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StockWatch: Buy Britannia, United Spirits, Sell Tata Global Bev

The Quint looks at stock recommendations from brokerage firms for you to buy / sell post the June quarter results. 

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Kotak Equities has a Reduce rating on Tata Global Beverages with a target price of Rs 150 per share against its last close price of Rs 141 per share.

The company recorded another disappointing quarter with revenues rising by 6 percent and net profit falling 14 percent. Kotak has cut its estimates on the company’s earnings and has revised its target price downwards to Rs 150 from Rs 155 earlier. This is due to a) weak quarter b) higher commodity inflation c) pick-up in Advertising and Selling expenses due to higher competitive intensity in key geographies.

The stock has fallen by eight percent in the last one year compared to the 10.3 percent rise in the Sensex.

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Elara Capital has an Accumulate rating on Britannia Industries with a target price of Rs 3,357 per share against its last close price of Rs 3,201, reflecting a gain of almost five percent.

The company reported a strong June quarter earnings with a 66.86 percent jump in consolidated net profit at Rs 189.66 cr while net sales rose to Rs 2,002.51 cr, up 13 percent  from the corresponding year-ago quarter.

And the research firm remains bullish on the business direction of Britannia as it plans to 1) implement split distribution in 13 cities which will generate 20% higher sales 2) plans to plug the gap in distribution reach with Parle (currently 1.5x), it has doubled its direct reach to 1mn outlets in last 2 yrs and added 80,000 outlets in Q1 3) plans on increasing market share in rural 4) cakes, rusk, snacks, dairy have huge potential and are focus areas for company 5) planned a capex of INR 4-5bn this year to set up plants in TN & Karnataka, R&D centre and others.

The stock has risen by a sharp by 179 percent in the last one year compared to the 10.3 percent rise in the Sensex.

Nomura has a Buy rating on United Spirits with a target price of Rs 4,050 per share against its last close price of Rs 3,591 per share, reflecting a gain of 12 percent.

According to the report, the outlook for the spirits industry remains positive and the factors driving this are low consumption per capita, favourable demographics, rising GDP per capita and evolving attitudes amongst society towards consumption of alcohol.

Also the company has stated that their focus, going forward, will be on premium products and the popular segments, and only states where either they are making money or can envisage profitability in the future.

Therefore, Nomura remains positive on the company and expects a sharp rebound in profitability in 2016-17 on a low base in 2015.

The stock has risen by 53 percent in the last one year compared to the 10.3 percent rise in the Sensex.

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Anand Rathi has downgraded Marico Inds to HOLD recommendation with a target price of Rs 465 per share. The last traded price of the stock was Rs 438 per share.

The FMCG major Marico reported a 28.3 percent growth in consolidated profit at Rs 237.8 crore compared to Rs 185.3 crore in the year-ago period, supported by operational performance and other income. Revenues grew by 9.9 percent to Rs 1,783.2 cr.

Inspite of a strong Q1 earnings, the research firm says that Marico’s overall domestic volume growth, at six per cent, was a drop lower than the eight per cent expected, which was driven by Saffola, and that volume weakness could cap any upside.

Also it expects Marico’s domestic volume growth to be hit in the short term by the broader market slowdown and rising price differences of Saffola to other competing oils. Further, the international business continues to drag on growth.

The stock has risen by 63.4 percent in the last one year compared to the 10.3 percent rise in the Sensex.

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(Disclaimer: Recommendations are from various brokerage/research houses and experts. The Quint does not endorse, or take responsibility for any investment decision based on the above recommendations.)

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