Should you bet on turnaround stories? These firms swung to profit in March quarter
PNB Housing Finance, Chennai Petroleum Corporation and Jindal Stainless stood among companies which managed to report profits in Q4FY21 after registering losses in Q4FY20
Overcoming Covid-19 blues, Indian companies have managed to post a decent show in the March 2021 quarter. Low base, cost-cutting measures and government’s measure to boost infrastructure came to the fore to support corporate earnings in the previous quarter.
As a result, at least 20 companies in the BSE 500 index managed to report a profit in Q4FY21 against losses in the corresponding quarter last year. Brokerages are also bullish on select turnaround stories.
Among the major companies, Tata Steel posted a consolidated profit of Rs 6,644.15 crore during the quarter under review as against a net loss of Rs 1,481 crore in the year-ago quarter.
Brokerage views
Axis Capital is positive on Tata Steel with a price target of Rs 1,325. “Tata Steel is the key beneficiary of rising iron ore prices due to integrated India operations. We see the uptrend to continue, as steel prices rise led by dwindling supplies in China on environmental restrictions and demand strength,” it said.
Likewise, Anil Agarwal-led Vedanta posted a consolidated net profit of Rs 6,432 crore as against a net loss of Rs 12,521 crore, all thanked to the rise in zinc and aluminium volumes along with record-high commodity price levels.
Motilal Oswal Financial Services has a ‘Neutral’ call on Vedanta with a target of Rs 300. “Given the promoter’s intent to increase the stake and loans given to the parent by Vedanta, we believe potential corporate actions could be the key drivers of the stock price. Moreover, high leverage and scheduled debt repayments at the parent Vedanta Resources Ltd remain an overhang,” the brokerage said.
Private sector lender Axis Bank posted a profit of Rs 2941.41 crore against a loss of Rs 1,262.43 crore on a year-on-year basis. YES Securities has a ‘Buy’ call on Axis Bank with a price target of Rs 825. “Axis Bank did not augment nor utilised its Covid buffer standing at 80 bps of loans. This implies a significant cushion for any potential impact on asset quality from the second wave of the pandemic. With only minor tweaks in our growth and asset quality assumptions, we continue to expect sizeable improvement in return ratios from the current fiscal,” YES Securities said.
Turnaround
Motilal Oswal Financial Services said it has posted its highest-ever quarterly net profit of Rs 448.16 crore, driven by Rs 264 crore investment gains. The brokerage had posted a loss of Rs 253 crore in the year-ago quarter.
Bottomline of other Tata Group firms including Tata Communications, Tata Consumer Products (TCPL) and Tata Investment Corporation also came into black against losses in the corresponding quarter. ICICI Securities has ‘Buy’ rating on Tata Consumer with a price target of Rs 770. “Focus on premiumisation and differentiation will potentially continue to improve realisations as well as boost margins. Furthermore, we believe that strategic acquisitions (like Soulfull) are an important pivot for TCPL’s value creation story,” ICICI Securities said.
The Great Eastern Shipping, Adani Power, Thyrocare Technologies, Network18 Media, CSB Bank, Raymond, Venky’s India, Blue Dart Express, Indiabulls Real Estate, SIS Ltd, PNB Housing Finance, Chennai Petroleum Corporation and Jindal Stainless stood among other players which managed to report profits in Q4FY21 over losses in Q4FY20.