The Q2 earnings season is here, shifting investors' attention to observing how companies have picked-up pace after the disruption caused by the coronavirus pandemic. It is also a good time to observe performances of large companies, that are generally preferred for stable returns over the long term, to see how they fared the once-in-a-century health crisis.
Here are 4 large-cap stocks with brand reputation and promising Q2 performance, that are trading conveniently lower than their 52-week highs, making them value picks among Indian stocks for long-term investment.
Based on 3 November's closing price of Rs 949.80, the stock has corrected over 35 percent from its 52-week high of Rs 1,468.
The engineering and construction major reported a 45 percent decline in consolidated net profit at Rs 1,410.29 crore for the September-ended quarter when compared to Rs 2,551.67 crore in the same period a year ago.
Larsen & Toubro Limited's revenue growth slipped 12 percent as the lingering impact of the pandemic was felt during the quarter. Profit was helped by the divestment of the E&A business Schneider Electric, but higher credit provisions in the financial services business and disruption of the metro services caused a slump. However, profit margins remained healthy at 10.7 percent vs 11.3 percent on a yearly basis.
Its consolidated order book was at Rs 2.99 lakh crore, down 42 percent from the same period last year on a decline in domestic and international orders due to the pandemic.
Sharekhan has picked L&T as part of long term picks to be made during Mahurat Trading this year as the company's order inflow pipeline remains robust and provides healthy visibility for bagging orders ahead. The company is also better poised to ride any uncertainties owing to multiple levers such as a strong business model, diversified order book, and a healthy balance sheet, it said.
ICICI Securities has maintained an "add" rating on the stock on account of its strong order book and balance sheet.
"We believe both Central and state governments will start focusing on investment towards infrastructure and job creation. Restart of ordering activity on large multilateral projects such as high-speed rail is expected to fuel demand and aid ordering from similar projects in metro, water segment, etc. Given the strong balance sheet, cash infusion from the Schneider deal and control on working capital, we maintain ADD on L&T with a revised SoTP-based target price of Rs 1,042 (earlier Rs 1,027)," it said.
2. Bharti Airtel
Based on 3 November's closing price of Rs 454.90, the stock has corrected over 25 percent from its 52-week high of Rs 612.
On 27 October, the telecom operator reported a sharp improvement in its net loss to Rs 763 crore for the September-ended quarter from Rs 23,405 crore in the same period last year. It also recorded its highest ever quarterly revenue of Rs 25,785 crore, 22 percent higher than the same quarter last year.
It reported ARPU (average revenue per user), an important performance metric for telecom operators, at Rs 162 for the September-ended quarter, when compared to Rs 154 in the previous quarter and Rs 128 a year ago.
Most brokerages have turned bullish on the stock after its results. Goldman Sachs has a "buy" call on Bharti Airtel with a target price of Rs 635 per share. It said that the company's execution continues to be near-flawless.
Citi also has a "buy" call on the stock with a target at Rs 690 per share, while BofAML (Bank of America Merrill Lynch) has a price target of Rs 640 on positive risk-reward. It added that strong business momentum for Bharti Airtel continues.
CLSA has a 'buy' call on the stock with a target at Rs 715 per share. The brokerage said that the company's revenue and EBITDA were led by strong India mobile data traction.
3. Axis Bank
Based on 3 November's closing price of Rs 533, the stock has corrected over 30 percent from its 52-week high of Rs 765.85.
Axis Bank made a sharp improvement in the September-ended quarter results led by a sharp drop in provisions and strong growth in advances, especially retail. The private lender reported a profit of Rs 1,682.7 crore for the period against a loss of Rs 112.1 crore in the same period a year ago.
Its asset quality improved, that is, its gross NPA (non-performing assets) and net NPA levels were 4.18 percent and 0.98 percent, respectively, as against 4.72 percent and 1.23 percent at the end of June 2020.
Brokerages are bullish on the stock after the bank reported better than estimated Q2 asset quality and profit.
Jefferies, Motilal Oswal, CLSA, IDBI Capital, Emkay and Kotak Institutional Equities have placed "buy" ratings. JP Morgan upgraded the stock to "overweight" while Credit Suisse maintained "outperform" rating and said that Axis Bank continues to be among the best positioned with capital and relatively low asset quality stress.
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.
About the author
Olga Robert is an M.Com graduate covering equity markets and personal finance for nearly three years. Her interests include tax planning, equities, DIY personal finance management and government schemes.