Stocks To Buy And Sell After Q3FY15 Results By Amar Ambani Of IIFL

Mahindra & Mahindra (Q3 FY15) – BUY
CMP Rs1,192, Target Rs1,500, Upside 25.8%

• Including MVML, M&M reported 9.7% yoy decline in revenues while it saw a modest rise of 0.9% on sequential basis
• OPM was at 11.7% when compared with 14% in Q3 FY14, decline in margins was led by higher other overheads and staff expenses as gross margins improved due to soft RM prices
• PAT at Rs9.7bn was higher than estimates due to 1) exceptional item of Rs3bn, 2) higher than expected sales due to above estimated realizations
• 1 new launch, 1 refresh and 1 new variant in each of the first three quarters of FY16, apart from new launches in the tractors segment
• Concerns regarding farm segment slowdown factored in recent correction, Upgrade rating to BUY with a revised 9-month TP of Rs1,500

Click here for the detailed report on the same.

GSPL (Q3 FY15) – BUY
CMP Rs121, Target Rs142, Upside 17.8%

• Revenues at Rs2.4bn were lower than our and street estimates owing to 11.9% yoy fall in tariffs and 25.5% qoq fall in tariffs (Q2 FY15 had one time Rs900mn impact of retrospective tariff revision)
• Volumes were at 23.4mmscmd for Q3 FY15 as compared to our estimates of 25mmscmd
• OPM at 83.6% was lower than our estimates of 86.8%, due to jump in staff costs
• Decrease in debt levels led to decline in interest expenses on yoy basis
• We maintain our BUY rating as we expect the gas availability to increase in the country, GSPL will be a major beneficiary; we maintain our target price at Rs142

Click here for the detailed report on the same.

ONGC (Q3 FY15) – BUY
CMP Rs340, Target Rs420, Upside 23.5%

• Net sales fall 9.2% yoy and 7.4% qoq owing to lower net realizations of crude oil
• Discount on crude oil fell 35% yoy and 33.5% qoq to US$40.4/bbl
• Natural gas realization was at Rs11,159/tscm v/s Rs9,706/tscm in Q3 FY14
• For Q3 FY15 upstream contribution towards under recoveries is at 68% and ONGC share among upstream companies is at 86.8%
• We maintain our BUY rating with a 9-month target price of Rs420 as we see additional re-rating room as reforms are yet to play out completely

Click here for the detailed report on the same.

Oil India Ltd (Q3 FY15) – BUY
CMP Rs502, Target Rs650, Upside 29.5%

• Net sales at Rs21.9bn were much lower than estimates owing to substantially higher than projected subsidy burden
• Oil production was at 0.87MT a decline of 4% yoy but sequentially remained flat while gas production was at 0.69bcm a rise of 1.3% yoy but a decline of 0.9% qoq
• Net realizations for crude oil were at US$37.4/bbl a fall of 28.2% yoy and 17.4% qoq as crude oil prices have fallen yoy while subsidy burden declined at a slower pace for Oil India; gas realizations were at Rs7,891 higher by 22.9% yoy and 22.7% qoq due to gas price hike
• OPM was substantially below estimates at 29.7% owing to sharp fall in crude oil realizations
• We maintain our BUY rating with a revised price target of Rs650 as the company would be a big beneficiary of the expected announcement of subsidy sharing formula

Click here for the detailed report on the same.

State Bank of India (Q3 FY15) – BUY
CMP Rs307, Target Rs360, upside 17.1%

• Domestic loan growth remains lackluster at 8% yoy; shift towards low-risk assets continues
• Robust growth in Retail TDs continues to drive CASA ratio lower
• Domestic NIM was stable; soft near term outlook but scope of some recovery in longer term
• Fee growth was modest; cost/income ratio under check due to muted opex growth
• Stress assets addition was lower than expected; however, near term outlook remains uncertain
• Retain BUY with 12-month TP of Rs360

Click here for the detailed report on the same.

Oil Marketing Companies (Q3 FY15)

Oil marketing companies (OMCs) – HPCL, BPCL, IOC – Q3 FY15 results reflected a mixed performance wherein the gross under recoveries reported for LPG and SKO at lower than market prices was almost fully compensated by upstream companies, government and over recoveries in diesel. For Q3 FY15, upstream contributed ~68% while government contribution was at 32%. In terms of operational performance, GRMs for IOC and HPCL were negative primarily on account of inventory losses. However, BPCL bucked the trend with a GRM of US$5.8/bbl. Interest costs were lower on a yoy basis as debt has reduced substantially. Falling crude prices and deregulation of diesel improve earnings prospects for OMCs with only uncertainty being the subsidy sharing pattern. We maintain our BUY recommendations on all three stocks.

Click here for the detailed report on the same.

HDFC Bank (Q3 FY15) – BUY
CMP Rs1,065, Target Rs1,245, upside 16.9%

• Overall loan growth decelerated to 17% yoy on the back of slowdown in retail loan growth
• CASA ratio dips to 41% on end-quarter basis; to structurally improve in longer term
• NIM declined by 10bps qoq; outlook is encouraging though
• Fee growth remains weak; high treasury profit lowers C/I ratio
• Asset quality remains strong; Tier-1 capital to increase by ~220bps post the recent equity issuance
• Retain BUY and raise 12-month target price to Rs1,245

Click here for the detailed report on the same.

Sun Pharma (Q3 FY15) – Accumulate
CMP Rs941, Target Rs970, Upside 3.3%

• Supply constraints lead to lower than expected US and ROW sales resulting in 9.9% qoq and 0.4% yoy revenue decline
• EBIDTA margin lower than estimated on negative operating leverage translating in to a large PAT miss
• Elevated valuations limit further upsides; retain accumulate with revised 9-12mth target of Rs970

Click here for the detailed report on the same.

Cox & Kings (Q3 FY15) – BUY
CMP Rs320, Target Rs375, Upside 17.1%

• Q3 revenues ex-Camping remained healthy at 18% yoy driven by 15.8% yoy domestic growth and >2x jump in Meininger revenues; 9m FY15 sales up ~20% yoy
• EBIDTA ex-Camping up 10.1% yoy in Q3 and ~19% yoy for 9m FY15
• Expect sustained growth across key divisions; revise estimates and retain BUY with fresh 9-12mth target of Rs375 (earlier Rs360)

Click here for the detailed report on the same.