corornavirus impact: Downgrades begin: Brokerages cut down estimates for stocks, sectors

Brokerages have slashed target prices on shares of companies across sectors to reflect the cut in their earnings estimates amid the wide-scale shutdown in businesses in the wake of the spreading Covid-19 pandemic.

Notable cuts in target prices have taken place in auto, auto ancillaries and diagnostics companies.

Active Covid-19 cases in India have surpassed 400 and over 3.5 lakh cases world-wide, impacting both domestic and overseas businesses of companies.

Last week, HSBC downgraded ONGC and Oil India to hold and cut target prices on them by 50-53% as earnings outlook materially deteriorated amid the sharp fall in both oil and natural gas prices.

HSBC also cut earnings per share (EPS) estimates for ONGC by 4-45% and by 3-41% for Oil India.

The firm has also estimated 4-6% decline in US dollar revenue forecasts for IT companies in the ongoing financial year, driven by Covid-19 impact and fears of a structural impact on demand environment in the US and Europe.

Fast-moving electrical goods and consumer durables company Havells has also borne the brunt of target price cuts, by CLSA as well as Dolat Capital, as slowdown in construction activity has exacerbated the growth moderation being witnessed in Havells’ core categories. CLSA has trimmed target price on Havells by 10% to Rs 590, while Dolat has downgraded the stock to ‘reduce’ besides cutting the target price by 17% to Rs 540.

Brokerages also expect travel restrictions to impact Apollo Hospitals Enterprises due to lower volumes of high-margin international patients and elective surgeries in the short term. CLSA has trimmed target price on the stock by 12% to Rs 1,850.

Motilal Oswal has cut consolidated EPS estimates on Endurance Technologies by 1-8% to factor in the impact of the global pandemic on the company’s EU business.

Brokerages have also sounded out warnings of earnings hit on companies which operate malls, multiplexes and run airlines.

Kotak Institutional Equities said lower crude oil prices may not be enough to blunt the impact of Covid-19 situation. The brokerage has a sell-rating on InterGlobe with a fair value of Rs 900.

Analysts believe earnings downgrades are set to continue with uncertainty looming over the extent of impact of shutdowns on various sectors.

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Written by sortiwa

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