Articles by Abhiraj Panchal

The Baseline    
21 Mar 2023, 04:24PM
Five analyst picks this week
By Abhiraj Panchal
  1. Data Patterns (India): ICICI Direct upgrades its rating to ‘Buy’ from ‘Hold’ on this defence and aerospace electronics company with a target price of Rs 1,555. This indicates an upside of 10.4%. The company’s board has approved the allotment of 40.97 lakh shares through QIP, at an issue price of Rs 1,220.31 per share, aggregating to Rs 500 crore. Analysts Chirag Shah and Vijay Goel “believe that fundraising for working capital and product development will benefit the company in faster execution of existing contracts, and in bidding for more contracts”.

The analysts are optimistic as the defence player has strong order inflows with a healthy pipeline of orders worth Rs 2,000-3,000 crore in the next three years. They also expect electronic components used in Indian defence platforms to be sourced locally, instead of from foreign manufacturers, as indigenisation efforts continue.

Shah and Goel anticipate revenue and profit CAGR of 29.3% and 28.5% respectively over FY22-25.

  1. Kalpataru Power Transmissions: Sharekhan maintains a ‘Buy’ call on this electric utilities company with a target price of Rs 695, indicating an upside of 22.3%. “Our interaction with Kalpataru Power Transmission reinstates the positive stance on the company’s capability to accelerate its revenue growth and margin expansion,” say the analysts.

    They believe that the company is a leading player with a strong order book (Rs 46,642 crore, up 46% YoY) as well as fresh orders (surpassed order inflow guidance for FY23), which will lead to improved revenue visibility. 

They are also positive about the company due to its merger with JMC Projects. The merger is expected to increase the group’s geographical reach and improve its capability to bid for large-size and more complex projects. According to the analysts, the company also expects a decline in debt and improvement in the working capital cycle thanks to better operating performance and monetisation of non-core assets.

  1. PVR: Prabhudas Lilladher retains its ‘Buy’ call on this multiplex company with a target price of Rs 2,096, indicating an upside of 33.1%. Analysts Jinesh Joshi and Stuti Beria expect synergy benefits of Rs 200 crore from the PVR-Inox merger to accrue over the next two years. They expect that the merger will enhance balance sheet strength, enabling rapid expansion into new markets. 

Joshi and Beria believe that the merged entity will lend a size advantage and improve bargaining power with various stakeholders in the value chain, like film distributors, real estate developers, ad networks and ticket aggregators, resulting in material revenue/cost synergies. 

The analysts are also positive about PVR and estimate that it will open 155 screens per annum for the next two years after the merger.

  1. LTIMindtree: ICICI Securities maintains its ‘Buy’ rating on this IT consulting & software company with a target price of Rs 5,651, implying an upside of 21%. Analysts Sumit Jain and Aditi Patil are positive about the company’s prospects on the back of strong cross-selling opportunities and its ability to bag larger deals post-merger. They believe that Larsen & Toubro Infotech (LTI) and Mindtree complement each other and this allows them to scale up operations.

    According to the analysts, “Mindtree is stronger in front-end digital solutions and LTI shines in back-end ERP-related core transformation solutions.” They expect the company’s EBIT margin to improve by 260 bps over FY23-26 to 18.6%, driven by operating leverage with a higher scale of operations and integration-related synergies. 

Jain and Patil believe that, with their track record of strong management execution, the combined entity’s management is well-equipped to enable industry-leading profit growth in the coming quarters. The analysts expect the firm’s net profit to grow at a CAGR of 18.8% over FY22-25.

  1. Tata Motors: Motilal Oswal keeps its ‘Buy’ rating on this automobile manufacturer with a target price of Rs 540, indicating an upside of 31.3%. Analysts Jinesh Gandhi, Amber Shukla and Aniket Desai believe that the Jaguar Land Rover (JLR) brand is on a sustainable growth path and will be one of the key drivers of growth for the company. They add that Tata Motor’s domestic passenger and commercial vehicle business is already on a healthy growth trend. They see the prospects of JLR improving as supply-side pressures subside and demand remains healthy. “As supplies improve, JLR should reach near zero net debt levels by FY25, thanks to improved production, better margins and working capital release,” the analysts say.

Gandhi, Shukla and Desai believe JLR will firmly position itself as a luxury premium brand as it changes its branding strategy and redefines Jaguar with premium launches in the electric vehicle market in CY25. The analysts expect the company’s revenue to grow at a CAGR of 14.2% over FY23-25. 

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

The Baseline    
08 Mar 2023
Five analyst picks this week
By Abhiraj Panchal
  1. Ceat: Motilal Oswal reiterates a ‘Buy’ call on this tyre manufacturer with a target price of Rs 1,860. This indicates an upside of 28.8%. After visiting its Halol facility and an overview of its research and development centre, analysts Jinesh Gandhi, Amber Shukla and Aniket Desai say the company has showcased its capabilities to scale international business to Rs 35 billion and explore electric vehicles. The tyre manufacturer also indicates improved efficiency at the Halol plant.

According to the analysts, “Cyclical recovery in both OEMs and replacement will enable faster absorption of new capacities and drive operating leverage benefits. This, coupled with softening raw material prices, would help a partial recovery in margins in FY23 and full recovery in FY24.” They remain optimistic as the company continues to focus on key strategic areas as well as expansion in international markets and electric vehicles. In addition, they believe prudent capex plans to be long-term catalysts for Ceat.

  1. KSB: ICICI Direct retains its ‘Buy’ call on this industrial machinery and pump manufacturer company with a target price of Rs 2,390, indicating an upside of 23.3%. According to an institutional investor call arranged by KSB and ICICI Securities on February 28, 2023, the company’s profit has grown 41.9% YoY to Rs 55.9 crore in Q3FY23, while its revenue improved 17.8% YoY to Rs 533.3 crore. KSB has an order intake of Rs 2,045.6 crore for the year ending December 2022. 

Analysts Chirag Shah and Vijay Goel say, “Domestic business is doing better with healthier demand for standard pumps and engineered pumps.” The analysts remain optimistic as nuclear, petrochemical and mechanical seal segments of KSB witness strong traction and the company focuses on increasing its share in services and spares. Shah and Goel expect revenue, EBITDA and profit to grow at 18.1%, 22.1% and 21.6% CAGR respectively over CY22-24, led by strong execution.

  1. Federal Bank: Axis Direct maintains its ‘Buy’ rating on this private bank with a target price of Rs 170, implying an upside of 27%. Analysts Dnyanada Vaidya, Prathamesh Sawant and Bhavya Shah believe the company is well-placed to deliver healthy growth in the medium term as its operational metrics continue to improve. They expect the bank to see robust credit growth, driven by an improvement in the share of high-yielding products. The analysts also see the firm’s improving fee income, moderating operating expenses and improving asset quality as key positives and that “this would result in the bank’s credit costs trends continuing to remain benign”.

Vaidya, Sawant and Shah are upbeat about the bank’s prospects due to its high share of retail-dominated deposits and healthy CASA ratio. The analysts anticipate healthy growth in the medium term due to the company’s expansion plans and its healthy metrics. They expect the bank’s net profit to grow at a CAGR of 15.3% over FY23-25. 

  1. Axis Bank: ICICI Securities maintains its ‘Buy’ rating on this bank with a target price of Rs 1,130. This indicates an upside of 32%. Analysts Chintan Shah and Renish Bhuva believe the company’s acquisition of Citibank’s consumer business in India will enable the bank to capture premium market share growth. The total purchase consideration for the acquisition is Rs 11,603 crore. The analysts say the deal is favourable for Axis Bank as it gets “access to Citibank’s huge retail deposit base, affluent and profitable consumer franchise and strategic synergy benefits over the medium term”.

Shah and Bhuva see this deal as a boost towards the bank’s long-term growth as it aligns with its premiumisation strategy. It gets access to a sizable granular deposit base and an opportunity to cross-sell its products to Citibank’s affluent customers. The analysts expect the company’s net profit to grow at a CAGR of 39% over FY22-24.

  1. Infosys: Bob Capital Markets maintains a ‘Buy’ call on this software and services company with a target price of Rs 1,760, indicating an upside of 18%. Analyst Saptarshi Mukherjee says, “Private 5G is expected to be a key enabler for the digital transformation of enterprises.” He adds that the market for private 5G services in India is likely to be around $570 million by 2026, and the software expense will be materially higher than hardware and services over the next decade.

According to Mukherjee, the company is well-placed to leverage its global 5G expertise to deliver private 5G-as-a-service. “Despite Infosys’ cautious outlook on a few verticals, we believe its strength in managing the twin journey of digital transformation and cost takeout will drive growth leadership,” he concludes.   

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

The Baseline    
21 Feb 2023, 04:26PM
Five High Performing Analyst Picks This Week
By Abhiraj Panchal

This week, we take a look at analyst stock picks which saw positive YoY profit and revenue growth in Q3FY23, with strong Trendlyne Durability, Valuation and Momentum scores.

  1. Oil India: Prabhudas Lilladher keeps its ‘Buy’ rating on this oil exploration & production company, and raises the target price to Rs 305 from Rs 300. This implies an upside of 19.8%. In Q3FY23, the company’s net profit surged by 76% YoY to Rs 2,284.4 crore and revenue grew by 37.7% YoY. Oil India has a high DVM score, with a Durability score of 85, Valuation score of 84.3 and Momentum score of 67.3. 

Analyst Avishek Datta attributes the firm’s robust Q3 performance to healthy crude oil and gas realisations, along with increasing demand. He adds that the company’s Numaligarh refinery has had a steady performance. 

Datta sees the company’s aggressive production expansion plans as a key positive, and expects oil volumes to increase by 30% and gas volumes to surge by 60% by FY25. The analyst believes, “Oil India’s earnings will ride on new capacity addition across crude oil, natural gas and refinery”. He expects the company’s net profit to grow at a CAGR of 15.7% over FY22-25. 

  1. Zydus Lifesciences: KRChoksey maintains its ‘Buy’ rating on this pharmaceuticals company and increases its target price to Rs 610 from Rs 507. This indicates an upside of 30.1%. In Q3FY23, the company’s net profit rose by 24.5% YoY to Rs 622.9 crore and revenue increased by 19.4% YoY. Zydus Lifesciences has a Durability score of 75, Valuation score of 33.3 and Momentum score of 67.7. 

Analyst Abhishek Agarwal attributes the company’s growth in Q3 to healthy growth in the key markets of India and the US. He points to new product launches and innovations in the US market as growth drivers. According to the analyst, “Zydus Lifesciences has a strong portfolio of existing products and new US product launches in the pipeline, which provides revenue visibility over the long term.”

Agarwal expects growth in the India formulations business will be led by rising market share in key therapies. The consumer wellness segment will see an expansion in margins in the medium term, he says, due to pricing actions and recovery in rural demand. The analyst anticipates the firm’s revenue to grow at a CAGR of 14.3% over FY22-25. 

  1. JK Lakshmi Cement: Axis Direct maintains a ‘Buy’ call on this cement manufacturer with a target price of Rs 840, indicating an upside of 12.8%. In Q3FY23, the company’s net profit increased 19.1% YoY to Rs 76.4 crore, while its revenue grew 20.9% YoY. The company missed the brokerage’s estimates according to analysts Uttam Srimal and Shikha Doshi. JK Lakshmi Cement has a Durability score of 75, Valuation score of 37.5 and Momentum score of 60.8. 

The analysts say, “The company is working on many levers – optimising geo-mix, higher production, sale of blended cement, increasing proportion of trade sales, premium and value-added products, logistic efficiency.” They expect the company to post EBITDA growth of 12% CAGR over FY21-24 on the back of better realisation, higher volume and cost-saving initiatives.

Srimal and Doshi are optimistic as the demand for cement remains robust on account of the government’s push for infrastructure development and affordable housing.

  1. Mahindra & Mahindra: HDFC Securities maintains a ‘Buy’ call on this automobile manufacturer and increases the target price to Rs 1,554. It indicates an upside of 15.1%. In Q3FY23, the company’s profit rose 34.7% YoY to Rs 2,676.6 crore, while its revenue grew 30% YoY. Analysts Aniket Mhatre and Sonaal Sharma believe that the higher-than-estimated profit growth is backed by higher other income. Mahindra & Mahindra has a Durability score of 70, Valuation score of 47.5 and Momentum score of 58.9.

According to the analysts, “It is commendable that Mahindra & Mahindra has already achieved most of the targets it earmarked a couple of years ago (like EPS CAGR, improvement in auto margins, RoE at 18%, calibrated asset allocation, etc.) and the management has indicated that it is now time to raise its targets.” 

They continue to remain positive about the company on the back of a big order backlog for utility vehicles, positive rural sentiment, strides taken to achieve a strong position in electric vehicles and cautious capital allocation.

  1. Oil And Natural Gas Corp: ICICI Direct updates its rating to ‘Buy’ from ‘Hold’ on this oil and gas producer and gives it a target price of Rs 180, indicating an upside of 16.7%. In Q3FY23, ONGC reported an increase of  5.1% YoY in net profit to Rs 11,489 crore and a 15.7% YoY rise in revenue. Analysts Harshal Mehta and Payal Shah say the results are below estimates due to the decline in crude prices and increase in depreciation. ONGC has a Durability score of 70, Valuation score of 74.7 and Momentum score of 64.5.

The analysts believe that even if gas prices get capped, realisations are likely to remain high as they are well above historical averages, and with the commencement of production from the KG Basin in May, volumes are expected to grow. They add, “Sustained higher crude oil prices and gas realisations can result in better profitability.” Mehta and Shah remain optimistic due to the high dividend yield and payout ratio.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

The Baseline    
10 Feb 2023
Which stocks did superstar investors buy in Q3FY23?
By Abhiraj Panchal

Many investors closely track the portfolios of superstars to identify interesting sectors and stocks to invest in. We take a look at some of the stocks superstar investors bought or added more of, during Q3FY23.

Most superstar investors didn’t see major QoQ changes in their net worth in Q3FY23, except Dolly Khanna. Her net worth fell by 21.4% QoQ to Rs 409.74 crore during the quarter. 

Sunil Singhania and Vijay Kedia’s net worth fell by 5.1% and 5.3% respectively, while Porinju Veliyath’s net worth fell by 1.3%. Ashish Kacholia’s net worth rose by 1.6% and Rakesh Jhunjhunwala's portfolio value rose marginally.

These superstars have varied investing interests, as shown in the chart below, which indicates the sector with the biggest share in each superstar’s portfolio. 

RARE Enterprises’ favoured sector is textiles, apparels and accessories, while Sunil Singhania’s is metals and mining, Ashish Kacholia’s is chemicals and petrochemicals.

Rare Enterprises increases stake in Banking & Finance and Auto stocks

Rakesh Jhunjhunwala’s portfolio rose marginally by 0.01% QoQ to Rs 33,230.4 crore in Q3FY23. Rare Enterprises, which manages the late big bull’s portfolio, increased stakes in several companies during the quarter. 

Rakesh Jhunjhunwala’s portfolio increased its stakes in Rallis India and Federal Bank by 0.9% each to 10.3% and 3.5% respectively. It also increased its holding in Geojit Financial Services and Canara Bank by 0.8% and 0.6% to 8.4% and 2.1% respectively.

Rare also increased holdings in Tata Motors and NCC by 0.5% each during Q3, and bought more shares in Karur Vysya Bank, Tata Communications and Edelweiss Financial Services

According to shareholder filings, the portfolio’s largest buys were healthcare supplies company Bilcare and auto parts and equipment maker Autoline Industries. But this data point should come with a disclaimer. 

In Q1FY23, the total holding of Rakesh and Rekha Jhunjhunwala in Bilcare and Autoline was 8.5% and 4.5%, respectively. In the Q2FY23 BSE fillings of Bilcare and Autoline Industries however, the names of Rakesh Jhunjhunwala or Rekha Jhunjhunwala are not mentioned in the shareholders list. But the Q3FY23 BSE filings of both the companies show Rekha Jhunjhunwala back in the list as a shareholder with significant stakes. She holds a stake of 7.4% in Bilcare and 4.3% in Autoline Industries. 

The large movement in shareholding could be due to a filing error in Q2, and hence these companies are not included in the chart above. 

Sunil Singhania’s Abakkus Fund increases stake in multiple small-cap companies

Sunil Singhania’s Abakkus Fund saw its consolidated net worth fall by 5.1% QoQ in Q3FY23 to Rs 1,973.8 crore. It added Tracxn Technologies to the portfolio during the quarter by buying a 1.6% stake in the IT consulting company. It also bought a 1.8% stake in Dreamfolks Services, a travel support services company and added a 0.3% stake in Mastek, increasing its stake in the IT company to 3.1%. 

The fund also bought an additional 0.2% stake in Sarda Energy & Minerals, Ion Exchange (India) and Technocraft Industries (India) each, bringing its stake to 2.1%, 3.2% and 3% respectively. It added minor stakes in already existing small-cap portfolio companies like Dynamatic Technologies, Stylam Industries, Siyaram Silk Mills and HG Infra Engineering, taking its holdings to 2.6%, 2.4%, 2.1%, and 1.5% respectively. 

After selling its stake in CMS Info Systems in Q2FY23 to below 1%, Abakkus  now holds a 1% stake in the company.

Ashish Kacholia adds four small-cap companies to his portfolio

Ashish Kacholia’s net worth increased by 1.6% QoQ to Rs 1,800.3 crore in Q3FY23. During the quarter, he added Goldiam International (textile company), Raghav Productivity Enhancers (capital goods company), Likhitha Infrastructure (infrastructure service provider) and Knowledge Marine & Engineering Works (transportation company) to his portfolio. He purchased 1%, 2.1%, 2% and 2.3% stakes in these companies respectively.

The marquee investor purchased 1.3% and 1.2% stakes in chemical companies Agarwal Industrial Corp and Yasho Industries respectively and now holds 3.8% in each. During Q3FY23, he added 0.8% of Best Agrolife (now holds 2.3%), 0.6% of SJS Enterprises (now holds 4.4%), 0.4% of TARC (now holds 2.2%) and 0.2% of Ador Welding (now holds 4.4%) to his portfolio. 

Kacholia bought an additional 0.1% stake in Gravita India, Megastar Foods and Xpro India, and now holds 2.1%, 1.1% and 4.5% stakes respectively. The other companies where he increased stakes were Garware Hi-Tech Films and PCBL.

Dolly Khanna makes no new additions to her portfolio in Q3FY23

Dolly Khanna’s net worth fell by 21.4% QoQ to Rs 409.7 crore in Q3FY23. Compared to previous quarters, the investor drastically slowed down buying in Q3. She only increased her stake marginally in three companies and did not make any new additions to her portfolio. Khanna tends to turn bearish when markets become volatile, so this is not unusual for the investor.. 

She raised her stake in Industrial Gases company National Oxygen by 0.1% to 1.2%. The company has risen over 6.3% over the past three months till February 8. She also raised 0.05% stake each in Monte Carlo Fashions and Prakash Pipes.   

Porinju Veliyath makes three new additions to his portfolio in Q3FY23

Porinju V Veliyath’s net worth fell by 1.3% QoQ to Rs 174.9 crore in Q3FY23. He added three new small and micro-cap companies to his portfolio. He bought a 1.3% stake in furniture manufacturer Priti International and 1.1% stake each in Max India and Lakshmi Automatic Loom Works in Q3.

The investor raised his stake in Special Consumer Services company Kaya by 1% to 2.4% in Q3FY23. This is after he cut 0.1% from  the company holding in Q2FY23. He also bought an additional minor stake in Aurum Proptech.

Vijay Kedia adds Siyaram Silk Mills to the portfolio

Vijay Kedia’s net worth fell 5.3% QoQ to Rs 729.7 crore in Q3. Kedia’s only buy during the quarter was a new addition–a 1.1% stake in Siyaram Silk Mills, an Indian blended fabric and garment manufacturer. In Q3FY23, the textile company’s net profit fell for the first time in the past seven quarters to Rs 51.9 crore.

Mohnish Pabrai increases his stake in Edelweiss Financial Services

Mohnish Pabrai’s net worth in Q3FY23 fell by 6.9% QoQ to Rs 1,540.02 crore. The only change he made in his portfolio was buying an additional 0.3% stake in Edelweiss Financial Services. As of Q3FY23, he holds a 6.7% stake in the company. The financial services company reported a 42.7% YoY increase in net profit to Rs 101.3 crore in Q3FY23.

1 Comment
12 Feb 2023
The Baseline    
07 Feb 2023
Five analyst picks this week post results
By Abhiraj Panchal

This week in analyst picks we take a look at stocks with YoY revenue and profit growth above 10% in Q3. We also look at forward PE ratio estimates for these stocks one year from now. 

The forward PE estimate is the expected value of earnings to the share price one year ahead. To calculate the FY24 forward PE ratio, we use the Forecaster's target price estimates and annual one-year forward forecaster EPS estimate.

  1. Larsen & Toubro: BOB Capital Markets maintains its ‘Buy’ rating on this construction and engineering company, and raises its target price to Rs 2,440 from Rs 2,390. This indicates an upside of 12.7%. In Q3FY23, the company’s net profit grew 24.3% YoY to Rs 2,552.9 crore and revenue rose 17.3% YoY to 46,389.7 crore. 

Analysts Vinod Chari, Tanay Rasal and Nilesh Patil write that the firm remains “the best play on India’s capex story, and is our preferred capital goods pick.” They believe the company is well-positioned to benefit from the Centre’s push toward infrastructure given its robust tendering pipeline and order win rate of 15–20%. The analysts also see increasing private sector orders as a positive for the company. In Q3FY23, private sector orders accounted for 39% of L&T’s total order inflows, up from 18% a year ago.

Given the robust order pipeline, the analysts anticipate healthy growth in order inflows in the coming quarters. Chari, Rasal and Patil expect the company’s revenue to grow at a CAGR of 16.9% over FY22-24. Larsen & Toubro’s FY24 forward PE estimate is 31.7, higher than the current PE TTM of 30.

  1. Coal India: ICICI Securities maintains its ‘Buy’ rating on this coal mining company and revises its target price to Rs 282 from Rs 294. This implies an upside of 28.6%. In Q3FY23, the firm’s net profit surged by 70.1% YoY to Rs 7,755.6 crore and revenue grew by 23.7% YoY to Rs 35,169.3 crore. 

Analysts Rahul Modi and Anshuman Ashit cite cost increases - driven by higher wage provisioning and contractual expenses - for lowering the target price despite robust results. The analysts do point out that growth was driven by an increase in volumes and realisations. They expect this growth momentum to continue given the strong domestic demand for coal. The analysts expect Coal India’s production volume to touch 700 million tonnes in FY23. They added, “With 9MFY23 production/offtake already at 479 and 509 million tonnes (+15.8%/+5.4% YoY), CIL's volume is poised to reach 700 million tonnes in FY23.”

Given the strong operational performance and with domestic demand for coal remaining strong, Modi and Ashit anticipate the company’s net profit to grow at a CAGR of 11.4% over FY22-25. The forward PE estimate for Coal India stands at 5.3, higher than its current PE TTM of 4.6.

  1. Bajaj Finance: KRChoksey maintains a ‘Buy’ call on this NBFC with a target price of Rs 8,030, indicating an upside of 30.3%. In Q3FY23, the company’s net profit grew by 39.9% YoY to Rs 2,973 crore while its revenue grew by 26.4% YoY to Rs 10,786 crore. 

Abhishek Agarwal said, “Bajaj Finance continued to post strong growth in terms of business and profitability.” He added, “The NBFC has registered the highest-ever customer addition during the quarter.” The analyst is optimistic about the finance company on the back of its strong background, brand name, diversified product offerings, prudent risk management, and long-term potential for robust AUM growth. He expects Bajaj Housing Finance (a subsidiary) to be a core driver for growth in upcoming quarters, led by improving opportunities in the housing finance business. 

Agarwal expects profit and net interest income to grow at 35.1% and 25.4% CAGR respectively, and the asset quality to remain stable. The forward PE estimate for Bajaj Finance is 39.5, which is higher than the current PE TTM of 34.4.

  1. Laurus Labs: ICICI Direct retains a ‘Buy’ call on this pharmaceutical company with a target price of Rs 400. This indicates an upside of 21.2%. In Q3FY23, the company reported an increase of 32.1% YoY in net profit to Rs 203 crore. It reported revenue of Rs 1,546.2 crore (up by 49.5% YoY), which the analysts Siddhant Khandekar, Kushal Shah and Utkarsh Jain believe increased on the back of 210% YoY growth in custom synthesis. 

According to the analysts, the company is well-positioned to meet the fast-growing global demand for new chemical entity drug substances and drug products with ongoing supplies for seven commercial products. They are also positive about the pharma company due to its robust order book, product launches in anti-diabetic (FY23) and CV portfolio in the United States and Europe that have a target opportunity at $40 billion. The forward PE estimate for Laurus Labs is 27.7 as against the current PE TTM of 19.4. 

  1. Westlife Foodworld: Axis Direct maintains its ‘Buy’ call on this fast food restaurant holding company with a target price of Rs 930, indicating an upside of 32.7%. In Q3FY23, the company’s net profit increased by 72.4% YoY to Rs 36.4 crore and its revenue grew by 28.7% to Rs 619.2 crore. 

Analyst Preeyam Tolia believes that same-store sales growth stood at 20% led by increased footfalls, improved product mix and price hikes. His confidence in the restaurant chain holder comes from bright future prospects supported by the company’s strong execution track record of revenue and EBITDA growth, driven by new product launches and cost rationalisation programs. He expects Westlife Foodworld to deliver revenue EBITDA growth of 30% and 43% CAGR, respectively,  over FY22-25. Westlife Foodworld’s forward PE estimate is 104.3 as compared to the current PE TTM of 102.7.

All these stocks have a higher forward PE ratio as the average target share price of these stocks is relatively higher compared to their forward earnings per share.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

The Baseline    
24 Jan 2023
Five analyst picks this week in the tech sector
By Abhiraj Panchal
  1. Cyient: IDBI Capital maintains its ‘Buy’ rating on this IT Consulting & Software company with a target price of Rs 1,045. This implies an upside of 19.6%. In Q3FY23, the firm’s net profit surged 97.2% QoQ to Rs 156 crore and revenue grew 15.9% QoQ.

Analysts Devang Bhatt and Dhawal Doshi expect the services segment’s revenue to grow 25% YoY in FY23 on the back of organic and inorganic levers. They anticipate “it to be driven by double-digit growth in aerospace, communication, medical, mining, automotive and healthcare business verticals”. The analysts also expect the firm’s cost realisation initiatives to expand margins further in the coming quarters.

However, Bhatt and Doshi believe Cyient’s margin in FY23 will be impacted by the one-offs in litigation and acquisition-related charges. But they expect the margins in FY24 and FY25 to improve due to the absence of one-off costs and easing of supply-side challenges. The analysts anticipate the IT firm’s revenue to grow at a CAGR of 19.9% over FY22-25.

  1. Wipro: ICICI Direct upgrades its rating to a ‘Buy’ from ‘Hold on this software services company with a target price of Rs 455. This indicates an upside of 12.9%. In Q3FY23, the company reported a 14.8% QoQ growth in net profit to Rs 3,052.9 crore, while its revenue grew by 3.6% QoQ to Rs 23,867.3 crore. According to analysts Sameer Pardikar and Sujay Chavan, “Wipro reported weak Q3 results on the revenue front.”

The total contract value for the quarter was $4.3 billion. The analysts think that sustainability of the same in the subsequent quarters will likely provide revenue visibility for FY24. They also believe that Wipro’s decision to change leadership in areas of America, West Asia, Japan and Australia will provide a stimulus to revenue growth in the regions. Pardikar and Chavan remain optimistic about the stock on the back of higher penetration in Europe, client mining and acquisition of new logos.

  1. Infosys: HDFC Securities maintains a ‘Buy’ call on this big-4 IT company with a target price of Rs 1,815, indicating an upside of 18.9%. In Q3FY23, Infosys’ profit grew by 9.4% QoQ to Rs 6,586 crore and its revenue increased by 5.3% to Rs 39,087 crore. Analysts Apurva Prasad, Amit Chandra and Vinesh Vala said that revenue growth was ahead of consensus, supported by higher pass-through revenue, which was linked to integrated deals. The IT company has increased its revenue guidance for Q4FY23 to 16-16.5%. 

The total contract value for Q3FY23 was $3.3 billion. The analysts are also positive about the company as they expect a recovery in North America and strong traction in the energy & utilities, and manufacturing verticals. Out of the 32 large deals that Infosys won, 25 were from North America. “Acceleration in vendor consolidation and cost take-out deals has led to  growth in its core services (vs historical decline),” they added.

  1. Just Dial: ICICI Securities maintains its ‘Buy’ rating on this internet technology company with a target price of Rs 750. This indicates an upside of 14.2%. In Q3FY23, the firm’s net profit grew 44.4% QoQ to Rs 75.3 crore, and revenue rose by 7.9% QoQ.

Analysts Abhisek Banerjee and Heenal Gada believe the stock is trading at an attractive valuation after falling nearly 34% over the past year. They believe this correction in price is an overreaction and are positive on the company as it has beaten their EBIT margin estimates in Q3. Its margin expanded by 400 bps QoQ to 12.3%, beating the analysts’ estimate of 9.4%.

Banerjee and Gada believe the sustained and sequential improvement in collections indicates an improvement in demand for the firm’s services. They add, “Just Dial has ~26% revenue exposure to the B2B e-commerce segment. We believe this is likely to be the primary growth driver for the company going forward.” The analysts expect the company’s net profit to grow at a CAGR of 100.8% over FY23-25. However, the company’s Trendlyne Durability Score is 45, indicating average financial health - the company has negative net cash flow and weak ROE. 

  1. HCL Technologies: Motilal Oswal reiterates its ‘Buy’ rating on this technology company with a target price of Rs 1,270, indicating an upside of 14.6%. For Q3FY23, the company reported a profit of Rs 4,096 crore, a 17.4% QoQ increase, and revenue of Rs 26,960 crore (in line with the brokerage’s estimate), an 8.2% QoQ rise. Analysts Mukul Garg, Prakash Bhanushali and Pritesh Thakkar said, “Strong revenue growth guidance of 16-16.5% YoY in CC terms for services should address investor concerns on the company’s growth.”

“Despite seasonality and a tough demand environment, HCL maintained its growth momentum in both IT Services, and engineering research and development verticals,” the analysts added. They believe higher exposure to cloud offers a better resilience to its portfolio in the current context, with higher demand for cloud, network, security, and digital workplace services.

Remaining optimistic, analysts said, “Strong sequential growth within services, robust headcount addition, healthy deal wins, and a solid pipeline indicate an improved outlook.” 

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

Vijay Kishanlal Kedia    
18 Jan 2023
Portfolio X-Ray: Vijay Kedia’s SMILE is his investing secret
By Abhiraj Panchal

Vijay Kishanlal Kedia, born in Kolkata, is an Indian investor based out of Mumbai. He began investing in the stock market at the age of 19 years and started Kedia Securities in 1992, when he was 33. 

Speaking about his investment rationale in an interview, Kedia had said, “One should scout for companies which have good management... find a very good management, a very honest management and see the product in which the management is going to grow, going to outperform its peers and the economy. Invest in those companies for the next 10-15 years, and you cannot go wrong." According to reports, he uses the SMILE approach in investment–‘small in size, medium in experience, large in aspiration, and extra-large in market potential’. 

As of end-Q2FY23, Kedia’s net worth is Rs 770.7 crore, and he publicly holds stakes in 16 stocks. The best-performing stock in his portfolio is Tejas Networks, a telecom service company. The stock price of the company has risen 11x since it was added to his portfolio in June 2020. 

The marquee investor bought a stake in pharmaceutical company Neuland Laboratories in Q3FY20 and in textile company Vaibhav Global in Q4FY17. Their stock prices have also risen by 308.2% and 285.4%respectively since the purchase. The oldest best-performing stocks in the portfolio are specialty chemicals company Sudarshan Chemical Industries and furnishing company Cera Sanitaryware, both bought in FY16. Their stock prices have increased 243.7% and 164.0% respectively in the past seven years. Kedia also earned approx 181.3% returns from Elecon Engineering, which was added to the portfolio in Q1FY22.

Interestingly, Kedia has held all the negative-performing stocks in his portfolio since before December 2015. It suggests that Kedia doesn’t let go of underperformers easily - perhaps hoping for an eventual recovery. 

Kedia sold a part of his stake in Lykis (he held 2.7% Q2FY23 before selling to below 1% in Q3FY23), a personal products company, in Q2FY23. Its stock price has fallen 49.6% since Q3FY16. The second worst-performing stock is Atul Auto (auto components manufacturer). Its stock price has dipped 48.6%, followed by Panasonic Energy India (electronic components company), which fell 29.5%. Stock price of Repro India, a publishing company, has also decreased by 22.4%.  

Telecom services, general industrials and textile among Kedia’s preferred sectors

The marquee investor has 30.1% of his portfolio invested in the telecom services sector, aggregating to Rs 218.4 crore. He has 16.8% in general industrials, 13.1% in textiles, apparels and accessories, and 9.7% in diversified consumer services. Hotels, restaurants and tourism amounts to 7.4%, and chemicals and petrochemicals amounts to 5.2%. 

Commercial services and supplies, automobiles and auto components, pharmaceuticals and biotechnology, FMCG, cement and construction, and software and services occupy less than 5% each of the portfolio.

Kedia’s portfolio has been dormant in terms of new buys or additions during Q2FY23 except for a minor stake addition in Elecon Engineering, an industrial machinery company.  In Q3FY23, from the data available, he has not made any additions yet.

As for cutting stakes, Kedia sold a 6.6% stake in Lykis, an FMCG company, in Q2FY23, while the company announced a 113.1% YoY rise in profit and 28.2% increase in revenue for the same quarter. He reduced his Affordable Robotic & Automation stake to 12.3% in Q2FY23 from 14.2% in Q4FY22. He also cut a 0.3% stake in Ramco Systems and a minor stake in Tejas Networks.

n Q3FY23 (from the most recent available data), Kedia has sold a 0.3% stake in Tejas Networks (now holds 2.3%), a 1% stake in Talbros Automotive Components (now holds 1.3%) and cut his stake in Lykis to below 1%.

Most companies in Kedia’s portfolio were profitable last quarter

Only three companies in the portfolio have reported a loss for Q2FY23–Ramco Systems, Panasonic Energy India and Atul Auto. Even while reporting profit, seven companies have fallen YoY in net profit and two in revenue. Ramco Systems has dipped 15.7% YoY in revenue and suffered a loss of Rs 60.3 crore. Neuland Laboratories reported an 88.8% rise in net profit and Elecon Engineering had an 82.3% growth in profit during the same period.

From the portfolio, eight stocks that outperformed their respective industries, include Affordable Robotic & Automation, Elecon Engineering, Atul Auto and Tejas Networks. Ten companies have outperformed their industry over a quarter and eight outperformed over a month.

Cera Sanitaryware has the highest basic annual EPS of Rs 116.2, followed by Neuland Laboratories (Rs 49.74), Talbros Automotive Components (Rs 36.36) and Heritage Foods, a packaged foods company, (Rs 20.81).

Around 11% of the companies in the portfolio trade in the PE Buy Zone and PE Sell Zone each. Neuland Laboratories trades in PE Buy Zone, while Vaibhav Global trades in PE Sell Zone. The rest of the companies trade in PE Neutral Zone.

Meanwhile, the PE of all stocks in Kedia’s portfolio is above their respective sectors, proving that he prefers stocks with good valuations relative to their sectors.

How volatile is Kedia’s portfolio?

The beta for 10 stocks in Kedia’s portfolio is below 1 for a year, and 6 stocks are greater than 1. However, six stocks have a beta below 1 for a quarter. The average beta of the portfolio for a year is 0.89, whereas it is 1.14 for a quarter. 

To conclude, Kedia prefers stocks that are not as volatile as the benchmark index in the long run. He also prefers stocks with strong valuations. Kedia’s portfolio doesn’t see frequent changes, and he holds on to stocks for long periods. To quote the marquee investor, while luck plays a big part in stock market investments, knowledge, courage and patience are the cornerstones.

The Baseline Hi Unicursal, thanks for pointing this out - the chart has been fixed.
19 Jan 2023
19 Jan 2023
The Baseline    
10 Jan 2023
Five analyst picks this week
By Abhiraj Panchal
  1. InterGlobe Aviation: ICICI Securities maintains its ‘Buy’ rating on this airlines stock with a target price of Rs 2,360. This indicates an upside of 14.4%. Analysts Ansuman Deb and Ravin Kurwa expect the company to post a profit in Q3FY23 on the back of rising daily passengers and a fall in aviation turbine fuel (ATF) prices. They expect an 18% QoQ growth in the number of passengers carried (PAX) by Indian airlines in Q3. “Accordingly, IndiGo could report total PAX of 22.5mn in Q3FY23, up 14% QoQ, based on market share assumption of 56% in December 2022,” they added.

The analysts believe the company’s domestic passenger load factor (PLF) will maintain traction in Q3, in line with rising demand. They estimate its PLF to come in at 85% in Q3FY23. ATF prices are also likely to fall 8% QoQ, which will reduce margin pressure on the company. Deb and Kurwa expect Indigo’s revenue to grow at a CAGR of 59.1% over FY22-24. 

  1. Prestige Estates Projects: Motilal Oswal maintains its ‘Buy’ rating on this realty company with a target price of Rs 675. This indicates an upside of 45.2%. Pritesh Sheth and Sourabh Gilda expect “CY23 to be a defining year for the company as it looks to grow its pre-sales on a strong base, provide growth visibility”, and allay concerns about high debt levels. The analysts believe the firm’s launch pipeline and robust pre-sales bookings will improve cash flow generation. Given stronger cash flows, they expect a large part of the firm’s capex to be funded through internal accruals, thus capping net debt. 

Sheth and Gilda anticipate the firm’s pre-sales to rise further in FY24 on the back of higher-than-expected launches in the next 12 months. They believe its commercial portfolio will generate a rental income of Rs 3,200 crore in the next five-six years. The analysts estimate the company’s revenue to grow at a CAGR of 11% over FY22-25.     

  1. UNO Minda: Axis Securities recommends a ‘Buy’ call on this auto components manufacturer with a target price of Rs 571. This indicates an upside of 6.7%. Analyst Neeraj Chadawar says, “The company is well-diversified with an ICE-EV agnostic product portfolio and is constantly increasing kit value, leading to higher wallet share with existing and potential clients.” According to him, the company’s divisions are operating at optimum capacity and it has announced a critical capex growth pipeline to meet incremental demand. 

Chadawar says that announcements made in Q2FY23—expansion of lighting (capex of Rs 400 crore) and alloy wheels (Rs 190 crore) capacity, total capex pipeline of Rs 1,664 crore, and joint venture with Buehler and Tachi-S—will further boost the company’s long-term growth drivers. With strong growth drivers and a strong order book, the analyst expects revenue and profit CAGR of 22% and 42% respectively over FY22-25.

  1. Can Fin Homes: ICICI Direct initiates coverage with a ‘Buy’ call on this housing finance company and a target price of Rs 625. This indicates an upside of 14%. Analysts Kajal Gandhi, Vishal Narnolia and Pravin Mule say,  “Can Fin Homes continues to focus on tier-2 and tier-3 cities where there is less competition from banks and it can benefit from pricing power with an increased focus on branch expansion.” With the government’s focus on affordable housing, the analysts think the company is poised to benefit in terms of an improved growth trajectory. They expect the loan book to grow at 17% CAGR in FY22-25. 

Gandhi, Narnolia and Mule say, “Can Fin Homes has been a best-in-class housing finance player with a robust business model and underwriting practices.” The analysts are optimistic about the housing finance provider as it will have consistent growth with a focus on efficient operations, coupled with relatively lower cost and strong underwriting, which will in turn, benefit earnings and return ratios.

  1. KPIT Technologies: Ashika Research gives a ‘Buy’ call to this IT consulting and software company with a target price of Rs 800, indicating an upside of 11.5%. According to the analysts, “KPIT stands to benefit from the recent acquisition of four Technica Group Companies, as it will help it  create a unique one-stop shop for the automotive industry in its transformation towards Software Defined Vehicles.” They added that the acquisition will enable KPIT to retain clients, engage much earlier in client development programmes, be part of complex architecture, etc.

According to the analysts, the company is a strong player in a high entry barrier segment as it operates in an area which is extremely complex and disruptive. Therefore, entry into such a segment is extremely difficult for new players. The analysts are positive on the back of soaring deal size, healthy balance sheet status, strategic end-to-end engagement model and strong demand. “All key growth levers in cumulation affirm the continuance of positive earnings growth trajectory,” they concluded.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

Rakesh Jhunjhunwala and Associates    
03 Jan 2023
Portfolio X-Ray: The new team managing Rakesh Jhunjhunwala’s portfolio has big shoes to fill
By Abhiraj Panchal

Rakesh Jhunjhunwala, christened the Big Bull of the Indian stock market, was known for his skill in picking winners – and then holding on to them for a long time in topsy-turvy markets. His patience with his investments and his belief in betting on “great businesses, not stocks” earned him comparisons to the American investor Warren Buffett.

After graduating from Sydenham College in Mumbai,  Jhunjhunwala enrolled at the Institute of Chartered Accountants of India. Influenced by his father’s interest in the stock market,  he began investing in college, and his road to becoming a billionaire investor started with Rs 5,000 in 1985. 

Over his long career, Jhunjhunwala was chairman and director at multiple companies, including Hungama Media, Aptech, Viceroy Hotels, and Concord Biotech. He also founded Akasa Air. Jhunjhunwala ran his asset management firm Rare Enterprises till his death in 2022.

Since his passing in August, his portfolio has been managed by the team at Rare Enterprises, headed by Utpal Sheth and Amit Goela. The portfolio’s net worth in Q2FY23 was Rs 33,225.8 crore, and it publicly holds stakes in 30 stocks.

The best-performing stock in Big Bull’s portfolio is Escorts Kubota. Its price has risen 1,145% over the past seven years. However over the years Rare Enterprises reduced its stake to 1.4% in Q2FY23 from 10.2% in Q3FY16.

The next best-performing stock is gem and jewellery company Titan with a price change of 648.2%, followed by realty company Anant Raj (422.6% rise) and IT training services companyAptech (391.9% rise). Jhunjhunwala’s portfolio owns a 43.8% stake in Aptech. In stocks that were added recently, Indian Hotels (bought in Q1FY21) has risen 311.4%, Tata Motors (bought in Q2FY21) 191%, and Jubilant Ingrevia (bought in Q3FY18) 103.5%.

The worst-performing stock in Jhunjhunwala’s holdings is pharmaceutical company Wockhardt; it has fallen 55.7% since Q3FY21.

While another pharmaceutical stock Jubilant Pharmova has fallen 45.3% since Q1FY18, the oldest negatively performing stock in the portfolio is healthcare supplies company Bilcare. As its price fell by 36.5% since Q3FY16, Rare Enterprises cut its stake to below 1% in Q2FY23 from 8.5% in Q1FY23. It also cut its  Indiabulls Housing Finance (housing finance company) stake to below 1% as its price fell 40.7% since the time of purchase.

Textiles, apparels and accessories, and banking and finance are Rare’s preferred sectors

As much as 38.5% or Rs 12,780 crore of Jhunjhunwala’s total portfolio value is concentrated in the textiles, apparels and accessories sector, as it holds a 5.5% stake in Titan, whose market-cap is 2.3 lakh crore.

Similarly, Jhunjhunwala holds 14.4% of the footwearcompany Metro Brand, taking the retailing sector to 10.4% of the total portfolio. The banking and finance sector constitutes 27.6% of the portfolio. Automobiles and auto components take up 5.5% of the total holdings, while the rest constitute less than 4% each.

Portfolio changes in Q2FY23

In Q2FY23, Jhunjhunwala’s portfolio had no major additions except for Singer India.  RARE Enterprises added a 7.9% stake in the household appliances manufacturer. Other additions were 0.5% stake each in Tata Communications (telecom services company) and Titan, a 0.4% stake in Fortis Healthcare (healthcare facilities company), and minor stake additions to NCC and Tata Motors

Rare Enterprises cut 1.6% stake in specialty chemicals company Jubilant Ingrevia, 1% stake in Federal Bank, and 0.5% stake each in Canara Bank, D B Realty and agrochemicalscompany Rallis India. Stakes in Autoline Industries, Indiabulls Housing Finance and Bilcare were cut below 1%, as against 4.5%, 1.2% and 8.5% respectively in Q1FY23.

Tata Motors among loss-making holdings, several portfolio stocks outperform their industry in share price

Of the 30 companies in the portfolio, only four have reported a consolidated net loss in Q2FY23. Tata Motors had the highest loss of Rs 944.61 crore, as against a loss of Rs 4,441.6 crore in Q2FY22. The other companies that reported losses are Wockhardt, Dishman Carbogen Amcis (pharmaceuticals company) and Orient Cement.

12 companies in the Big Bull’s portfolio outperformed their respective industries over the year in share price.  Stocks that outperformed their industries include Karur Vysya Bank, Metro BrandsEscorts Kubota, Federal Bank, and NCC.

Escorts Kubota had the highest basic annual EPS of Rs 74.1. Crisil had a basic annual EPS of Rs 64, Tata Communications of Rs 52, Canara Bank of Rs 35 and Jubilant Ingrevia of Rs 30. 

50% of Jhunjhunwala’s portfolio stocks are  trading in the PE Buy Zone (Stocks are in the PE Buy Zone when their current PE is below their historical PE levels). The stocks in the PE Buy Zone include D B Realty, Prozone Intu Properties, Geojit Financial Services and Nazara Technologies (internet software and services company).

Meanwhile, 27% of the stocks, including Agro Tech Foods, Escorts Kubota, Jubilant Pharmova and Singer India are trading in the PE Sell Zone. Stocks that have their PE higher than their respective sectors are Edelweiss Financial Services, Crisil, Escorts Kubota, Titan, Nazara Technologies and Agro Tech Foods.

How volatile is Jhunjhunwala’s portfolio?

The beta for 12 stocks in Jhunjhunwala’s portfolio is below 1, and 18 stocks are greater than 1. The average beta of the portfolio for a year as well as the quarter is 1.1. The volatility of the portfolio is in line with the benchmark index.

Rakesh Jhunjhunwala or the Big Bull will be remembered for his uncanny ability in figuring out where the market was headed, and his optimism for the Indian economy - even in the midst of the pandemic. It will be interesting to see if the RARE Enterprises team lives up to the reputation this portfolio has built over the past several decades.

The Baseline    
22 Dec 2022
Portfolio X-Ray: Ashish Kacholia has an eye for smallcap and midcap winners
By Abhiraj Panchal

Ashish Kacholia is known in the industry for his skill in picking small and midcap winners. He started his career in Prime Securities, and later moved to Edelweiss. He co-founded Hungama Digital with Rakesh Jhunjhunwala and now serves as a board member. He started his own company Lucky Securities in 2003. Kacholia holds a Bachelor's degree in Production Engineering and a Master's in Management Studies. 

Kacholia primarily invests in small-cap and a few mid-cap companies, and has an uncanny eye for finding potential multibagger stocks.  His net worth in Q2FY23 was Rs 1,772 crore, and he publicly holds stakes in 40 stocks, of which 37 are small-cap companies.

Best-performing companies in Kacholia’s portfolio are Beta Drugs, Safari Industries (India) and Carysil. The price of Beta Drugs has increased 573.4% since he added it to his portfolio in Q4FY19. He currently owns a 5.7% stake in the pharma company. 

Kacholia bought stakes in  Safari Industries (India) and Carysil in Q4FY20 and Q3FY16 respectively. Their stock prices have also risen by 328.4% and 276.3%respectively since the purchase. The investor booked profits on Mastek (bought in Q2FY19), Vishnu Chemicals (bought in Q3FY16) and Mold-Tek Packaging (bought in Q1FY18) before cutting his stake to below 1% in Q2FY23, as they started to hurt the portfolio holding value. The prices of these companies rose by 271.6%, 353.4% and 191.9% respectively till Q2FY23, since the time of purchase.

The worst-performing stocks in Kacholia’s portfolio are IOL Chemicals and Pharmaceuticals and  United Drilling Tools. Their prices have fallen by 52.7% and 41.5%respectively since added to the portfolio in Q3FY21 and Q3FY22. He also cut his stake in Kwality Pharmaceuticals to below 1% in Q2FY23 as its price fell 50.8% by the end of the quarter of purchase. 

Chemicals, consumer durables, textiles among Kacholia’s favourite sectors

Kacholia’s diversified portfolio has 16.4% investment in the chemicals and petrochemicals sector, aggregating to Rs 300.7 crore. He has invested 14.9% of his portfolio in consumer durables, 13.9% in textiles, apparel and accessories, and 9.4% in general industrials. While commercial services and supplies and pharmaceuticals and biotechnology amounts to 8.3% each, software and services has 7.8%, and diversified consumer services 5% of his portfolio. The least invested sectors are food, beverages and tobacco, banking and finance, FMCG, realty, and hardware technology and equipment with less than 2% each.

The marquee investor went on a buying spree and added nine new stocks to his portfolio in Q2FY23. He also increased his holdings in 12 companies during the same period. He reduced his holdings in ten companies, of which five were cut to below 1%. In new additions, he bought 5% of Dudigital Global, 3.3% of D-Link (India) and 2.6% of Agarwal Industrial Corp. He also increased his stakes in Hindware Home Innovation and Ador Welding by 1.3% and 1% respectively. Kacholia cut a 0.3% stake in Genesys International Corp and 0.2% in Safari Industries (India) and reduced holdings in Mastek, Mold-Tek Packaging, Vishnu Chemicals, VRL Logistics and Kwality Pharmaceuticals to below 1%. 

During the recent quarter, Kacholia bought a 2.1% stake in Raghav Productivity Enhancers on November 4, a 1% stake in Likhitha Infrastructure on November 30 and a 0.8% stake in Aditya Vision on December 9. On December 21, he sold a 0.6% stake in D-Link (India) in a bulk deal.

Kacholia prefers companies with good fundamentals

Of the 40 companies that Kacholia holds, only one reported a net loss in Q2FY23. Sastasundar Ventures reported a consolidated net loss of Rs 4.9 crore despite a 60.3% rise in consolidated revenue, while the rest had net profit. 

During Q2FY23, Best Agrolife reported a net profit of Rs 129.8 crore, indicating an increase of 415.4% YoY, while its revenue rose by 115.9% YoY. Agarwal Industrial Corp, Safari Industries (India) and Barbeque-Nation Hospitality reported a YoY rise in net profit by 257.1%, 144.2% and 142.6% respectively, while their revenue increased by 40.4%, 67% and 40.6%. Kacholia cut his stake in Vishnu Chemicals to below 1%, while its profit grew by 111.2% in Q2FY23. Eleven companies in the portfolio reported a YoY fall in net profit, while three reported a YoY fall in revenue. United Drilling Tools, IOL Chemicals and Pharmaceuticals, Carysil and Vaibhav Global are among the companies that reported a fall in net profit.

From the portfolio, 22 companies outperformed their respective industries over a year and quarter, and 17 companies outperformed over a month. PCBL, Arvind Fashions and La Opala RG are among the companies that outperformed their industries.  

Sastasundar Ventures announced the highest basic annual EPS of Rs 222.7, followed by Bharat Bijlee (Rs 98.3), Garware Hi-Tech Films (Rs 72), Agarwal Industrial Corp (Rs 51.1) and Best Agrolife (Rs 46).

While 21% of the stocks in Kacholia’s holdings, like Barbeque-Nation Hospitality, Best Agrolife, Shaily Engineering Plastics and Safari Industries (India) are currently trading in the PE Buy Zone, 27% are trading in the PE Sell Zone. Companies in the Sell Zone include HLE Glasscoat, Vaibhav Global and Fineotex Chemical. Meanwhile, the PE of seven stocks is above their respective sectors, like HLE Glasscoat, Arvind Fashions, Genesys International Corp, Megastar Foods and Shankara Building Products.

How volatile is Kacholia’s portfolio?

Over a year, the beta for 20 stocks in Kacholia’s portfolio is below 1 and 16 are greater than 1. However, 29 stocks have a beta lesser than 1 for a quarter. The average beta of the portfolio for a year is 0.94, whereas it is 0.8 for a quarter. 

The Beta of Ashish Kacholia’s portfolio is lesser than that of the Nifty 50. Even though the volatility is marginally in line with the benchmark index for a year, it is lower over the quarter. We can conclude that Kacholia, despite his preference for smaller companies, may make safer bets while buying stocks. On the valuation side, he currently holds stocks in both the PE Buy and Sell Zones.  

Overall, the marquee investor looks for companies with strong fundamentals and have the potential to turn into multibagger stocks. He then tends to hold them for a longer period to book higher profits, and rarely panics during downturns.