Do you know about these top stocks? Check analyses, benefits, returns of shares

The Indian equity market has been volatile for quite some time now due to domestic as well as global factors. In such uncertain periods taking a position in the share market is very risky. People with adequate information can only make the right decisions. Here are the analyses of 5 stocks by brokerage Edelweiss that may help you in your bet: 

Kotak Mahindra Bank (BUY): 

Brokerage Edelweiss said that Kotak Mahindra Bank (KMB) delivered a steady Q1FY20, reinforcing its view that the bank's earnings momentum would sustain in spite of the challenging environment. 

Key highlights: a) Growth momentum softened due to lower growth in corporate/business banking (cautious stance) and below-trend vehicle finance growth (slow underlying sales). b) An improving net interest margin (NIM) profile (returns consciousness) supported 20 per cent-plus YoY NII growth. c) The continued focus on building up the stable and low-cost franchise is evident from  current and savings account  (CASA) growth of 20 percent-plus YoY (contrary to softening trend at peers) and suggests it is priming for growth. 

The brokerage said that given the bank's best-in-class liability franchise (CASA ratio of >50%); marginal stress baggage— GNPL at 2.19%; and c) strong capitalisation (tier-1: >17%), a strong foundation is in place to capture emerging opportunities. 

Key variables: The roadmap for a reduction in promoter shareholding. 

Edelweiss maintains ‘BUY’ with a revised sum-of-the-parts (SoTP) of Rs 1,632 (rolling forward by one quarter; earlier Rs 1,576).

Amara Raja Batteries (HOLD):
Amara Raja Batteries (AMRJ) reported a 2 percent YoY sales growth in Q1FY20. This was driven by healthy spurt in auto replacement, offsetting a sharp decline in OEM sales. Industrials grew 11 percent YoY on 20 percent growth in UPS. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin expanded 300 bps to 15.4 percent (sustainable according to management) with softer lead prices, driving 27 percent EBITDA growth (5% above estimate). 

"Our positive stance on the battery sector led by: i) healthy auto replacement cycle & new segments within industrials; and ii) soft lead price scenario. However, due to lower OEM sales, we revise down FY20/21E EPS by 4% and estimate 9%/17% sales and PAT CAGR over FY19-21. Maintain ‘HOLD’ with target price of INR676 (18x Q3FY21E)," Edelweiss said.

L&T Finance Holdings (HOLD):
An Edelweiss report said that L&T Finance Holdings (LTFH) posted a Q1FY20 PAT in line at Rs 5.5 billion with an asset quality holding up while growth softened a bit. In an overall tough environment for NBFCs, we size up LTFH on: a) Liquidity: Comfortably placed with a strong balance sheet as well as parentage; b) Asset quality: Holding up, but pockets of concern emerging—systemic risk in construction financing,  loan against property (LAP) and infrastructure (including renewable) must be monitored. c) Growth: softened; with management preferring quality, growth may soften further. Besides, performance in micro finance institutions (MFI) (>5x in three years), 2W (>3x in three years) and real estate (>4x in three years) calls for monitoring growth sustainability (slow underlying sales) and asset quality (overleveraging). 

While management is rising to the occasion, the brokerage said it expects valuations to settle lower till comfort emerges on key operating segments. "All in all, we are pruning P/BV to 1.4x (from 2x), which yields a revised target price of Rs 120 (versus Rs 175 earlier). Downgrade to ‘HOLD’ from ‘BUY’."

Bharat Forge (REDUCE):
Edelweiss said Bharat Forge's FY19 numbers reveal strategic initiatives – with a focus on diversification and tapping new opportunities – continue to be the mainstay. This led to a spurt in capital expenditure to Rs 11 billion, resulting in negative free cash flow (FCF) of Rs 2.2 billion in FY19 (versus average FCF of Rs 4.2 bn over FY16–18). 

Management outlook remains cautious amid the slowdown in global economic activity and escalating trade tensions between China and the US. "We continue to believe the cyclical impact of the global slowdown will overshadow the anticipated gradual benefits of diversification while most high-margin segments seem to be peaking out. The domestic automotive segment too continues to decelerate. All in all, we are cutting FY20E and FY21E EPS by 10% each. Maintain ‘REDUCE’ with a revised TP of INR410 (Rs 460 earlier), maintaining 18x PE."

Redington India (BUY):
The brokerage said that it maintained a positive view on Redington considering robust free cash flow (FCF) generation, favourable working capital and sustained momentum in IT and mobility business dynamics. "The stock is trading at an attractive valuation (6.6x FY21E EPS). We retain ’BUY/SO’ with TP of Rs 153."