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Investors can expect a sharp rise in net income of India Inc in the March quarter due to Covid-19 led disruption in the base quarter. On average, Kotak Institutional Equities projected 125% YoY growth in the net profit of Nifty50 companies in hopes of a strong YoY increase in net income of automobile, banks, oil and gas and metal and mining companies.
On the other hand, the brokerage firm said it sees more than 20 companies reporting over 100% growth in net profit in Q4. This includes private lender ICICI Bank, metal majors Jindal Steel and Power, JSW Steel, National Aluminum and energy-to-telecom behemoth Reliance Industries.
There are hopes that margins of metal companies may increase sharply in Q4 led by higher prices. Kotak has a ‘Buy’ rating on ICICI Bank, JSPL, JSW Steel with a price target of Rs 650, Rs 475, and Rs 600, respectively. On the other hand, it has an ‘Add’ rating on Reliance Industries with a price target of Rs 2,050.
Commenting on the banking space, brokerage Sharekhan said that it is betting big on private lenders and State Bank of India. “The economy is showing signs of a gradual return to recovery, which augurs well for long-term demand outlook. We prefer large corporate/retail private banks and SBI among public sector banks and see the potential for them to gain market share as the situation normalises. Healthy market share gains and CASA ratio increase will be facilitators for improvement in return ratios,” Sharekhan said.
From the pharmaceutical space, Kotak believes that Laurus Labs and Sun Pharmaceuticals may post 178% and 141% YoY growth in profit after tax in Q4FY21. In the real estate space, Kotak added that players like DLF and Embassy Office Parks REIT and Sunteck Realty may report between 100%-600% growth in net profit for the quarter ended March 31.
Kotak has ‘Reduce’ ratings on Sunteck, DLF and Laurus, while it holds ‘Buy’ or ‘Add’ call on Sun Pharma and Embassy Office Parks REIT.
In the transportation space, Kotak Institutional Equities expects Adani Ports and Gateway Distriparks may report 279% and 187% YoY growth in net profit in Q4FY21.
Kotak Institutional also sees over 100% YoY growth in net profit growth of players like Apollo Tyres, Ceat, TVS Motor, SBI Cards and Payments, State Bank of India, Cholamandalam and Astral Poly Technik.
Analysts at Kotak hold a bullish view on SBI Cards (target price: Rs 1,030) and SBI (Rs 450).