6 stocks that saw target price downgrade post Q2 results

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Updated: October 29, 2015 5:08:43 PM

Brokerage houses have been continuously reviewing Q2 earnings of India Inc and revising target prices accordingly.

Stocks that see target price cutBrokerage houses have been continuously reviewing Q2 earnings of India Inc and revising target prices accordingly. (Reuters)

Most of the companies till now have announced their results for the quarter ended September 30, 2015. Companies like Reliance Industries, Sun TV, Infosys, Dish TV and Wipro beat market estimates while Q2 results of companies like Just Dial, Hindustan Unilever and Asian Paints remained below expectations.

Brokerage houses have been continuously reviewing Q2 earnings of India Inc and revising target prices accordingly.

Below are five stocks that have witnessed cut in their target price post Q2 numbers by the analysts.

Dabur India
FMCG major Dabur posted 18.7 per cent rise in consolidated net profit to Rs 341.1 crore for the second quarter ended September 30, on account of robust growth in key consumer categories like toothpastes,hair oils and home care.The company had posted net profit of Rs 287.5 crore during the same period of the previous fiscal, 2014-15. Net sales of the company rose to Rs 2,092.1 crore for the second quarter, 2015-16, up 8.7 per cent, as compared to Rs 1,924.1 crore in the year-ago period, Dabur Ltd said in a statement. Religare in a research note said, “We pare our FY16, FY17 and FY18 earnings estimates by around 1.9 per cent, 2.9 per cent and 3.9 per cent, respectively, to build in the slower-than-expected recovery in consumer demand. We accordingly revise down our September 2016 target price to Rs 310 (from Rs 325 earlier) and maintain ‘Buy’ on the stock.” On October 28, the share price of Dabur India was at Rs 271.50.

Thermax
Thermax reported 24.6 per cent drop in standalone net profit at Rs 64.83 crore for the quarter ended September 30, 2015. The company’s net profit in the year-ago period was Rs 86.01 crore. Total income of the company during the period decreased to Rs 1,069.62 crore from Rs 1,180.31 crore in the year-ago period. “As on September 30, Thermax has an order backlog of Rs 4,006 crore against Rs 5,016 crore in September, 2014,” the company had said in a statement. Thermax Ltd, a leading energy and environment solutions provider, has manufacturing facilities in India, China and Europe.

Sharekhan in a research note said, “The management commentary regarding order inflow visibility is not encouraging during the post-result conference call. As reflected in the Q2 result, based on a slower-than-expected order inflow outlook and weak revenue traction, we are revising down our revenue as well as earnings estimates by 12-14 per cent for FY2016 and FY2017. However, improvement in bottom-line performance of subsidiaries was a positive surprise, which is expected to be sustained in future. In line with the revision in earnings estimates, we have cut our price target to Rs 955 and retained ‘Hold’ rating on the stock due to its rich valuation and flattish earnings outlook.”

UPL
UPL posted a revenue of Rs 2,801 crore, a growth of 5 per cent YoY. However, the negative effect of currency limits the growth for the quarter. Growth in revenue was largely driven by a healthy volume growth of 13 per cent and price increase of 2 per cent, however the effect of the positive price and volume was largely negated by unfavourable currency (-11% YoY). The reported net profit improved by 12 per cent YoY to Rs 185 crore which included extraordinary expenses of Rs 44 crore (Rs 5 crore for restructuring of Latin American and European businesses and Rs 36 crore forex loss in other income), adjusting to that PAT stood at Rs 229 crore, a growth of 3 per cent YoY (high tax rate YoY). The revenue from domestic and Latin American markets grew by 5 per cent and 8 per cent respectively, however revenue from Europe declined by 10 per cent YoY. The company was able to marginally improve its OPM on account of change in product mix and better cost management.

Sharekhan said, “We have tweaked our earnings estimates for FY2016 and FY2017 in view of high volatility in currency especially in Latin America and ROW markets. Considering the above, we have revised downwards the revenues from Latin America and ROW. Hence, we have revised our price target downwards to Rs 550. However, we continue to prefer UPL in the agro-chemical space on account of a recent decline in price, wide presence geographically and continuous introduction of new products across different geographies. We continue to maintain our ‘Buy’ rating on the stock.”

JSW Steel
For the second quarter ended September 30, 2015, JSW posted net profit of Rs 116.95 crore, down 84.38 per cent, against Rs 748.76 crore in the corresponding quarter a year ago. Religare in a research note said, “JSW’s Q2 results outperformed expectations, with a net profit of Rs 110 crore as against losses estimated for the quarter. Our preference for JSW stemmed from its lower raw material prices sources particularly iron ore, which we now believe have limited legs to go beyond Q4FY16. On assuming Rs 6,700 as EBITDA/t for full-year FY17, our September 2016 target price works out to Rs 975 (Rs 1,050 earlier). Downgrade to ‘HOLD’ (from BUY).” On October 28, JSW Steel share was at Rs 911.75.

Somany Ceramics
Net profit of Somany Ceramics jumped 1.43 per cent year-on-year at Rs 10.65 crore for the quarter ended September 30, 2015. The company posted net profit of Rs 10.50 crore in the corresponding quarter a year ago. Gross sales jumped 7.85 per cent YoY at Rs 419.48 crore. Management of Somany Ceramics expects growth to pick up in the second half of 2015-16 and has guided for FY16 revenue growth of around 15-16 per cent (as against 18-19 per cent earlier) amid improving demand from government projects, corporates and exports. Religare cuts FY16/FY17/FY18 revenue/PAT estimates by around 2 per cent for Somany Ceramics on account of the revised guidance but maintained positive outlook on the stock. The brokerage house revised its September 2016 target price to Rs 455 from Rs 465 earlier. On October 28, Somany Ceramics share was at Rs 336.

Federal Bank
According to Prabhudas Lilladher, Federal Bank reported weak Q2FY16 as lumpy slippages in corporate and SME segments resulted in 15 per cent/39 per cent rise in GNPL/NNPLs. NII growth remains suppressed affected by sluggish loan growth, while fee income remains tepid. The bank sold loans worth Rs 360m to ARC during Q2FY16 and another Rs 140 crore during the current quarter and guided for potential stressed assets of Rs100‐150 crore. Management guided for better asset quality trends in H2FY16 and aims to bring down net NPL ratio to less than 1 per cent (1.33% currently). The brokerage house cuts its estimates to factor in higher opex & provisions and lower Federal Bank target price to Rs 72 (from Rs 80) and retain our ‘BUY’ rating. On October 28, the share price of Federal Bank was at Rs 56.30.

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