Good results buoy price targets of Nifty companies

National Stock Exchange
More Nifty 50 companies have seen upgrades in their price targets than downgrades following their March quarter earnings announcement. Out of the 18 companies in the blue-chip index that have announced their results so far, 10 companies have seen an increase in their price targets, while six have seen a downgrade in their targets. Meanwhile, analysts haven’t changed their targets in the remaining two companies. The targets are 12-month consensus analysts price targets complied by Bloomberg.

The trend is similar in the broad-based BSE 200 index, where around 50 firms have announced their results so far. About 30 companies in the BSE 200 index have seen an increase in their price targets. The increase in price targets is on the back of better-than-expected results by India Inc.

Rating agency CARE on Tuesday said most companies that have announced their results so far have seen an improvement in their sales and profits. “The sample of 216 companies witnessed growth in sales of 4.1 per cent in Q4FY16 against -7.1 per cent last year, while net profits grew 13.5 per cent against 7.1 per cent, indicating some improvement in both top line and bottom line,” CARE added.

The rating agency, however, has highlighted that very few banks have announced their results and the picture could change going forward.

YES Bank has seen highest increase in price target revised after its quarterly results. For the March 2016 quarter, the bank reported a 30 per cent year-on-year (y-o-y) growth in total revenue, led by healthy growth in net interest income at 27 per cent y-o-y. In banking sector, which is grappling with the problem of non-performing assets, YES Bank came out unscathed.

On the flip side, HCL Technologies saw a downward revision of five per cent after its disappointing results. The country's fourth-largest information technology (IT) services firm reported lower-than-expected marginal growth in consolidated net profit at Rs 1,926 crore for the fourth quarter of FY16 on a sequential basis.

Market experts believe the increase in price targets, even if results price on the upside, might not be much as stocks are already trading at fair valuations.

The benchmark Sensex trades at 16 times its one-year forward earnings estimate compared to long-term average of 14 times.

Sanjeev Prasad, executive director and co-head of Kotak Institutional Equities, said in a recent note that valuations of the Indian market have reached fair value based on their 2016-17 earnings estimate.

“The consensus earnings estimates for this financial year seem to indicate a growth of 16-17 per cent on the higher side. We are believers of early-teen kind of growth,” said Manishi Raychaudhuri, Asia equity strategist at BNP Paribas.


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