/Covid-proof stocks! 12 posted 50% profit growth in Q4, 20 turned around business

Covid-proof stocks! 12 posted 50% profit growth in Q4, 20 turned around business

March quarter earnings season has come to an end, with some 152 BSE500 firms posting a rise in their Q4 net profit, out of which 20 reported quarterly profit against losses in the corresponding quarter last year.

That makes analysts bullish on some of these counters despite the Covid-19-induced uncertainties.

The 10-day nationwide lockdown to contain the spread of Covid-19 pandemic caused a huge dent to businesses of India Inc during the latter part of March. However, at least 12 BSE500 companies emerged top grossers with profit expansion of over 50 per cent and sales growth of 25 per cent in Q4.

Maharashtra Scooters reported over 150 times growth in net profit at Rs 107.14 crore for the quarter against Rs 0.68 crore profit posted for the same quarter last year. Net sales grew nearly 87 per cent YoY.

Bharat Dynamics posted 150 per cent growth in Q4 bottom line and Bharat Electronics 75 per cent. Sales grew over 50 per cent for both.

JM Financial has a ‘hold’ rating on Bharat Electronics with a price target of Rs 80. “We expect a declining Ebitda over FY20-22E, as share of low margin orders increases, while shrinking backlog and bloated net working capital may continue to pose growth challenges,” the brokerage said.

Among others, Gujarat Gas, Ujjivan Financial Services, Laurus Labs, UPL, Shipping Corporation of India, Alembic Pharmaceutical, Hudco and Muthoot Finance reported 50-162 per cent growth in Q4 net profit on 25-40 per cent rise in net sales during the quarter.

YES Securities last month gave a ‘buy’ rating to Alembic Pharma with a price target of Rs 1,100. “Its acute portfolio (cough & cold, pain management and anti‐infectives) is fairly resilient in the current disruption,” the brokerage said.

Bank of Baroda Capital Markets is positive on Muthoot Finance with a price target of Rs 1,250 (Rs 950 earlier). “Muthoot Finance’s gold AUM increased 22 per cent YoY to Rs 41,600 crore in Q4 due to robust gold loan demand. Stoppage of low-yield products in Q4 and reset of liabilities kept spreads buoyant at 15.1 per cent. We increase FY21 earnings estimate by 15 per cent and FY22 estimate by 11 per cent to bake in better gold loan demand,” the brokerage said.

“The Q4 earnings season showed weak trends across the board, factoring in the early impact of Covid-19 disruption and the impact of the resultant lockdown. Among major sectors, auto and cement fared well, while financials and industrials lagged. Most of the companies indicated multiple efforts for cost rationalization, which bodes well for long-term sustainability,” said Siddharth Sedani, Vice President, Equity Advisory, Anand Rathi Shares and Stock Brokers.

Shares of Bharat Dynamics have advanced the most in first quarter of FY21 at 80 per cent, followed by Muthoot Finance (up 78 per cent), Hudco (up 74 per cent) and Alembic Pharma (up 71 per cent). Others including Laurus Labs, Shipping Corporation, Ujjivan Financial Services, Gujarat Gas, UPL, Maharashtra Scooters and Bharat Electronics have risen 20-62 per cent.

Among the firms that reported profit growth, IDBI Bank, Jindal Steel and Power (JSPL), Indian Overseas Bank, UCO Bank, Bank of Baroda, Oil India, The New India Assurance, IDFC First Bank, Torrent Pharma, Welspun Corp, Tata Power Company, Jubilant Life Sciences and Adani Green Energy managed to stay in the black despite having reported loss for the same period last year.

Edelweiss Securities sees JSPL at Rs 190 per share going ahead. “JSPL has accepted a binding offer from Templar Investments to divest its entire stake in Jindal Shadeed for a consideration in excess of $ 1 billion. The transaction is likely to be completed in a month. We view this as a positive development, as JSPL’s leverage ratios will become far more attractive in a period of lean earnings while the balance sheet will strengthen further.”

Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities said the impact on earnings in H12020 has been broadbased, as the lockdown has impacted almost all businesses except those dealing in necessary items.

“FY20 numbers have been hit, FY21 estimates are being cut and FY22 actual estimates are going down because of a reduction in previous two-years’ base numbers. Our FY21E EPS for Nifty50 now hovers at around Rs 450 and that for FY22E somewhere around Rs.615. Most probably these estimates could see further downward revision post June quarter earnings.”

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