If a stock lags on earnings or there is threat to the industry of which it is a part or for any other potential reason, there can be a possible downgrade. These downgrades may be done on monthly or quarterly basis or when the brokerage perceives some bullish or bearish momentum ahead then also such changes are done.
Now here we will discuss some of the scrips that have been downgraded by brokerages lately given the various stock fundamentals etc.:
|Scrip||Downgraded||Brokerage||Target price revision||Last traded price as on July 7, 2021||Potential Downside|
|Vodafone Idea Limited||'Sell'||ICICI Securities||Rs. 5||Rs. 8.9||44%|
|Shoppers Stop||'Sell'||HDFC Securities||Rs. 180||Rs. 245.8||27%|
|Spicejet||'Sell'||BOB Capital Markets||Rs. 60||Rs. 78.95||24%|
1. Vodafone Idea:
The beleaguered telecom service provider has been downgraded by both ICICI Securities and Motilal Oswal. ICICI Securities has given a ‘Sell' call on the scrip and sees the stock to hit a target price of Rs. 5.
Cash problem persist with the telecom service provider said ICICI Securities in its report:
"Vodafone Idea's (VIL) Q4FY21 reported revenues were down 11.8% QoQ to | 9,607.6 crore, out of which 9.6% decline was due to removal of IUC. On a reported basis, ARPU fell ~11.6% QoQ to | 107. Reported EBITDA margins were up 660 bps QoQ to 45.9%, aided by one-off related to IT and network costs to the tune of | 450 crore. Adjusted for the same, margins were at 41.2%", added the report.
On the valuation front, the company's research report said VIL remains the weakest private telco. Further the report added the company's survival is only possible on quick quick capital infusion and tariff hike/floor tariff implementation. This is indeed required become of the upcoming payment deadlines etc. We maintain SELL rating with a DCF based target price of Rs. 5/share (vs. Rs. 6/share, earlier). We will monitor triggers like fund raise and tariff hike, before changing stance.
2. Shoppers Stop:
For the retail company headquartered at Mumbai, HDFC Securities has given a ‘Sell' recommendation and sees the stock to weaken in price by a sharp 27% from the last traded price to hit a target price of Rs. 180.
Mall Bound Shoppers Stop saw the most impact
HDFC Securities in its report said with the company's major presence in malls, the retail stores of Shoppers Stop were the worst affected amid the lockdown due to the second wave. However, 4Q recovery (95% of baseline sales) has been better than expected (HSIE: -87.5%). "Gross margin improved sequentially (GAAP: 40.9% vs HSIE: 37.9%). Absolute operating cost structure was in line. We continue to remain circumspect on the longevity of the business as cost arbitrage between pure-play department stores and online platforms continues to shrink with each passing year, said the company."
" We meaningfully cut our FY22 EBITDA estimates to account for the second wave impact. FY23 EBITDA estimates remain largely unchanged. Maintain SELL recommendation with a DCF-based TP of INR 180/sh (implying 9x FY23 EV/EBITDA)."
The airline company was seen trading firm in the previous day's trade as the civil aviation allowed airlines to operate at increased capacity. Nonetheless the no frill air carrier today traded again lower by a margin.
Rising fuel and liquidity crisis a major problem with the airline
BOB Capital Markets sees a liquidity crisis for Spicejet. Also another dampener is the rising fuel cost.
The brokerage company said the company's Q4FY21 revenue and it logged a net loss of Rs. 2.4 billion, translating to negative EPS of Rs 3.9. We remain cautious due to the weak balance sheet (negative net worth); as well as growing competition amid rising fuel cost. Maintain SELL with a revised TP of Rs 60 (vs. Rs 70) as we cut estimates owing to the pandemic-linked crisis and higher fuel costs.
All of the above 3 stocks are picked from brokerage reports. Investing in stocks is risky and investors should do their own research. The author, the brokerage firm or Greynium Information Technologies Pvt Ltd is not responsible for any losses incurred due to a decision based on the above article. I