Price and liquidity of stocks is often a major deciding factor for investors, especially retail investors, who do not wish to park a large sum in a single company. To diversify investments, cheap stocks provide the opportunity to purchase quantifiable equity in different sectors.
However, its also important to understand the rationale behind investing in a stock. Here are 3 such stocks that were recommended by analysts this week and are conveniently priced below Rs 100.
1. Tata Power
Emkay Global has a "buy" rating on Tata Power with a target price of Rs 73. The stock's last traded price was Rs 54.30 on NSE.
The company announced this week that plans to set up an Infrastructure Investment Trust (InvIT) for its renewable energy assets, a move that hoped to help reduce its debt further.
Emkay Global said that renewable InvIT and non-core asset sales will significantly de-risk the balance sheet, with net debt/equity estimated at 1:1 by FY23. "Earnings growth will be super-charged, rising 41 percent through FY23 with significant and sustainable improvement in ROEs (Return on Investments)," it said.
2. Karnataka Bank
Centrum Broking placed a "buy" rating on Karnataka Bank with a target price of Rs 60. Shares of the lender closed the week at Rs 43.10. The private bank had reported a 13 percent increase in its net profit at Rs 119.44 crore for the September quarter, as bad loans moderated.
The lender witnessed an improvement on the asset quality front, as the gross non-performing assets (NPAs) fell to 3.97 percent of the gross advances as on 30 September 2020, from 4.78 percent in the year-ago period.
Centrum Broking said that as the corporate share is declining, it has lowered its the loan growth estimates for FY21 from 6 percent to 2 percent, though better net interest margin (NIM) could see higher net interest income (NII).
"Due to the one-time resolution scheme we see a shift in provisions from FY21 to FY22," estimating the overall impact on FY21 and FY22 PAT (Profit After Tax) to be 8 percent and 8.1 percent, respectively.
The brokerage remains positive on the stock due to its retail/SME focus and attractive valuation, it said.
3. Federal Bank
HDFC Securities has a "buy" recommendation on the Kerala-based private bank with a price target of Rs 78. Shares of Federal Bank closed at Rs 52.10 apiece on NSE on 16 October.
The bank also reported its September ended quarter's financial performance on Friday. Its net profit fell 26 percent in the quarter to Rs 308 crore on account of an increase in its provisions to deal with a likely rise in slippages due to the economic impact caused by the COVID-19 pandemic.
On the Q2 results, HDFC Securities' Research Analyst Darpin Shah said in a note that Federal Bank's FB's pre-provision operating profit grew strongly, led by an uptick in NIMs (net interest margin) and core fees.
"However, a sharp (prudent) rise in non-tax provisions dragged net earnings. Despite the improvement in operating performance and positive commentary on collections, our earnings estimates are mostly unchanged, as we conservatively factor in higher provisions. Attractive valuation and a strong liability franchise underpin our stance," he added.
The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.