Stay with largecaps in the short term: HDFC Securities

Nifty has been trading in the narrow range of 11,564-11,787 on closing basis for last one month. The Nifty has been taking support around 11,550 and the same should be kept as a stop loss in long positions.

Any close above 11800 would result in a breakout from the consolidation and in that case, we can expect Nifty to rally towards 12,000 and 12,430.

The Nifty has recently violated 20-day EMA support of 11,637. And, now a close below 11,550, which has been the lower level of the recent consolidation in Nifty, would be considered bearish trend reversal for the short-term.

Nifty is placed above medium to long-term moving averages of 20, 50, 100 and 200 days. The gap between 50-DMA and 200-DMA has been widening gradually, which indicates that bullish momentum is intact for medium to long term.

Oscillators are showing weakness in the trend but unless price support is broken, short term trend would be considered bullish in Nifty. To conclude, Nifty is holding positional up trend but fallen into the short term consolidation.

A close above 11,800 would result in a breakout and dive below 11,550 would result in a bearish trend reversal. The Midcap and Smallcap stocks are going weak and therefore it would be advisable to stick to the largecaps with strict stop losses, as far as short-term trading in concerned.

Here are three stocks that could give 7-11 percent return in the next month:

UltraTech Cement: Buy| LTP: Rs 4519| Target Rs 5,000| Stop loss: Rs 4,200| Return: 11 percent

Recently, the stock registered a new all-time high above Rs 4,600. It formed a bullish golden crossover on the charts that indicates a long-term trend reversal.

The stock has broken out from the long consolidation which was held on for the last nine quarters. The company has also posted nice quarterly results.

Considering the technical evidence discussed above, we recommend buying the stock at CMP and average it around Rs 4,400, for the target of Rs 5,000, and keep a stop loss at Rs 4,200 on a closing basis.

ITC: Buy| LTP: Rs 307| Target: Rs 330| Stop loss: Rs 295| Return: 7.5 percent

The stock witnessed a bullish golden crossover on the charts, where 50-DMA surpassed 200-DMA on the upside, indicating a long-term bullish trend reversal.

From the FMCG space, ITC looks the strongest stock for the short-term. The stock price has surpassed the crucial resistance level of Rs 300 after a long time.

Considering the technical evidence discussed above, we recommend buying the stock at CMP and average it at 300, for the target of Rs 330, and keep a closing stop loss at Rs 295.

ONGC: Buy| LTP: Rs 170| Target: Rs 185| Stop loss: Rs 160| Return: 9 percent

The stock price has broken out from the consolidation range of Rs 155-160. It has been sustaining above its 200-DMA. The short-term moving averages have been trading above long term moving averages.

Indicators and oscillators have been showing strength on the daily and weekly charts. Long term trend line breakout is seen on the weekly charts.

Considering the technical evidence discussed above, we recommend buying the stock between CMP and Rs 165 for the target of Rs 185 and keep a stop loss at Rs 160 on a closing basis.

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Texmo Pipes gains 5% on preferential share allotment

Shares of Texmo Pipes and Products rose more than 5 percent intraday on March 28 after the board allotted equity shares worth Rs 3.01 crore on preferential basis to promoter group Shree Padmavati Irrigations LLP.

The company in its BSE release said it has allotted 13 lakh equity shares at a price of Rs 23.20 per share to Shree Padmavati Irrigations.

The share touched its 52-week high of Rs 40.70 and 52-week low of Rs 14.20 on 10 September 2018 and 17 July 2018, respectively.

At 0940 hrs, Texmo Pipes and Products was quoting Rs 20.60, up 5.91 percent on the BSE.

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Source: Moneycontrol

HCL Tech rallies 3% as BofAML upgrades stock, expects 20% upside

HCL Technologies rallied about 3 percent on Thursday morning and was also the top Sensex gainer after global investment firm BofAML upgraded the stock.

BofAML revised its rating on the stock to 'buy' from 'neutral' and hiked its target price from Rs 1,060 to Rs 1,250 which translates into an upside of nearly 20 percent from current levels.

The stock has been on investors’ radar - it has rallied by about 9 percent so far in 2019 and a little over 10 percent in the last three months.

The global investment bank expects the organic revenue growth rate to improve in 2019-20. The stock is poised to gain from the large deal intake and lower portfolio drag.

The global investment bank sees stable margin on accretion from software products in the next financial year. The 2019-20 revenue guidance implies an uptick in organic growth rate.

In the December quarter results, HCL Tech has maintained its full-year constant currency revenue growth guidance at 9.5-11.5 percent and EBIT margin expansion forecast at 19.5-20.5 percent.

The country's fourth largest IT company reported 2.8 percent sequential growth in December quarter net profit to Rs 2,611 crore, beating analysts' estimates.

Revenue in rupee terms increased 5.6 percent quarter-on-quarter to Rs 15,699 crore in the quarter ended December 2018, the company said.

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Source: Moneycontrol

Bank of Baroda raises lending rates by up to 0.2%

Ahead of the monetary policy review, state-owned Bank of Baroda (BoB) Tuesday increased its lending rates by up to 0.2 per cent, a move that will make home, auto and other loans expensive.

The bank has revised the marginal cost of funds-based lending rate (MCLR) with effect from Thursday, BoB said in a statement.

The MCLR for a three-month tenor increased to 8.50 per cent from the existing 8.30 per cent and for six-month maturity, it will go up to 8.70 per cent from the current 8.50 per cent.

Interest rate on one-year tenure will go up by 0.1 per cent to 8.75 per cent.

Most of the retail loans are benchmarked against one-year MCLR.

The RBI is schedule to unveil its sixth bi-monthly monetary policy on Thursday.

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Source: Moneycontrol

Titan stock jumps 5% as brokerages hike target price on strong Q3 earnings

Titan Company shares gained 5 percent to hit a 52-week high of Rs 1,044.30 on Monday morning as brokerage houses raised price target on the stock after the company reported strong earnings for December quarter.

The stock was quoting at Rs 1,031.90, up Rs 40.60 or 4.10 percent, amid high volumes on the BSE at 10:12 hours IST.

Global brokerage house Credit Suisse upgraded rating on the watches-to-jewellery maker to outperform from neutral and raised price target to Rs 1,175 from Rs 935 apiece after increase in its earnings estimates by 3-10 percent.

Higher gold prices have been aiding an already strong growth trajectory, said the research house which sees tailwinds from a strong wedding season.

CLSA also retained its outperform call on the stock and raised price target to Rs 1,100 from Rs 1,035 after revising EPS estimates by 2-6 percent as strong Q3 results drove earnings upgrade.

Exceptional performance in jewellery business was highlight of Q3 earnings and watches business faced margin headwinds on phasing out issue in A&P spends, the brokerage house said, adding the management is hopeful of a pick-up in jewellery sales in March.

Titan reported a healthy 43.5 percent on-year growth in third quarter consolidated profit to Rs 413.2 crore driven by revenue growth and strong jewellery business during festive season.

Revenue from operations during the quarter grew 34.6 percent year-on-year to Rs 5,871.5 crore with jewellery business growing 37 percent YoY.

The topline growth was driven by these new introductions, some successful activations as well as measured network expansion, the company said.

The income from watches increased 18.8 percent to Rs 641 crore and the eyewear business too grew a healthy 39.7 percent in Q3 to Rs 129 crore.

At operating level, EBITDA (earnings before interest, tax, depreciation and amortisation) grew 31.4 percent YoY to Rs 584.2 crore in Q3, but margin contracted to 10.3 percent against 10.5 percent YoY.

Adjusted EBITDA stood at Rs 654 crore for the quarter. During the quarter, there was an additional provision of Rs 70 crore made for investments as part of treasury operations in inter corporate deposits in the IL&FS group.

Jefferies has maintained its hold rating on Titan but raised target price to Rs 1,100 from Rs 920 after increase in earnings estimates by 6 percent for FY19-21.

"The company continued to execute strongly & gaining share in jewellery business. 48x FY20e PE fairly captured superior execution & strong brand franchise," the brokerage said.

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Source: Moneycontrol

DHFL falls 13% even as co divests majority stake in Aadhar Housing Finance to Blackstone

Shares of Dewan Housing Finance (DHFL) fell 13 percent in the morning trade, even as the company decided to divest its stake in Aadhar Housing Finance to Blackstone.

The stock touched a 52-week low of Rs 97.00. It touched an intraday high of Rs 111.15 and an intraday low of Rs 97.00.

Private equity major Blackstone agreed to buy nearly 80 percent of affordable homes-focused Aadhar Housing Finance from the financially stretched Wadhawan group for an undisclosed sum.

The group's holding company Wadhawan Global Capital (WGC) will be selling its 70 percent stake in the company, while its listed mortgage lender subsidiary DHFL will also be exiting its investment, which is reported to be around 9 percent, as per a company statement on February 2.

The deal comes days after the group was alleged to have syphoned off over Rs 31,000 crore of public money as reported by news portal Cobrapost, which claimed loans were taken from DHFL and the money taken out of the country by the Wadhawans.

The group has denied all the allegations, even as the DHFL stock plunged since then.

At 09:36 hrs Dewan Housing Finance Corporation was quoting at Rs 106.70, down Rs 4.75, or 4.26 percent.

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Source: Moneycontrol

Strong earnings outlook, attractive valuation make ICICI Bank a must buy

The third-quarter earnings of ICICI Bank strengthens our belief that the bank is well on track on multiple fronts to deliver to targeted returns by June 2020. In fact, we will not be surprised if it revises targeted consolidated RoE (return on equity) of 15 percent upwards in another couple of quarters.

ICICI Bank reported a very healthy performance for Q3 FY19 with core pre-provision operating profit (excluding treasury income ) increasing by 14 percent year on year (YoY). However, rise in provisions led to muted headline number of reported net profit declining by 3 percent YoY.

With bulk of problem assets already recognised till FY18 and in Q1 FY19, the slippages or gross additions to non-performing assets continued to trend downward in Q3. However, our enthusiasm for the bank is not just limited to receding asset quality problems. There is more than a reason that makes us decisively positive on the stock.

The bank has continued to improve its retail franchise – both assets and liabilities. ICICI Bank’s balance sheet it is now comparable to best in class and is the first reason for our optimism with bank’s CASA (low cost current and savings) deposits at 49 percent and retail loans at 59 percent of total loan book.

Bank’s adequate capitalisation is the second reason that makes us affirmative. In an environment where large a large part of the lending system has been crippled because of a shortage of capital (public sector banks) and receding liquidity (NBFCs), ICICI Bank is well poised to leap ahead with more than adequate capital.

Third and the most important reason is expectation of improvement in return ratios. With the receding asset quality issues and provisions thereof, we expect the reported numbers to improve significantly from FY20 as the current year (FY19) remains a year of consolidation due to higher credit costs.

And last but not the least, considering multiple levers that should help drive sustained improvement in RoE, bank’s valuation is extremely attractive.  With the stock currently trading around 1.5 times FY20e book, current valuations seems to be pricing in the most concerns and offers a favourable risk reward.

Key positives

Overall advances growth stood at 12 percent YoY as healthy 14 percent growth in domestic loan book was partially negated by 5 percent de-growth in international loans. A strong focus on retail lending has enabled ICICI Bank to grow its domestic loan book almost in line with the system growth, despite cyclical weakness in the large corporate segment. Retail assets grew by solid 22 percent YoY while corporate loans were almost flat YoY.

The net interest margin (NIM) for the quarter improved to 3.40 percent from 3.33 in previous quarter mainly due to better margins on international book while margins on the domestic book remained almost stable at 3.72 percent.

Fee income growth was healthy at 16 percent driven by retail fees which constituted 73 percent of total fees.

Provision coverage ratio (PCR) improved significantly to 68.4 percent (up 950 bps sequentially). This is much faster -than-expected acceleration in bank’s earlier stated objective to improve PCR to 70 percent by June 2020.

Gross slippages to non-performing assets declined in Q3 to Rs 2,091 crore which was very encouraging. Thanks to contained slippages and higher provisioning, net NPAs declined to 2.58 percent compared to 3.65 percent in Q2.

The bank’s exposure to list 1 and list 2 of corporates undergoing resolution through National Companies Law Tribunal (NCLTL) declined at Rs 3,816 crore and Rs 8,828 crore respectively. PCR on the list 1 and 2 was very healthy at 90 percent and 72 percent respectively as at end December increasing the likelihood of write backs in future.

Additionally, the bank’s disclosed pool of loans to corporate and SME rated BB and below (potential stress) declined to Rs 18,812 crore (equivalent to 3.3 percent of the loan book) which also include the IL&FS exposure.

Key negatives

CASA (low cost current and savings accounts) ratio dipped marginally to 49.3 percent as at end December as growth in CASA deposits lagged growth in term deposits. Still overall performance on liability continues to be impressive.

Current stock price factors in known issues; valuation rerating to continue

In May last year, management articulated its strategy to deliver consolidated RoE of 15 percent while improving NNPA to 1.5 percent and maintaining provision cover above 70 percent by June 2020.

With its 2020 vision in place, investors should expect much lower NPA formation and normalised credit cost in FY20, mid-teen loan growth, steady margin and a fast journey to reach RoE of 15 percent. With a strong capital adequacy (Tier I capital ratio at 15.14 percent), we don’t see many constraints in delivering its targets.

With a potential improvement in return rations, the current valuation of its core book at 1.5 times FY20e P/BV looks compelling. In fact, ICICI bank is trading at significant discount of more than 30 -40 percent relative to its closest corporate lending peer having similar asset quality issues.

The indictment of Chanda Kochhar by internal enquiry committee doesn’t alter bank’s growth plans. Appointment of  Sandeep Bakshi as CEO had lifted the cloud of management related uncertainty. Q3 earnings indicate a clear sky making ICICI Bank an exciting yet relatively safe investment bet for long term.

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Source: Moneycontrol

HDFC shares dip as brokerages remain positive, but cut earnings estimates

Housing Development Finance Corporation (HDFC) shares declined more than 1 percent in the morning on January 30 as brokerages remained positive on the stock but cut earnings estimates after third-quarter earnings

The stock was quoting at Rs 1,899, down Rs 19.80, or 1.03 percent on the BSE at 09:57 hours IST.

While maintaining buy call on the stock with a price target at Rs 2,360 apiece, CLSA said it has maintained stock among its top picks in the financial sector but lowered earnings estimates a bit to factor in a tad weaker topline.

The housing finance major has been gaining retail share but is cautious on corporate loans.

Credit Suisse also slashed its FY19 EPS estimates by 2 percent due to slower loan growth and fee income, though it retained outperform rating with a price target at Rs 2,150.

The research house said Q3 results were largely in line with estimates as HDFC remained better placed and has managed to maintain spreads.

Asset quality continued to see some pressure but individual NPAs are stable, it added.

HDFC's third-quarter profit fell 14 percent sequentially and 63 percent YoY to Rs 2,114 crore due to a high base.

Net interest income growth came in at a robust 26 percent YoY (versus 15 percent AUM growth), driven by (a) stable spreads, (b) higher assignment income in the quarter and (c) lower leverage due to capital raise and warrant conversion.

The company scaled back on the corporate lending business, while the retail lending business was largely unaffected. AUM grew 3 percent QoQ/15 percent YoY, driven by a growth of 18 percent YoY in retail lending and 8 percent YoY (slowest in past three years) in corporate lending.

Its provision for expected credit losses stood at Rs 116 crore for the quarter ended December 2018, narrowing compared to Rs 401.30 crore reported in September quarter and Rs 1,765 crore in the same period last year.

Asset quality slightly weakened in the quarter gone by as gross non-performing assets were higher at 1.22 percent against 1.13 percent at the end of September quarter.

Reported spreads and margins were largely stable at 2.3 percent and 3.2 percent, respectively. Interestingly, the calculated cost of funds remained unchanged on a sequentially at 8.35 percent.

While maintaining buy call on the stock with a target at Rs 2,300, Motilal Oswal said HDFC's retail loan growth is impressive, despite intense competition and a high base. The next few quarters would be even better, given easing competition due to liquidity issues, it added.

Over the past nine months, HDFC has hiked its home loan rate by 60-70bp, resulting in improved profitability versus the past two years.

While corporate loan growth has slowed down, the research house believes it is only cyclical and should revert to normal soon.

Japanese brokerage firm Nomura said overall results were mixed and valuations at 15.5x September 2020 book look reasonable.

The research house maintained buy call on the stock with a target at Rs 2,000 but corporate banks (private banks) are higher in its pecking order.

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Source: Moneycontrol

HCL Technologies Q3: Should you buy, sell, or hold the stock?

Brokerages remain positive on HCL Technologies after the Noida-based company posted strong results for the quarter ended December 31, 2018.

Shares of the company rose 4.7 percent on the BSE in early trade.

HCL Technologies reported a Q3 net income of Rs 2,611 crore, up 19 percent from the same period last year.

Revenue, too, jumped 22.6 percent YoY to Rs 15,699 crore. On a constant currency basis, revenue grew 13 percent from the corresponding quarter last year.

The company said it expects FY19 revenues to grow 9.5-11.5 percent on a constant currency basis.

Here is what brokerages had to say about HCL Technologies results after the third quarter earning results:

Brokerage: CLSA | Rating: Buy | Target: Rs 1,380

CLSA hiked the stock's target price to Rs 1,380 from Rs 1,350. It also raised its estimate for HCL technologies' FY19-21 revenues and EPS by 102 percent.

Brokerage: Nomura | Rating: Buy | Target: Rs 1,170

Along with Cognizant, HCL technologies remains one of the top buys in the IT sector, according to Nomura.

The company requires 1.7 percent growth QoQ to achieve the topline of its guidance.

Brokerage: Credit Suisse | Rating: Outperform | Target: Rs 1,350

Credit Suisse has raised the target price on the stock to Rs 1,350 from Rs 1,275.

Pick-up in revenue growth and improved organic growth should help remove some key concerns, Credit Suisse added. 

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Source: Moneycontrol

DHFL shares tank 8% despite management clarification on Cobrapost allegations

Shares of Dewan Housing Finance that plunged a little over 8 percent on January 29 soon after Cobrapost accused the company of siphoning off Rs 31,000 crore of loans, tanked another 8 percent on January 30 despite management clarification.

Chairman Kapil Wadhawan in a press conference on January 30 countered the charges, claiming all the transactions were legitimate, and all loans are completely secure. He said, Cobrapost made malicious allegations against DHFL, and the motive of the complainant is extortion and cause more damage to the company.

DHFL further clarified in a press release that it received an email at 8.44 am in the morning on Tuesday, with a follow-up reminder one hour later, seeking answers to 64 questions from Cobrapost, many of which were laced with political innuendos.

“We are shocked and surprised to receive this inquiry this morning, although Cobrapost had announced its press conference last Friday, i.e. 25 January 2019, to disclose an alleged financial scam. One would have expected as a responsible media house Cobrapost would have asked these questions during their investigations and not on the day of the press conference,” it said.

The management in the press conference on January 29 said that it has apprised its board and auditors of the allegations and also appointed an external expert to examine the complaint to ensure transparency.

Commenting on the liquidity situation, the management said that the liquidity situation in the last few months has been challenging. But, assured that they would be able to generate another Rs 4,000-5,000 crore of liquidity over the next 4-5 months by selling non-core assets and talks are in advance stage.

DHFL has never delayed or defaulted on repayment to banks, and have repaid liabilities of Rs 18,000 crore including commercial papers (CPs) of Rs 10,000 crore since September, the management clarified during the press conference.

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Source: Moneycontrol

Bank of Baroda jumps 4% as profit jumps to Rs 471.2 crore

Bank of Baroda’s shares rose around 4 percent on Wednesday morning as traders bet on the steady results posted by the company.

It touched an intraday high of Rs 118.20 and an intraday low of Rs 116.00.

Bank of Baroda posted a 321.6 percent year-on-year (YoY) increase in its December quarter net profit at Rs 471.21 crore on strong growth in interest income and improved asset quality.

Net interest income (difference between interest earned and expended) increased to Rs 4,744 crore in Q3. Adjusting for IT refund of Rs 326 crore in December 2017, NII increased by 16.62 percent YoY. The domestic core fee income increased by 16.11 percent YoY to Rs 771 crore.

"With the bank on-boarding corporate customers on the basis of a well-defined target market and retail customers on a score-based approach, the credit quality of recently acquired portfolio has shown distinct improvement as measured by credit score external ratings available with credit rating agencies," Bank of Baroda said in a statement.

Provision for bad loans was at Rs 3,416 crore in Q3, up from Rs 3,155 crore in the year ago period.

Gross non-performing assets (NPA) ratio stood at 11.01 percent for Q3FY19 compared to 11.31 percent a year ago, and 11.78 percent in the September quarter.

Net NPA ratio declined to 4.26 percent in Q3Fy19 compared to 4.97 percent a year ago and 4.86 percent in the September quarter.

At 09:30 hrs Bank Of Baroda was quoting at Rs 116.60, up Rs 2.75, or 2.42 percent, on the BSE.

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Source: Moneycontrol

Chinese bamboo tree approach: Vijay Kedia raises stake in 2 stocks in Q3

'Invest like a bull, sit like a bear and watch like a hawk'

This mantra is very well known among stock market investors.

But D-Street veteran Vijay Kedia, MD, Kedia Securities, famous for his songs on stock market investing, recently highlighted the principle of Chinese Bamboo Tree.

In a tweet earlier this month, Kedia said investing is just like ‘Chinese Bamboo Tree’, it takes time to achieve success, on the sidelines of ‘Ted Talk’ at IIM Amritsar. Patience is key to making it big in stock market. It is more like a ubiquitous Chinese bamboo tree, which takes years to grow, he said.

As per the latest shareholding data, Kedia raised his stake in two companies during December quarter as compared to September quarter 2018.

A quick look at his portfolio reflects the Chinese Bamboo Tree approach - all the stocks that have declared their shareholding pattern for December quarter in which Kedia has a stake are down up to 55 percent.

He tweaked stake only in three companies, which reflects his stand of staying put and giving his investments time to grow and give multi-fold returns.

Of the 10 companies in Kedia's portfolio in which he holds more than 1 percent at the end of the December quarter, he raised stake in two companies — Innovators Facade Systems and Vaibhav Global.

Innovators Facade is a leading façade and fenestration one-stop solution provider. And Vaibhav Global is a multi-national electronic retailer, wholesaler, and manufacturer of fashion jewelry and lifestyle accessories.

Kedia, along with another veteran investor Ashish Kacholia, holds more than 1 percent stake in Vaibhav Global. Vijay Kedia raised his stake from 1.91 at the end of September quarter to 2.09 at the end of December quarter, shareholding data showed.

Kedia reduced stake in Sudarshan Chemical Industries from 3.26 percent recorded in the September quarter to 2.86 percent seen in the December quarter.

Sudarshan is a leading colour & effect pigment manufacturer with experience of over 60 years. The company primarily serves the coatings, plastics, inks and cosmetics markets.

Kedia held his stake constant in 7 out of 10 companies — Lykis, Panasonic Energy, Cera Sanitaryware, Everest Industries, Repro India, Kokuyo Camlin and Apcotex Industries.

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Source: Moneycontrol

HCL Tech to announce Q3 earnings today; here are the key factors to watch out for

Software firm HCL Technologies is expected to report healthy growth in October-December 2018 quarter as revenue in constant currency terms is likely to grow in the range of 2.5-3.9 percent sequentially and the same in dollar term is seen growing around 2.1-3.2 percent for the quarter.

Sharekhan expects maximum 3.9 percent sequential revenue growth in constant currency terms driven by ramp up of large deals and a strong season for product business.

Kotak Securities said the distribution of revenue growth is as follows: (1) organic constant currency revenue growth rate of 3 percent, (2) contribution from H&D International of $21 million, or 1 percent, and (3) cross-currency headwind of 70 bps.

Large deal contribution is expected to be from IMS business and seasonal strength in its IP business.

ICICI Securities and Edelweiss Securities expect dollar revenue growth of 2.1 percent QoQ and rupee revenue to grow around 3.8-3.9 percent sequentially in Q3.

On the full year forecast front, Kotak Securities expects HCL Technologies to maintain 9.5-11.5 percent constant currency revenue growth guidance. "Organic revenue growth for FY19 will be higher than the earlier expected 5.25 percent."

Profit for the quarter could grow in the range of 1-2 percent, according to brokerages except Motilal Oswal which expects over 6 percent decline in bottomline.

Brokerages expect expansion in operating margin in the range of 20-70 basis points QoQ.

"EBIT margins could expand 20 bps QoQ to 20.2 percent owing to IP seasonality & rupee benefit partly countered by partial wage hike (around -70 bps)," ICICI Securities said while Edelweiss Securities said margin may benefit from INR depreciation and rise 70 bps QoQ.

Kotak Securities expects EBIT margin to increase 40 bps sequentially led by revenue uptick and sharp sequential growth from higher margin IP business.

Key things to watch out for

> Products business strategy in light of aggressive acquisitions

> Synergies in services business from product acquisitions

> Sustainability of growth in IMS

> Measures to turn around underperforming applications business

> Outlook on ER&D segment

> Update on IP partnerships and deal pipeline

> Update on IBM product acquisition

> Traction in Digital

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Source: Moneycontrol

Axis Bank Q3 profit likely to grow sharply, NII growth could be over 10%

Axis Bank, which will announce its earnings for October-December period on January 29, is expected to report healthy growth in profitability due to a low base a year-ago.

Overall, analysts expect third-quarter profit growth in the range of 50-110 percent over the same period last year, partly driven by lower provisions.

Edelweiss Securities expects maximum growth in profit at 110 percent whereas Antique Stock Broking sees over 50 percent growth compared to a year-ago period.

Net interest income, the difference between interest earned and interest expended, is likely to grow more than 10 percent along with credit growth of over 10 percent and stable margin YoY.

"Advance growth is expected at 11.5 percent YoY, led by traction in retail and corporate portfolio. Increase in MCLR to be offset by a rise in the cost of funds, keeping margins broadly stable at around 3.5 percent," ICICI Securities said.

Edelweiss Securities said loan growth will be better than industry average given the continued momentum in retail growth and opportunistic pick up in corporate while Prabhudas Lilladher also said loan growth should be better on loan buyouts from NBFCs and raised MCLRs should benefit yields and marginally NIMs leading to 13-14 percent NII growth.

Margins are expected to expand sequentially to around 3.5 percent as the loan book re-prices, Motilal Oswal said.

Asset quality is expected to improve sequentially with controlled slippages for the quarter ended December 2018.

According to Prabhudas Lilladher, gross non-performing assets (NPA) as a percentage of gross advances may fall at 5.62 percent against 5.96 percent sequentially whereas Motilal Oswal said gross NPA could be at 5.9 percent against 5.96 percent QoQ.

Edelweiss Securities said trajectory on slippages should be controlled as credit cost will remain elevated.

Net stressed loans for the bank have declined to 5.8 percent, as the bank has already improved its coverage ratio to 73 percent.

"Though there are some signs of recovery in NPL cycle, we expect slippages to moderate to around 2.9 percent (from 4.6 percent a year ago) as the bank proceeds to clean up its balance sheet," Motilal Oswal said.

Key issues to watch out for

> Quantum of corporate slippages from BB and below list and any revision in the size of the stressed assets, outlook on the power assets

> Bank's strategy on retail, unsecured and business banking loans

> Strategy of new management on business growth and rejig in the top portfolio will be keenly observed

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Source: Moneycontrol