As Q3 earnings season ends, four diverse stock picks that can give up to 24% returns

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Published: February 21, 2020 1:00:55 PM

The December quarter earnings season saw mixed reactions from the street. So, where should you invest now? Here are some suggestions.

With the earning season more or less over, the question that comes to mind is where should you invest going forward.

The December quarter earnings season saw mixed reactions from the street. Banking sector showed signs of revival as asset quality improved and recoveries from non-performing assets helped banks. While the auto sector fell short of estimates as sales failed to pick up after a jump initially that was aided by the festive season. For the Nifty-50 index net profit grew at 1.8 per on-year basis, helped by expanding EBITDA margins due to cut in the corporate tax rate that was announced by the Finance Minister last year. With the earning season more or less over, the question that comes to mind is where should you invest going forward. So, here are four stocks that ICICI Direct recommends post the third quarter earnings.

Apollo Hospitals: After posting strong revenue growth of 16.6 per cent in the quarter ended December 31, Apollo Hospitals has made a strong case for itself. The pharmacy business of the company grew 21.8 per cent year-on-year and the hospital business saw a 12.1 per cent growth. EBITDA grew 40.6 per cent on-year basis at Rs 376.7 crore. Net profit of Apollo Hospitals grew 9 per cent to Rs 94.8 crore. “The company owns one of the best integrated business models in the healthcare space with a strong management pedigree. We value the stock on an SOTP basis by valuing the healthcare business (existing hospitals & JV) at 13 times  FY22E EV/EBITDA, healthcare business (new hospitals, JVs) and pharmacy business at 2 times FY22E EV/sales,” said analysts at ICICI Direct in a research note. With a ‘buy’ rating the target price for Apollo Hospitals has been set at Rs 2,060, or 16 per cent upside from the CMP. The scrip ended the trading week at Rs 1,780.

Bharti Airtel: Even after posting a loss of Rs 1,080 crore in the third quarter, Bharti Airtel remains on the list of recommendations. What works towards the benefit of the company is a ballooning of its 4G subscriber to the tune of 21 million. Bharti Airtel India revenue jumped 7 per cent on-year basis. ICICI Direct said, “Airtel continues to report a relatively stronger retention of its revenue market share with stable KPI across, and also enjoys a comfortable leverage vis-àvis peers. Notwithstanding AGR issue, Airtel’s survival is assured post fundraising and tariff hike. With resilient performance amid challenging times, it is one of the better placed telecom players.” The share price of Bharti Airtel at closing on Thursday stood at Rs 544, the target price has been set at Rs 630 or 16 per cent upside.

Brigade Enterprises Limited: The company posted a marginal rise in net profit to Rs 49.33 crore in the quarter. Brigade Enterprises Limited exhibited robust operating performance in Q3FY20, according to analysts at ICICI Direct. On the leasing business front, Brigade Enterprises leased 0.87 million square foot area. “Overall, we anticipate BEL’s share of lease income to grow at 20.6% CAGR to | 560.1 crore in FY18-23E. On the residential business front, sales volume grew 39.4% YoY (8.2% QoQ growth) to 1.08 msf in Q3FY20,” ICICI Direct noted. The target price for Brigade Enterprises Limited is at Rs 275 an upside of 21 per cent from where it stands right now.

Hero Motocorp: EBITDA margins came in at 14.8 per cent for Hero Motocorp. The company reported at profit after tax of Rs 880 crore, largely supported by the cut the corporate tax rate. ICICI Direct said that Hero Motocorp, in a recent analysts event showcased capability to move up the value chain with premium category products which gives analysts confidence that the company will maintain its market leadership position. Hero Motorcorp ended the trading week at Rs 2,240, the target price has been kept at Rs 2,800 an upside of 24 per cent.

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