A host of brokerages have come out with updates on stocks such as Canara Bank, Gland Pharma, Karur Vysya Bank and Route Mobile post their December quarter results. Most of these stocks, except Gland Pharma, have received ‘buy’ ratings from analysts. In the case of Tata Consumer Products limited, Motilal Oswal said the company is on a portfolio expansion spree in its F&B segment with product launches into newer and innovative categories. That, it said, should drive growth for the Tata Group company going ahead.
Canara Bank | Emkay Global | Buy | Target Rs 385
Emkay said Canara Bank reported a strobe beat on profit at Rs 2,880 crore, up 92 percent YoY against its estimate of Rs 2,020 crore, mainly backed by continued uptick in margins and lower opex. The bank has moved to the new tax regime and, thus, the effective tax rate has been lower, at 25 percent, supporting profitability, it said.
Credit growth was decent at 18 percent, largely driven by robust traction in the corporate book. Unlike PVBs, deposit growth was better than the industry run rate at 12 percent, Emkay said.
NIM shot up 19bps to 3.1 percent due to continued asset re-pricing and higher yield on balances with the RBI, it said.
Fresh slippages moderated that, coupled with higher recoveries/write-offs, led sequential reduction in gross NPA ratio to 5.9 per cent.
The bank has several resolutions lined up (SREI, Religare Finvest, ADAG Group) which are largely written-off and should boost its ‘other income’. We raise our earnings estimates by 18-28 percent over FY23-25, factoring in better margins, higher recovery from written-off accounts and lower tax rate,” Emkay said.
Gland Pharma | Kotak Institutional Equities | Reduce | Target Rs 1,375
Kotak Institutional Equities said December was another subdued quarter for Gland Pharma. While the supply situation is gradually resolving, the demand environment is challenging with increased competitive intensity in the US being a key concern, it said.
Owing to continued challenges on multiple fronts, Kotak expects Gland’s growth and margins to reset downwards to a new normal. The brokerage has maintained a ‘reduce’ rating on the stock, with a lower fair value of Rs 1,375 from Rs 1,660 earlier.
While competition for Gland’s key products has escalated over the past few quarters, traction in new launches has been muted. Lower transfer pricing in Micafungin and shift in delivery format in Vancomycin also has had an impact, Kotak said. Gland with its spotless record could potentially benefit from regulatory issues faced by other injectable manufacturers but Kotak believes any such upside is factored in its 5 per cent US sales CAGR estimate for FY2023-25E.
Tata Consumer | Motilal Oswal | Buy | Target price Rs 940
Motilal Oswal said Tata Consumer is on portfolio expansion spree in its F&B segment with product launches into newer and innovative categories such as RTD, Jelly and Glucose through NourishCo. These are expected to be strong drivers of growth for the company, it said.
Tata Consumer’s strategy aims at transforming by strengthening and accelerating its core business, exploring new opportunities, unlocking synergies, digitization of the supply chain, expansion of its product portfolio and innovation and enhancing its focus on premiumisation and health and wellness products. The company is also looking at expanding its sales and distribution infrastructure, supply chain, and capacity building towards being a multi-category FMCG player.
Motiilal Oswal expects a sales CAGR of 9 per cent, Ebitda CAGR of 14 per cent and PAT CAGR of 23 per cent, respectively, over FY22-25.
Route Mobile | Nuvama Institutional Equities | Buy | Target Rs 1,590
Nuvama Institutional Equities said Route Mobile posted stellar results with better-than-expected revenue and profitability. With sustained growth momentum on the back of diversified product portfolio and geographical mix, Route is on track to clock 70 percent revenue growth for FY23, it said.
Route’s business remains solid – revenue growth, going ahead, will be rooted in LATAM, Middle East and Africa. Cash flows have been constrained owing to strategic business initiatives for a couple of firewall deals and will likely normalize Q1FY24 onwards, Nuvama said.
Net-net, Nuvama said Route’s overall performance has been impressive, given the backdrop of cautious spending from enterprises amid macro headwinds. Route continues to gain market share and benefit from its global presence.
Karur Vysya Bank | Emkay Global | Buy | Target Rs 155
Emkay said despite higher provisions Karur Vysya Bank reported a 13 percent beat on PAT, mainly due to continued margin expansion, recovery from written-off accounts and lower effective tax rate (due to higher write-offs). As promised, the bank brought down net NPA below 1 percent and expects incremental LLP to be lower, Emkay said. Karur Vysya Bank has guided for exit RoA of 1.35 per cent in Q4 against 1.3 per cent in Q3.
“Overall gross credit growth was healthy at 16 per cent while net credit growth at 16 per cent YoY was due to higher w-offs. However, higher asset re-pricing of the MCLR portfolio led to 25bps QoQ improvement in NIMs at 4.3 per cent . The bank has started the pilot run for its MFI business via BC tie-up, sensing a high-margin business opportunity and a granularized portfolio,” Emkay said.
The board has extended MD & CEO Ramesh Babu’s term for another three years, subject to approval by the RBI. Emkay said this is comforting, given his contribution in the current transformational journey of the bank.
“Karur Vysya Bank remains one of our top picks in the small banking space, given expected improvement in its RoA/RoE to a decade high of 1.4 per cent/16 per cent, healthy capital ratios and emerging Management credibility.
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