resulting in improved profitability.

  • Motilal Oswal’s target price: Rs 1,633.
  • Bloomberg analysts’ consensus target price: Rs 1,625.
  • Most bullish target price: Rs 2,125 by KR Choksey.
  • Most bearish target price: Rs 1,270 by Kotak Securities.

Bloomberg consensus recommendation: Buy: 26, Hold: 8 and Sell: 8.

Ashok Leyland Ltd.

The commercial vehicle maker is looking to de-risk itself from exposure to Indian truck business by getting down revenue contribution from 62 percent at present to 50 percent in the next five years. This will be done by growing share of light commercial vehicles, exports, spare parts and defence. The brokerage believes that this will not only reduce the company’s dependence on domestic truck business, but also drive strong revenue growth.

  • Motilal Oswal’s target price: Rs 149.
  • Bloomberg analysts’ consensus target price: Rs 134.
  • Most bullish target price: Rs 175 by India Infoline.
  • Most bearish target price: Rs 95 by Haitong.

Bloomberg consensus recommendation: Buy: 30, Hold: 9 and Sell: 8.

Titan Co. Ltd.

The company’s jewellery business’ growth prospects remain robust, with watches and now eyewear starting to contribute to growth. The jewellery business continued gaining market share in the April-June period. The company is confident of delivering double-digit margins in the watches segment.

  • Motilal Oswal’s target price: Rs 1,130.
  • Bloomberg analysts’ consensus target price: Rs 1,039.
  • Most bullish target price: Rs 1,240 by Macquarie.
  • Most bearish target price: Rs 820 by HDFC Securities.

Bloomberg consensus recommendation: Buy: 27, Hold: 6 and Sell: 1.

Sun Pharmaceutical Industries Ltd.

Sun Pharma’s U.S. sales excluding Taro in the first quarter showed a positive surprise. The U.S. sales run rate would gain further momentum with increased traction from the Halol facility and new launches, the brokerage said. It believes that profitability and operating leverage will improve as operating cost is expected to increase at a lower rate compared to sales growth.

  • Motilal Oswal’s target price: Rs 700.
  • Bloomberg analysts’ consensus target price: Rs 574.
  • Most bullish target price: Rs 700 by Motilal Oswal.
  • Most bearish target price: Rs 340 by Quant Broking.

Bloomberg consensus recommendation: Buy: 18, Hold: 12 and Sell: 11.

Infosys Ltd.

With first quarter financials meeting estimates, the brokerage believes the company is on track to deliver guidance of 6-8 percent constant currency growth this financial year. The margin band is conservative despite the share of digital inching up, recent rupee depreciation, and investments already defined internally. The valuation gap narrowing to tier-I Indian and global peers is another trigger.

  • Motilal Oswal’s target price: Rs 1,550.
  • Bloomberg analysts’ consensus target price: Rs 1,415.
  • Most bullish target price: Rs 1,648 by Edelweiss.
  • Most bearish target price: Rs 1,040 by Emkay.

Bloomberg consensus recommendation: Buy: 40, Hold: 8 and Sell: 4.

Bank of Baroda

The public sector lender has reported steady improvement in asset quality as bad loan watch list size has reduced to Rs 8,600 crore with the provisioning coverage ratio improving. This provides comfort on strength of the balancesheet as around 85 percent of slippages in the first quarter was from that watch list. Steady improvement in margins would drive healthy earnings recovery, according to the brokerage.

  • Motilal Oswal’s target price: Rs 175.
  • Bloomberg analysts’ consensus target price: Rs 173.
  • Most bullish target price: Rs 230 by Investec.
  • Most bearish target price: Rs 120 by Macquarie.

Bloomberg consensus recommendation: Buy: 39, Hold: 6 and Sell: 2.

L&T Finance Holdings Ltd.

The non-banking finance company has scripted an impressive turnaround and delivered strong growth with a consistent improvement in profitability. The company has grown well in the high-return on equity business and continues allocating more capital to it. The hit on net worth due to ECL, which was expected to be taken over this financial year and FY20, has been taken upfront. Hence, while this would be neutral to net worth for financial year 2020, it would be accretive to FY20 earnings per share.

  • Motilal Oswal’s target price: Rs 240.
  • Bloomberg analysts’ consensus target price: Rs 219.
  • Most bullish target price: Rs 250 by JM Financial.
  • Most bearish target price: Rs 180 by JP Morgan.

Bloomberg consensus recommendation: Buy: 14, Hold: 2 and Sell: 0.