Earnings, elections and RBI meet outcome to decide market direction

The market will get more clarity once earnings, state elections and RBI meet events are behind us, said Siddharth Sedani of Anand Rathi Stocks and Brokers.

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We expect the market to remain volatile in this results season and until upcoming state elections and the Reserve Bank of India (RBI) meeting in December first week. There will be more clarity on the movement of the market once these events are behind us.

The tight liquidity problems in the NBFC sector after IL&FS default has led to risk-off in the sector.

Liquidity problems can lead to slower consumer spending and investment which needs to be addressed soon.
Next week the auto sales figures will be released for the month of October which will be an important factor to watch out for.

HCL Technologies | Target: Rs 1,182

Strong positioning in high-growth Engineering Services business and a strong outlook for digital products and platforms businesses will help in delivering revenue growth going forward.

On the profitability front, we expect the company to report operating margins of around 22.9 percent in FY19 and 23.2 percent in FY20.

Sterlite Technologies | Rating: Buy | Target: Rs 400

The company has reported a growth of 39 percent in revenues at Rs 1,084 crore in Q2FY19 as against Rs 779 crore in Q2FY18.

The unexecuted order book stood at Rs 9,455 crore. This includes the Rs 3,500 crore multi-year system integration contract to design, build and manage the Indian Navy’s digital network.

Company’s Italian acquisitionMetallurgica designs and manufactures special precision optical fiber cables and specialized copper cables for various communication applications.

The company has reported a revenue growth of 22.5 percent YoY for Q1FY19 at Rs 876 crore against Rs 716 crore in teh same period, last year.

The PAT for the company stood at Rs 142 crore during the latest quarter as against Rs 55 crore in Q1FY18.

Sterlite Tech continues to witness strong order inflow owing to better industry prospects. Its unexecuted order book now stands at Rs 6,033 crore.

The order book excludes Rs 3500 crore for Indian Navy out of which 75 percent is system integration–executable over two years from the date of commencement, and balance 25 percent O&M contract executable over the next seven years.

On guidance front, the management continues to maintain $100 million profit guidance for FY20 and expects the current growth momentum to continue as there is a huge expansion in demands in next few years owing to the global rollout of 5G network and increase in data related capex.

On the capex front, the company plans to incur Rs 1,000 crore over the next two years to augment its capacity and efficiency.

We remain positive on the company and maintain our ‘Buy’ rating on the stock with a target price of Rs 400 per share.

Mahindra & Mahindra Financial Services | Rating: Buy | Target: Rs 609

The total income increased by 39 percent at Rs 2,148 crore during the quarter ended September 30, 2018, as against Rs 1,540 crore in the corresponding period last year.

The Profit After Tax (PAT) stood at Rs 381 crore during the quarter as against Rs 164 crore during the corresponding period last year, registering a growth of 132 percent.

During the period ended September 30, 2018, the company’s customer base has crossed 5.6 million. The total value of assets financed for the half year ended September 30, 2018, was Rs 21,194 crore as against Rs 15,206 crore during the same period last year, registering a growth of 39 percent.

The total Assets Under Management (AUM) stood at Rs 59,473 crore as on September 30, 2018, as against Rs 47,213 crore a year before growing 26 percent.

The gross stage 3 levels have gone down to 9 percent for the period ended September 30, 2018, from 13.1 percent during the corresponding period last year. The net stage 3 levels have gone down to 6 percent for the period ended September 30, 2018, from 8.8 percent during the corresponding period last year. The stage 3 provisioning coverage ratio stands at 34.9 percent.

Going ahead, we believe the company to continue to grow its footprint across the country which should enable it to grow at higher rates and maintain its market share in the vehicle segment.

With Indian economy witnessing improvement in its macros especially the rural and semi-urban areas given higher government impetus we believe MMFS is well established in the hinterland to reap positive benefits in a medium term.

We have a ‘Buy ‘rating on the company with a target price of Rs 609 per share.

Disclaimer:-The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.

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