Biggest Target Price Upgrades And Downgrades After Q3 Earnings Season
The Nifty 50 stocks that saw the biggest upgrades and downgrades in analyst price targets after October-December earnings.
Stock price upgrades outnumbered downgrades after the October-December earnings for Nifty 50 companies even as cost pressure continued.
Analysts raised their price target for 29 of the 50 stocks between Jan. 10 and Feb. 17 earnings season, according to data on Bloomberg. Twenty-one stocks saw a reduction in consensus price targets.
More target price upgrades underscore a pickup in economic activity and improved domestic demand, reflected in better tax collections. But rising input costs continue to weigh on operating performance of India Inc. And a full-scale war between Russia and Ukraine could roil global markets, undermining forecasts. The Indian benchmarks, Sensex and Nifty, have fallen so far this year amid heightened volatility.
Best And Worst Price Revisions
Maruti Suzuki India Ltd., beset by a chip crunch that prompted production cuts in the third quarter, saw the biggest increase in target price among Nifty 50 constituents. That reflects easing concerns, and the company also ranked among the companies that beat estimates by most.
Still, the target price upgrade for the maker of Swift Dzire was not enough to lift it out of the list of Nifty 50 stocks offering the least potential returns.
Maruti Suzuki: Motilal Oswal says that the company is primed for a comeback led by favourable product lifecycle, easing supplies and stable raw material.
ONGC: Nomura expects rising oil and gas prices to boost near-term earnings and finds the valuation compelling due to high commodity prices. The brokerage is, however, not fully convinced on long-term outlook.
Hindalco Industries: Patience on the stock is starting to pay off, notes Dolat Analysis & Research Themes, as it adds that Hindalco's strategy to nurture Novelis over the last decade is yielding results and the benefits will be persistent in the long term.
Bajaj Finance: Buoyant growth is likely to continue, believes Anand Rathi, and expects the firm to log growth in profitability. Focus on digital transformation and marked improvement in asset quality are seen as other positives.
ICICI Bank: Jefferies branded the lender's Q3 an "almost picture perfect quarter". The ramp-up in SME and retail banking will aid ICICI Bank's growth to industry-best levels and drive the next leg of rerating, the brokerage added.
Dr. Reddy's Laboratories Ltd. and Tata Steel Ltd. led the list of stocks that saw the biggest downgrade in target price.
Dr. Reddy's: Emkay Global lowered its target price despite in-line Q3 results, as it removed the vaccine-related upside. Almost all the segments posted growth but fell sequentially.
Tata Steel: The company's Ebitda contraction cycle continued in the December quarter, said Jefferies. The brokerage expects more pressure on the margin due to high coking coal prices and downtrending steel realisation.
Bharat Petroleum: Net debt reduced further in Q3, while privatisation looks likely to be delayed to FY23, Motilal Oswal noted.
IndusInd Bank Ltd: Asset quality witnessed mixed trends while slippages remained high at 4.7%. The bank continues to strengthen its provision buffer -- a useful cushion, according to Edelweiss.
Divi's Laboratories: While it ranks among companies that surpassed estimates in the third quarter, that came on Covid-19-related sales. High valuations and potential risk to earnings mean that there is no major upside for the company from current levels, according to Jefferies.
According to Bloomberg data, analysts expect 27 of the Nifty 50 stocks to gain over 20% or above over their closing prices, as on Feb. 17. Not a single constituent is estimated to decline over the next 12 months.
The estimates, however, came prior to the escalation in tensions between Russia and Ukraine.
While the consensus target prices of Bharat Petroleum Corp. Ltd., Tata Steel, Housing Development Finance Corp. Ltd. and HDFC Life Insurance Co. were revised downwards, between Jan. 10 and Feb. 17, the stocks still offer among the best return potential.
Asian Paints Ltd., Eicher Motors Ltd., Nestle India Ltd., Maruti Suzuki and Titan Co. Ltd. are seen to have the least upside.
About 26 companies in the 50-stock gauge reported earnings above estimates during the quarter ended December, according to Bloomberg data. Twenty-one companies reported profit below estimates.
Biggest Hits And Misses
Among the broader group of NSE100 companies, Lupin Ltd., Kotak Mahindra Bank Ltd., ONGC led the list of companies that beat the estimates by most.
Hindustan Petroleum Corp. Ltd. and Torrent Pharmaceuticals Ltd. underperformed the most when compared with estimates.