Analyst Calls: Hero MotoCorp, Ambuja Cement, IndusInd Bank, Sun TV

Good morning!

The domestic stock market on Monday showed early signs of a possible breakout from its consolidation range. And Nifty futures on Singapore traded 79.50 points lower this morning, signalling a weak start for Dalal Street.

As you head for the day’s trade, here is a compilation of overnight analyst calls on various stocks.

• BOB Capital Markets has maintained its reduce rating on Hero MotoCorp with a target price of Rs 2,360 as against the current market price of Rs 2,240 citing high competitive intensity and a potential demand hit from BS-VI transition. While the firm likes HMCL’s renewed efforts to expand beyond its core commuter segment and build an emerging mobility vertical, benefits if any will accrue after a long gestation period, said the brokerage. The company plans to invest Rs 10,000 crore over 5-7 years towards new products, network premiumisation and mobility solutions. Given potentially weaker free cash flow on elevated investments, the brokerage has cut its target PE multiple to 13 from 14.

• Reliance Securities has maintained its buy recommendation on Ambuja Cement with a target price of Rs 250 as against the current market price of Rs 206. Looking ahead, likely commissioning of new capacities will be the key catalysts for the stock, said the brokerage. At current price, the stock trades at 11.2 times and 10 times operting profit before tax (EBITDA) of 2020 and 2021, respectively. Higher-than-expected sales volume and steep sequential reduction in operating cost aided a sharp 47 per cent year-on-year surge in EBITDA to Rs 450 crore as against the estimate of Rs 400 crore. A meaningful 5.3 per cent QoQ reduction in operating cost/tonne essentially led by lower fuel prices and improved operating efficiency was volume heartening, according to Reliance Securities.


• IndiaNivesh has maintained its buy rating on IndusInd Bank with a target price of Rs 1,500 as against the current market price of Rs 1,182. The target price takes into account likely additional stress from vulnerable segments although the brokerge has not plugged the same into our estimates yet. At two times FY21 estimated book value and 11.1 time FY21 estimated EPS, IndiaNivesh believes that IndusInd Bank’s risk-reward is attractive. With core return on assets remaining robust, the brokerage expects IndusInd Bank to be able to absorb asset quality shocks.

• Elara Capital has maintained its reduce rating on Sun TV Network with a target price of Rs 510 as against the current market price of Rs 491. Sun TV continues to underperform on lower ad growth, which has declined 6 per cent year-on-year in the nine months ended December 2019. The brokerage expect sthis underperformance to prevail in the near term as Sun TV’s other channels in the Tamil and Telugu genre have failed to report any sharp gains in viewership share. The stock has underperformed in the past year with 20 per cent decline in absolute terms from current levels. The valuations are at 13.9 times FY21 estimated PE.