Q3 results, Budget expectations driving forces for rising stocks: Motilal Oswal

Continuing with the rally, the equity market stayed bullish today after ending last week on new highs, marking its seventh consecutive week of gains.
 
Brokerage firm Motilal Oswal says quarterly results and expectations from the upcoming Budget would be key driving factors and investors can expect stock specific action to continue for the week.
 
Motilal Oswal has buy calls for these stocks: 
 
HDFC Bank 

(CMP1951, TP2350, Recom BUY, 20% upside)

• 32% YoY growth in core pre-provision operating profit (PPoP), 20% YoY growth in net profit

• Loans grew 27% YoY (4% QoQ) to Rs 6.3 trillion, retail loans 4.6% and 30% on QoQ and YoY, respectively. 

• Opex growth was controlled at 18% YoY (+3% QoQ), 106 bp QoQ decline in the C/I ratio to 40.4%•CASA ratio improved by 110bp QoQ to 44%, Stable margins at 4.3%

• GNPL/NNPL increased by 7% QoQ each, Provisions at Rs 13.5 billion, stable coverage ratio of 66%

• We arrive at a TP of INR2350 at 4.1 Mar-20E ABV
 
Kotak Mahindra Bank 
 
(CMP1060, TP1220, Recom BUY, 15% upside)

• PAT grew 20% YoY to Rs10.53b, Operating profit grew 19% YoY

• Margin contracted another 13 bps QoQ to 4.2%, CASA ratio declined 110 bps QoQ to 46.7%

• Absolute GNPA declined 2.6% QoQ, GNPL ratio improved by 16bp QoQ to 2.31%, PCR (cal.) improved by 419 bps QoQ to 53.9%

• Loans grew 23% YoY (+4% QoQ), deposits increased 21% YoY (+9% QoQ)

• Subsidiaries performance remains robust (KMPL, K-Sec, Kotak Mahindra Capital, Life Insurance and Asset Management )•We value KMB at INR1220 at 3.8x Mar-20E ABV
 
PC Jeweller 

(CMP586, TP685, Recom BUY, 17% upside)

• Sales grew strongly by 25.5% YoY to Rs26.4 billion, adjusted PAT grew 52.1% YoY to Rs 1.6 billion

• EBITDA increased by 52.2% YoY to Rs2.7 billion, EBITDA margin expanded 180 bps YoY to 10.2%

• We value PCJ at 29x Dec’19E EPS with a TP Rs 685
 
Zensar Technologies 

(CMP910, TP1100, Recom BUY, 21% upside)

• 3.4% QoQ revenue growth led by 9% QoQ growth in Digital, which now constitutes 39% of total revenue

• Gross/EBITDA margin expansion of 130/170bp

• PAT of Rs 574 million (-5.7% QoQ) bettered our estimate of Rs 549 million (-9.7% QoQ)

• We expect 12% revenue CAGR and cumulative margin expansion of 240bp over FY18-20E

• We value it at TP of Rs1100, discounting forward EPS by 14x
 
Bharti Airtel 

(CMP498, TP680, Recom BUY, 37% upside)

• Consolidated revenue fell 7% QoQ to Rs203.2b, EBITDA fell 6% QoQ to Rs 74.7b, PAT declined 11% QoQ to INR3.1 billion

• India wireless revenue/EBITDA fell 12%/17% QoQ

• Africa revenue declined 1% QoQ, but EBITDA jumped by a steady 10% due to a 7% drop in opex

• Capex guidance for FY18 was increased by Rs10-15 billion (earlier: INR250b); FY19 capex guidance stands at INR250b

• We estimate consol. EBITDA CAGR of 12% over FY18-20E to Rs 384 billion

• We value it at TP of Rs 680 (India business at 11x EV/EBITDA on Dec’19E, while Africa is valued at 7x EV/EBITDA)
 
Reliance Industries 
 

(CMP929, TP1069, Recom BUY, 15% upside)

• EBITDA increased 30% YoY (+6% QoQ) to Rs 137 billion, PAT rose 5% YoY (+2% QoQ) to INR84.5 billion

• Refining EBIT stood at Rs60.8 billion (-1% YoY, -7% QoQ)

• Petchem EBIT grew 68% YoY (+15% QoQ) to Rs 56.6 billion

• RJio exhibited PAT of Rs 5 billion, s/a revenue growth of 12% to Rs 68.8 billion, EBITDA growth of 82% to Rs 26.3 billion

• We value RIL at Rs 1,069 (On FY19E basis, the stock trades at 13.8x consolidated EPS of Rs 67.5 and EV/EBITDA of 9.4x