Which stocks buy or sell in January 2019
STOCK UPDATE
ICICI Bank
Structural and environmental changes improve outlook
- ICICI Bank’s liability franchise has improved significantly, along with its asset profile.
- We believe with peaking of NPA cycle, corporate-facing banks such as ICICI Bank are likely to benefit with improvement in the overall asset quality and profitablity.
- We maintain our Buy rating with a revised price target of Rs. 410.
VIEWPOINT
Bharat Forge
Earnings growth to moderate; Downgrade to Neutral
- We downgrade our view on Bharat Forge Limited (BFL) to Neutral from Positive as the company is likely to witness demand moderation across user segments. CV demand and non auto demand to moderate.
- We have reduced our FY2019 and FY2020 earnings estimates by 6% and 9%, respectively, to factor in demand moderation.
- Current valuations are fair and offer limited upside as earnings growth is set to moderate. Strong upcycle multiples are no longer justified.
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SECTOR UPDATE
Automobiles
Rough ride continues
- The automobile industry reported sluggish growth for December 2018 due to weak consumer sentiments driven by higher fuel cost, mandatory insurance costs and increased lending rates.
- Agressive inventory correction resorted by OEM's to clear year-end stocks also impacted wholesale dispatches.
- The PV segment reported meager 2% growth while CV segment sales declined ~9% on the back of a worsening MHCV sales and a moderation in LCV demand.
- 2W segment growth moderated to 6%.
- Peferred picks - M&M, Maruti Suzuki, Escorts and TVS Motors.
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