Yes Securities

Cera Sanitaryware (Buy)

CMP: ₹2,449.35

Target ₹3,003

Cera Sanitaryware (CRS) reported weak quarter with flat revenue growth y-o-y (negative 4 per cent vs our est.) led by 9.3 per cent decline in sanitary-ware (SW) segment while faucet-ware (FW)/tiles segments grew by 5.4 per cent/4.6 per cent respectively. Growth was impacted from severe floods in southern states of India which contribute about 40-45 per cent of sales.

Management believes that the government's recent move to set up a realty AIF of ₹25,000 crore for completion of stalled projects is likely to give a new lease of life to the real estate sector. We think demand recovery in SW segment would be moderate in H2FY20, while its FW segments will continue to see better traction with market share gain driven by: better dealer satisfaction; strong brand with large number of SKU’s; deeper penetration in central/north-eastern markets; robust distribution network; and bolstering after-sales service.

Amidst tight liquidity conditions in the real estate market, CRS has remained very selective in project business which has yielded positive results in form of prudent control over working capital during H1FY20. We trim FY20E/FY21E earnings estimates by 9 per cent/5 per cent. We expect CRS to deliver 17 per cent earning CAGR over FY19-21E with 18 per cent ROE.

Axis Securities

ICICI Bank (Buy)

CMP: ₹498.25

Target: ₹552

In Q2-FY20 ICICI Bank continued to improve on its asset quality supported by stable NIMs and steady loan growth. Bank reported 25 per cent y-o-y growth in NII led by NIMs, up 34 bps y-o-y , and decent loan book growth of about 13 per cent. Transition to the new corporate tax rate led to an accumulated DTA write-down impact of ₹2,920 crore resulting in PAT of ₹655 crore lower by 28 per cent y-o-y. PAT without the DTA write down would have been ₹3,575 crore.

Operating performance of the bank has been steadily improving. The bank is adequately capitalized for growth and provisioning and its RoE is likely to improve steadily. Contribution from subsidiaries, especially insurance and asset management, remains strong. Total slippages during the quarter were ₹2,482 crore. Of the total corporate and SME slippages, ₹373 crore came from the BB and below portfolio. Management stated that it expects more downgrades to the BB and below portfolio (₹1,6074 crore, nearly 2.6 per cent of loans), given the macro environment. The telecom sector is ~1.8% of the total exposure, mainly towards the top players

We maintain a buy on the stock with a target of ₹552 .

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