These Three Stocks Get A ‘Buy’ Rating From Brokerages

Brokerages initiated coverage with a ‘Buy’ rating on Kolkata-based financial services firm, Magma Fincorp Ltd. and optical fibre maker Sterlite Technologies Ltd., while upgrading Bajaj Auto Ltd. to ‘Buy’.

Here’s what the brokerages had to say on these stocks:

Edelweiss On Magma Fincorp

• Initiated ‘Buy’, with target price of Rs 238, which is an upside of 37.2 percent from current levels.
• Magma is a turnaround story; revamping business to build a scalable and profitable model.
• Regional diversification, balanced distribution mitigate event risk.
• Asset under management compounded annual growth rate of 15 percent and gross non-performing loans to dip to 5.2 percent by March 2020.
• Improving operating efficiencies to drive productivity surge.
• Acceleration in return ratios inevitable; expect return on assets and return on equity to expand to 2.2 percent and 13 percent, respectively by March 2020.
• Street values the stock at steep discount to peers, owing to weak RoE profile.

Axis Capital On Bajaj Auto

• Upgraded to ‘Buy’ from ‘Hold’; raised target price to Rs 3,905 from Rs 3,503; upside potential- 22.2 percent.
• Three wheelers – Strong growth to continue.
• Motorcycles – Banking on new launches.
• Premium bikes – Triumph could be a game changer.
• Exports – Recovering from low base.
• Foray into electric vehicles – Starting with three wheelers.
• Expect volumes and earnings to grow at a CAGR of 13 percent and 20 percent, respectively, over the financial years through March 2020 given the better mix.

Axis Capital On Sterlite Technologies

• Initiated ‘Buy’ with target price of Rs 430, which is an upside of 13 percent from current levels.
• Sterlite will benefit from a multi-year global data wave.
• Positives: exponential increase in data consumption, replacement of copper wires with optic fiber, transition to 5G and government initiatives.
• Shift towards optic fiber cables is inevitable due to its speedier data transmission.
• Expect domestic demand to accelerate as India has low fiber penetration.
• Expect revenue and earnings before interest, tax, depreciation and amortisation to grow at a CAGR of 20 percent and 25 percent, respectively, over the financial years through March 2020.
• Sterlite should command scarcity premium in market that has potential for exponential growth.
• Government capital expenditure towards Bharat Net and Smart city projects to drive software business.