Bajaj Finserv, Maruti Suzuki to ICICI Bank: Check call on these five shares

YES Securities gave a BUY call on ICICI Bank. The brokerage said sturdy loan growth, net interest margin (NIM) and asset quality are the positives for the bank.

HDFC Securities upgrade its rating on Karur Vysya Bank share to BUY. Image source: Reuters

In recent months, equity indices have witnessed constant fluctuation. After crossing the 40,000 mark in June, BSE Sensex returned to 37,500. Though many traders cash in such ups and downs in the market, small investors often fail to gain due to lack of information. Brokerages release their ratings on shares and sectoral outlooks that may give them some idea about the market trends. Here are the brokerages' reports on these five stocks:

Karur Vysya Bank (BUY):
HDFC Securities upgrade its rating on Karur Vysya Bank share to BUY. The brokerage said that slippages moderated quarter-on-quarter (QoQ) (Rs 4.7 billion vs Rs 6.2 billion QoQ), nevertheless they remained at elevated level, driven by higher commercial (Rs 3.1 billion) slippages.
"With most of the bad news priced in (and no more of it expected), we UPGRADE TO BUY (TP of Rs 87, 1.4x Jun-21E ABV of Rs 62)," the brokerage said.

Bajaj Finserv (REDUCE):
Bajaj Finserv (BEL) reported a mixed Q1FY20 with a steady momentum in the financing business (BFL) even as lower profitability in Bajaj Allianz General Insurance (BAGIC) and Bajaj Allianz Life Insurance (BALIC) impacted overall performance. BFL, notwithstanding challenges, posted strong numbers—asset under management (AUM, consolidated) jumped 38 percent year-on-year (YoY) and profit after tax (PAT) 40 percent YoY. BAGIC reported a soft quarter— a spike in the combined ratio to 103 percent and investment impairment eroded profitability. Though BALIC’s core operating metrics strengthened (growth, persistency), investment impairment impacted profitability, brokerage Edelweiss said.

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"We like BFL’s robust business franchise and track record, but stock valuation at >6x FY21E P/BV is steep, particularly in light of likely moderation in consumer demand, systemic liquidity tightness and risk aversion among NBFCs. Besides, life insurance’s intrinsic value should be ascribed at a discount to peers given its RoEV of 10%. Factoring these, we maintain ‘REDUCE’ with target price of Rs 6,445."

Maruti Suzuki (SELL):
Maruti Suzuki's Q1 FY20 performance was tad better than forecast in terms of revenues and earnings before interest, taxes, depreciation, and amortisation (EBIDTA) margin (10.4% vs forecast of 10%).

"The company's Management is cautious with regards to the demand environment and hopes are pinned on government for measures to revive industry. FY21E P/E of 23.8x is significantly higher than past 15-year average of 18.5x 1-year forward earnings, especially in the light of never-seen before slowdown in the industry," brokerage YES Securities report said.

ICICI Bank (BUY, upside 29%)
YES Securities gave a BUY call on ICICI Bank. The brokerage said sturdy loan growth, net interest margin (NIM) and asset quality are the positives for the bank. Management commentary remains upbeat; bank targets 15 percent return on equity (RoE) in Q1 FY21. it said. "Earnings to catapult; stand-alone bank valuation at 1.6x FY21 P/ABV," the brokerage said.

"The only missing link is fee income growth of 10% YoY. We maintain that the change in strategy – granularity, de-risking, people involvement – will keep earnings quality steady, which would be progressively valued as markets recognise their sustainability. We maintain a high-conviction ‘BUY’ with an SoTP-based target price of Rs 585," Edelweiss said.

TeamLease Services (HOLD):
TeamLease Services (TeamLease) reported strong Q1FY20 sales growth of 23 percent year-on-year (YoY), but a one-off provision in the non-core business segment dented profit (PAT down 14% YoY). Edelweiss had downgraded TeamLease in May in the wake of rich valuations, which left no room or tolerance for any slip-ups. This is exactly what has played out in Q1FY20 with the dip in earnings. Core business growth remains strong and Q1FY20 saw healthy headcount addition.
The brokerage said, "Though we remain confident of growth over coming quarters, we retain ‘HOLD’ reiterating that valuation of TeamLease was still too rich for a stance reversal. Factoring in the earnings miss, we are cutting TP to INR3,200 (from INR3,425), which implies limited upside potential."

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