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Stocks To Watch: Biocon, Fortis Healthcare, GM Breweries, Infosys, Tata Steel, TCS

Here are the stocks to watch in today’s trade.

People stand in line at the Bombay Stock Exchange (BSE) building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
People stand in line at the Bombay Stock Exchange (BSE) building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Stocks in Asia gained as high-level U.S.-China trade talks progressed into a second day and optimism grew that a truce can be achieved.

Shares opened higher in Seoul, Tokyo and Sydney, while S&P 500 futures advanced. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.12 percent to 11,275 as of 7 a.m.

Short on time? Well, then listen to this podcast for a quick summary of All You Need To Know before the opening bell.

Here are the stocks to watch in today’s trade:

  • Tata Steel Ltd: Crude steel production increased 4.65 percent to 4.5 million tonne in second quarter ended Sept. 30 as against 4.3 MT in the corresponding quarter in the last financial year. The crude steel production also includes numbers from Tata Steel BSL and Tata Steel Long Products, without eliminating inter-company transactions. The company’s overseas arm Tata Steel Europe reported liquid steel production of 2.46 million tonne during quarter as against 2.42 million tonne in the year-ago period.
  • Biocon: Unit entered into strategic licensing agreement with Evotec Group for an early-stage, pre-clinical bio similar asset.
  • Eveready Industries: Completed the sale of its land in Chennai for Rs 100 crore to Alwarpet Properties.
  • Astron Paper & Board Mill: Company has doubled its capacity to 1,74,600 million tonne per annum in the previous financial year. The company has invested on developing the Kraft paper segment which are then converted into cartons and supplied to companies.
  • Fortis Healthcare: Police in New Delhi have arrested former billionaire Shivinder Singh and three others on charges of siphoning funds and fraudulently diverting nearly $337 million from a lender they controlled. The authorities are still searching for Shivinder’s elder brother Malvinder Singh, an official at the Economic Offences Wing said asking not to be identified citing rules.
  • Muthoot Finance: Committee approved establishment of Global Medium-Term Note Program for $2 billion for the purpose of raising of funds through issuance of foreign currency bonds or rupee denominated bonds overseas on public/private basis in international markets subject to market conditions and regulatory approvals.
  • Raymond: Company will hold extraordinary general meeting on Nov. 5 for approval to extend corporate guarantee to its associate company JK Investo Trade.
  • NCC: India Ratings and Research has placed company’s long-term issuer rating of IND A on Rating Watch Negative from Stable.
  • NHPC has completed the formalities for the takeover of Lanco Teesta Hydro Power.
  • Arvind Smartspaces & HDFC Capital set up a Rs. 250 crore affordable and mid-income housing platform.
  • Bank of India reduced Overnight MCLR by 15 basis points to 7.95 percent and one-year marginal cost of funds based lending rate by 5 basis points to 8.3 percent with effect from Oct. 10.
  • Quess Corp: Shareholders approved amalgamation of the company’s four arms with self.
  • Aban Offshore has received award for deployment of rig from Oil & Natural Gas Corporation for a period of three years. Deployment is expected to commence in the second quarter of calendar year 2020.
  • Indian Overseas Bank reduced lending rates for retail and micro, small and medium enterprises segment by 25 basis points to 8 percent with effect from Nov. 11.
  • Godrej Agrovet has in created its shareholding in Godrej Maxximilk from 62.97 percent to 74 percent.
  • Vakrangee has announced its partnership with Aadhar Housing Finance Ltd. for offering distribution of Home Loan & Loan against Property through its Nextgen Vakrangee Kendras.

Earnings Reaction To Watch

TCS (Q2, QoQ)

  • Dollar revenue rose 0.6 percent to $5,517 million (BloombergQuint estimate at $5,587 million).
  • Revenue rose 2.1 percent to Rs 38,977 crore.
  • Net profit fell 1.1 percent to Rs 8,042 crore.
  • EBIT up 1.5 percent to Rs 9,361 crore.
  • EBIT Margin at 24 percent versus 24.2 percent.
  • Operating margin was at a nine-quarter low.
Opinion
Q2 Results: TCS Rewards Shareholders Even As Earnings Disappoint  

GM Breweries (Q2, YoY)

  • Revenue increased 8.6 percent to Rs 121.4 crore.
  • Net profit was up 2.6 percent at Rs 19.9 crore.
  • Ebitda was down 20.1 percent to Rs 24.3 crore.
  • Margin at 20 percent versus 27.2 percent.
  • Raw material costs as percent of sales stood at 20.5 percent versus 17.5 percent.

Earnings To Watch

  • Infosys
  • ITI
  • Bajaj Consumer Care
  • Den Networks

Pledge Share Details

  • PNB Housing Finance created pledge of 5.42 crore shares (32.25 percent) in favour of Catalyst Trusteeship on Oct. 9, acting on behalf of lenders Barclays Merchant Bank (Singapore) and Deutsche Bank.
  • JSW Steel promoters revoked pledge of 5.4 crore shares from Oct. 3-4.
  • Emami promoter group Diwakar Viniyog released pledge of 57,000 shares on Oct. 4.
  • Bajaj Consumer Care promoter Bajaj Resources created pledge of 3.62 lakh shares from Oct. 7-9.
  • Future Retail promoter Future Corporate Resources created pledge of 1.5 lakh shares on Oct. 9.

Trading Tweaks

  • Century Textiles & Industries ex-date for demerger
  • Religare Enterprises, Shriram EPC, IIFL Securities to move into short term ASM Framework
  • Pricol, 5Paisa Capital, Pioneer Distilleries to move out of short term ASM Framework
  • Zee Media Corporation, IIFL Securities price band revised to 10 percent

Who’s Meeting Whom

  • Welspun Corp to meet Emkay Global Financial Services on Oct. 11.

Money Market Update

  • The rupee closed at 71.06/$ versus 71.07/$ on Wednesday.

F&O Cues

Futures

  • Nifty October futures closed at 11254.2, premium of 19.7 points versus 34.4.
  • Nifty October futures up 0.1 percent, adds 14,000 shares in open interest.
  • Nifty Bank futures closed at 28,106.6, premium of 93 points versus 88 points.
  • Nifty Bank October futures open interest up 12 percent, adds 1.5 lakh shares in open interest.

Options

  • Nifty PCR at 1.14 versus 1.19 (across all series).

Nifty Weekly Expiry: Oct. 17

  • Max open interest on call side at 11,300 (9 lakh shares).
  • Max open interest on put side at 10,500 (7.7 lakh shares).
  • Open interest addition seen at 12000C (+7.6 lakh shares), 10,500P (6.3 lakh shares), 11,300C (+5.7 lakh shares).

Nifty Monthly Expiry: Oct. 31

  • Max open interest on call side at 11,500 (24.8 lakh shares).
  • Max open interest on put side at 11,000 (25.8 lakh shares).
Stocks To Watch: Biocon, Fortis Healthcare, GM Breweries, Infosys, Tata Steel, TCS

Brokerage Radar

On IndusInd Bank

Edelweiss

  • Maintained ‘Buy’; cut price target to Rs 1,793 from Rs 2,060.
  • September quarter saw growth moderation and higher slippages outside the stressed pool.
  • Business momentum was soft with growth being much lower than historical trend.
  • Asset quality reasonably steady while few accounts portend challenges.
  • Cut target as multiple comes down to 2.7x P/B from earlier 3.1 times.

Goldman Sachs

  • Maintained ‘Neutral’ with a price target of Rs 1,474.
  • Slower loan growth was offset by better margins in softening interest rate environment.
  • Accelerated provisioning to improve provision coverage to 50 percent is a prudent move.
  • Weaker PCR, continued slowdown, management change uncertainity should limit rerating.

Morgan Stanley

  • Maintained ‘Overweight’ with a price target of Rs 2,000.
  • Earnings miss was driven mainly by lower PPoP and higher provisions.
  • PPoP miss mainly driven by slower loan growth and higher opex.

Philip Capital

  • Maintained ‘Buy’; cut price target to Rs 1,500 from Rs 1,800.
  • NII was below expectations on account of lower credit growth but NIMs stable.
  • Higher slippages in consumer book were on account of MFI business.
  • Exposure on stress corporate to continue to act as deterrent for peak valuations.

Bernstein

  • Maintained ‘Market-perform’ with a price target of Rs 1,390.
  • The market signal reflects ‘we don't rate you quality anymore’.
  • Management remained unruffled and confident on recovery prospects.
  • Market is giving a signal to the management. Don't tell us, all is well.
  • Does not deserve a 'quality' valuation multiple, when the quality perception has not held out.
  • Credit cost doesn't inspire confidence when the CEO is in the last 6 months of his tenure.

On TCS

Edelweiss

  • Maintained ‘Hold’; cut price target to Rs 2,104 from Rs 2,137.
  • Volatility in BFSI and retail drags overall growth.
  • Dip in margin disappointing; aspirational margin band out of reach.
  • Cut revenue estimates for the current and the next financial year by 2.3 percent and 2.5 percent respectively due to massive cross currency headwinds.

Investec

  • Maintained ‘Sell’; cut price target to Rs 1,835 from Rs 1,910.
  • Falls short on revenue and margin.
  • Too early to call for an acceleration in revenue growth.
  • Margins have possibly bottomed out in the near term.

Phillip Capital

  • Maintained ‘Buy’; cut price target to Rs 2,200 from Rs 2,300.
  • Disappointing results; Dealflow strong.
  • Major segments of BFSI, retail and manufacturing remained weak.
  • Valuations might appear expensive, but TCS is a fundamentally superior stock to own.

UBS

  • Maintained ‘Neutral’ with a price target of Rs 2,300.
  • September quarter’s revenue miss adds evidence to demand slowdown.
  • Expect negative reaction, as Q2 miss is likely to lower earnings expectations.

Axis Capital

  • Maintained ‘Reduce’; cut price target to Rs 1,940 from Rs 2,060.
  • Weak quarter, no immediate triggers.
  • Challenges in key verticals, moderating digital growth, and longer tenured deals.
  • Remain watchful on growth momentum over FY19-21 that can weigh on premium valuations.

Emkay on TCS

  • Maintained ‘Hold’; cut price target to Rs 1,980 from Rs 2,050.
  • September quarter results confirm demand moderation.
  • Despite strong order intake, growth in key verticals moderated further.

More Calls

Citi on Bharat Forge

  • Maintained ‘Neutral’ with a price target of Rs 430.
  • Near term outlook challenged; diversification key to long term growth.
  • Management expects defense revenues to double over 2022-23.

Macquarie on Havells India

  • Maintained ‘Underperform’; cut price target to Rs 586 from Rs 592.
  • Fierce price pressure in the AC business posing challenge.
  • Llyod may loose market share and report lower margin in 2019-20.
  • Other segments also facing pressure.

HSBC on Maruti Suzuki

  • Maintained ‘Hold’ with a price target of Rs 7,200.
  • September quarter likely to be weak but also likely to be ignored by the street; festive sales will be the key.
  • Passenger vehicle industry continues to struggle as potential buyers see weaker income/wage growth and changed spending priorities.
  • From competition standpoint, increased focus on Rs 10+ lakh segment reduces risk of regressive branding.

HSBC on ICICI Lombard

  • Maintained ‘Reduce’; hiked price target to Rs 940 from Rs 814.
  • Motor Vehicles Act mildly positive from premium and loss ratio point of view.
  • Expect lower tax rate this year and future benefits to be ploughed back into the business.
  • Maintain Reduce rating, as we believe the shares are overvalued.

Morgan Stanley on India Gas

  • City gas distributors, gas aggregators and gas infrastructure providers that enable the gas transition will benefit the most.
  • IGL, Petronet LNG and Gujarat Gas are top picks as gas takes market share from oil.
  • Gujarat Gas: Maintained ‘Overweight’; hiked price target to Rs 238 from Rs 232.
  • IGL: Maintained ‘Overweight’; hiked price target to Rs 414 from Rs 351.
  • Gujarat State Petronet: Maintained ‘Underweight’; cut price target to Rs 228 from Rs 229.
  • Petronet LNG: Maintained ‘Overweight’; hiked price target to Rs 341 from Rs 286.
  • GAIL: Maintained ‘Overweight’; cut price target to Rs 188 from Rs 237.