Stock Tips: While investing in the stock market, utmost care should be taken in choosing the stock. At this time, most of the stocks in the market are going through a sell-off phase, in such a situation, you should buy only those stocks for which your investment advisor has suggested or you have selected the stock after doing financial study. If brokerage firms are to be believed, investors can earn profits by investing in Axis Bank and ITC. Motilal Oswal has maintained ‘Buy’ rating despite Axis Bank’s results being lower than expected. On the other hand, ITC has been rated ‘Ad’ by ICICI Securities due to rising cigarette sales and growth forecast in FMCG.
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Axis Bank: ‘Buy’
- Axis Bank reported a 94 per cent jump in profit and 11 per cent jump in interest income in the June 2021 quarter, but the results were lower than expected due to increased slippage.
- Brokerage firm Motilal Oswal has given buy advice despite weaker results than expected by Axis Bank. In the first quarter April-June 2021 of the current financial year 2021-22, Axis Bank’s PAT (Profit After Tax) ie net profit increased by 94 percent year-on-year to Rs 2160 crore and the bank’s PPOP (Pre-Provision Operating Profit) growth on an annual basis. But it was 13 percent.
- The slippage of Axis Bank increased from Rs 5280 crore in the March 2021 quarter to Rs 6520 crore in the June 2021 quarter, with the retail segment accounting for a majority of about 84 per cent. This resulted in a loss of about 15 bps in the asset quality ratio on a quarterly basis.
- The net interest income of the bank increased by 11 per cent on a year-on-year basis to Rs 7760.3 crore.
- According to Motilal Oswal, the slippage ratio will continue to increase further, but due to the additional provision buffer of 2 per cent (including standard provisions) there will be no significant impact on the balance sheet of the bank. In such a situation, the estimated RoA / RoE (Return on Assets / Return on Equity) for Axis Bank in FY 2023 may be 1.6% / 15.2%. In such a situation, the brokerage firm has retained the ‘Buy’ rating of this stock.
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- From cigarettes, FMCG to hotel business, ITC’s profit increased to Rs 3013.5 crore in the June 2021 quarter. In the first quarter April-June 2020 of the last financial year, the company’s profit was Rs 2342.76 crore. The maximum revenue for the company came from the cigarette, FMCG and paper segments.
- Cigarette sales in the June 2021 quarter grew at an annualized rate of around 30 per cent. FMCG revenue also grew by more than 10 per cent year-on-year.
- The company’s revenue grew by 37 percent while EBITDA grew at the rate of 51 percent on a year-on-year basis. However, net profit (PAT) grew only at 29 per cent year-on-year basis due to fall in other income. Cigarettes increased the company’s gross revenue by 33 percent.
- According to brokerage firm ICICI Securities, the company’s profits will increase through cigarettes and FMCG. Apart from this, the company is rescheduling the supply chain, which will reduce costs.
- ICICI Securities has increased the company’s earnings estimates by 2 per cent and has given ‘Add’ rating to ITC stock at a target price of Rs 240 based on discounted cash flow. According to the brokerage firm, the company’s PE is expected to be 17x by March 2023 at this target price. However, there are also risks involved such as tax hikes, which may impact sales.
(The stock recommendations given in the story are those of the respective research analysts and brokerage firms. Financial Express Online takes no responsibility for the same. Investments in capital markets are subject to risks. Please consult your advisor before investing.)