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Buy, Sell, Hold: 4 stocks and 1 sector are on analysts’ radar today

Tata Motors and BHEL, among others, are being tracked by analysts today.

Tata Motors

Brokerage: CLSA | Rating: Sell | Target: Rs 405


The brokerage house said that global luxury auto demand is softening, while it sees JLR gaining share. Further, it added, that it liked JLR’s strong pipeline, but remained concerned on its margin and India business. CLSA also sees further consensus downgrades ahead.

Petronet LNG

Brokerage: Citi | Rating: Buy | Target: Rs 541


The global financial services firm said that a possible purchase of 25 percent stake in Mundra’s LNG terminal to be a positive use of cash. A stake in Mundra LNG terminal may provide the company with a new avenue of growth, it added.

Further, it remains relatively immune to India’s broader LNG demand outlook. With GAIL’s Kochi-Mangalore pipeline under construction, it may see better utilisations from FY20. The company’s solid volume visibility & undemanding valuation make it a preferred pick, it added.

Mahindra & Mahindra

Brokerage: Credit Suisse | Rating: Overweight | Target: Rs 1,530


The research firm believes that farm loan waivers could further support tractor demand. It added that the states which waived loans so far account for more than 30 percent of total tractor volumes. This contribution, it says, will increase to 65 percent of total volumes if other states waive farm loans as well. It cited the instance of 2008 when waivers had improved tractor business CAGR to 21 percent.

BHEL

Brokerage: JPMorgan | Rating: Underweight | Target: Rs 120


JPMorgan said that staff costs were likely to increase 20 percent in FY18 after wage settlement exercise. Further, it added, that diversification efforts have not produced very significant results. The company will have to win a very large share to sustain 8-9 percent growth in FY19. It does not see replacement of thermal plants as being a big catalyst.

Metals

Brokerage: Jefferies


The research firm said that steel remains a tolling business and input costs were a key driver of steel prices. It feels that iron ore prices will remain under pressure on weak fundamentals. Chinese stimulus appears to be fading & re-stocking cycle has ended, the brokerage house said. Meanwhile, domestic steel prices should fall more, while prices are still at 6-8 percent premium to anti-dumping duty.

Among players in the sector, it sees earnings before interest, taxes, depreciation and amortisation (EBITDA) growth for major players to be modest. At SAIL, free-cash-flow could lag pushing net debt higher, while on JSW Steel, the firm feels that consolidated margin expectations are too optimistic. A sharper than expected fall in coking coal costs is a key risk.
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