Stock market analysis and stories by Satyam Kumar

Articles by Satyam Kumar

28 May 2024

5 stocks to buy from analysts this week - May 28, 2024

1. Bank of Baroda:

Geojit BNP Paribas maintains its ‘Buy’ rating on this bank, raising its target price to Rs 294, indicating a potential upside of 8.7%. In Q4FY24, the company reported revenue growth of 15.2% YoY to Rs 33,774.9 crore, with net profit rising 2.3% YoY to Rs 4,886.5 crore. Analyst Vinod T P attributes the muted profit growth to higher interest expenses, which rose 24.1% YoY to Rs 17,791 crore.

Vinod says, “The bank’s interest income rose 14.4% YoY to Rs 29,583 crore, driven by expansion in the retail loan segment which increased 20.7%.” He is upbeat about BoB as their asset quality improved in Q4, buoyed by a decline in gross non-performing assets (GNPA) and net non-performing assets (NNPA) to 2.9% and 0.7% respectively.

Analyst Vinod is optimistic as the bank has guided deposit growth in the range of 10-12% for FY25. He is also positive as Bank of Baroda aims to lower its GNPA and NNPA further, to 2.5% and 0.5% in FY25.

2. Astral:

Edelweiss maintains a ‘Buy’ rating on this plastic products manufacturer with a target price of Rs 2,476, indicating a potential upside of 13.9%. In Q4FY24, the company’s revenue increased 8.1% YoY and 18.8% QoQ to Rs 1,635.3 crore while its net profit decreased 11.7% YoY (but rose 60% QoQ) to Rs 181.6 crore. He notes that the decline in net profit was due to a decline in EBITDA due to higher employee cost (up 39% YoY) after the ramp up of new plant locations.

Analyst Nikhil Shetty attributes the quarterly improvement to growth in plumbing volumes, which rose 27% QoQ. He is upbeat as the management plans to set up manufacturing in Central India after the expansion in Hyderabad and Kanpur. He highlights the company’s plans to enter the PVC-O pipes segment, which is a cheaper alternative to iron pipes and is used in fresh water and high-pressure applications. He expects a revenue CAGR of 22.6% in FY25-26, buoyed by lower commodity prices and higher real estate activity.

3. JSW Steel:

ICICI Direct assigns a ‘Buy’ call to this steel products manufacturer with a target price of Rs 1,125, indicating an upside of 24.7%. In Q4FY24, the company’s net profit fell 64.6% YoY to Rs 1,299 crore, while revenue decreased marginally to Rs 46,511 crore. According to analysts Shashank Kanodia and Manisha Kesari, the profit was impacted due to higher raw material costs at its Indian operations and a drop in metal realizations.

However, the analysts are optimistic about JSW Steel’s expansion plan. The company plans to increase its domestic steel production capacity to 42 million tonnes per annum (mtpa) by H1FY28, and gradually expand it to 50 mtpa by FY31. It also plans on increasing its downstream capacities to raise its share of high-margin value-added products. The analysts model a volume growth of 10% CAGR over FY25-26 to 30 metric tonnes in FY26.

Kanodia and Kesari expect the EBITDA per tonne to improve with demand recovery in global markets, improved steel prices, and lower coking coal costs. The analysts conclude, “With strategic capacity expansion in place, favorable steel demand, and improvement in profitability, JSW Steel is poised to deliver a 450 bps improvement in margins in FY25.”

4. Shree Cements:

KR Choksey upgrades its rating on this cement manufacturing company to ‘Buy’ with a higher target price of Rs 30,662. This indicates a potential upside of 20.5%. In Q4FY24, the company reported a revenue growth of 6.4% YoY to Rs 5,582.4 crore, with net profit rising 28.4% YoY to Rs 674.9 crore. Analyst Unnati Jadhav highlights that EBITDA rose 59.9% YoY due to margin expansion led by higher inventory gains, better usage of alternate fuels, lower freight costs and employee expenses. She also attributes the growth in revenue to capacity expansion and higher capacity utilisation.

Jadhav is upbeat as the company intends to fund its capex plans worth Rs 4,500 crore for FY25 through internal accruals and does not intend to raise additional funds. Shree Cements also intends to reduce its logistics costs by investing in their private railway siding and expects to move 25% of their goods via rail in 3-4 years. She expects the firm to post revenue CAGR of 11.8% and adjusted net profit CAGR of 14.2% over FY25-26.

5. Ujjivan Small Finance Bank:

Axis Direct maintains its ‘Buy’ call on this small finance bank with a target price of Rs 64, indicating an upside of 19.7%. In Q4FY24, the bank’s net profit rose 6.5% YoY to Rs 329.6 crore, beating the brokerage's estimates, while its net interest income improved by 26% YoY. Analysts Dnyanada Vaidya and Prathamesh Sawant note that the growth was led by a 24% YoY increase in advances and margin expansion. The bank’s deposits improved 26% YoY while disbursements grew 11% YoY, which the analysts say was driven by strong growth in the non-MFI segments.

Vaidya and Sawant say, “Healthy demand across products, along with a gradual scale-up in new products (gold and vehicle loans), should help the bank sustain its growth momentum over the medium term.”

The analysts expect NIM to remain at 9% in FY25, supported by loan repricing, but expect margins to contract due to a shift in portfolio mix towards secured lending. They also estimate that operating costs will remain elevated as the company plans to invest in technology and human resources to build a better platform.

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

(You can find all analyst picks here)

The Baseline

22 May 2024

Chart of the Week: 13 of the 15 stocks constituting the Nifty Metal index trade near all-time highs

By Satyam Kumar

A week ago, US President Joe Biden imposed a new tariff hike on Chinese products, which is projected to affect around $18 billion in annual imports from China. He accused China of heavily subsidising products, causing Chinese companies to produce more than what the market can absorb and then dumping the excess at unfairly low prices. He said, “When you follow tactics like this, you’re not competing. It’s not competition, it’s cheating.”

Since the tariff hike on May 14, the Nifty Metal index as of May 22 has posted a sharp rally of 9.1%, as Indian exporters stand to gain from a fairer playing field. However, experts caution about US tariffs diverting the dumping of Chinese goods to India.

In this edition of Chart of the Week, we will be looking at the performance of India’s metal index, Nifty Metal, over the past year. As of May 22, the index has risen 76.6%, outperforming the benchmark Nifty 50, which has increased by 24.1%. This rise is mainly due to quick government intervention against Chinese dumping and surging commodity prices globally.

Hindustan Zinc and Vedanta drove index gains in the past quarter

In the past quarter, the metal index rose 24.4%, with approximately 70% of the gains driven by Vedanta and its subsidiary Hindustan Zinc. Since March 28, 2024, Vedanta and Hindustan Zinc have surged by 81% and 154%, respectively. This rally can be attributed to clarifications on debt distribution post-demerger and rising prices of base metals such as zinc, lead and silver.

On September 29, 2023, Vedanta's Chairman, Anil Agarwal, announced the creation of independent verticals through the demerger of Vedanta and Hindustan Zinc. He expects the demerger to be completed by the end of this year. The company also clarified that debt will be divided among demerged entities based on the ratio of assets allocated. In Q4FY24, the company reduced its debt by 10% QoQ to Rs 56,338 crore.

Hindustan Copper is the best-performing stock in the index, with gains of 299% in the past year. The company's shares have consistently risen in line with increased demand and movements in copper prices. Copper, an essential base metal, plays a pivotal role in the energy transition ecosystem, serving as a key component in manufacturing electric vehicles, power grids, and wind turbines. Recently, speculations of a shortage fueled by talks of output cuts by smelters have led copper prices to surge by over 25% since the start of the year.

Commodity trading company Adani Enterprises also gained 59.4% in the past year. On May 22, the company surged 18.9% as the conglomerate received a clean chit from the Supreme Court of India regarding the Hindenburg case. The apex court appointed a six-member committee following allegations of stock manipulation and accounting fraud by U.S.-based short-seller Hindenburg Research.

Selling by FPIs led index to decline in the Sept-Oct 2023 period

Among all the sectors, the metals and mining sector saw the highest FPI outflow of Rs 8,531 crore in FY24. Companies faced major hurdles due to the dumping of steel at cheaper rates and sub-standard imports from China. Between April and July 2023, steel imports from China to India rose 62% YoY, leading to a significant sell-off by foreign portfolio investors (FPI) of Rs 12,009 crore in August and September last year.

In response, the Indian government imposed a five-year anti-dumping duty on specific types of Chinese steel in September 2023. This tax, levied on imported goods priced below fair market value, aims to curb Chinese imports. The industry is also expected to address production gaps in 2024, supported by policy reforms, incentives, and expansion plans by industry giants such as Tata Steel, Vedanta, and JSW Steel.

Expanding manufacturing PMI boosts outlook for the metal sector

Manufacturing activity, which is indicated by the Purchasing Managers’ Index (PMI), is said to be expanding when it is higher than 50. The PMI for India has been above 50 for all of the past year, signifying robust growth in the manufacturing space. Rising PMI is often directly correlated to the higher demand for metals. On April 1, the metal index rose 3.7% after both the US and China posted expansion in their manufacturing activity in March 2024.

The US saw its manufacturing activity expand in March 2024 as it posted a PMI of 50.3 for the first time since September 2022. Although this figure is just above the threshold of 50, which separates expansion from contraction (PMI below 50), it ended a 16-month streak of shrinking activity.

Similarly, China's manufacturing activity expanded in March for the first time since September 2023, as its manufacturing PMI rose to 50.8 from 49.1 in February. The data offered some relief to China’s policymakers, even as a crisis in the property sector remains a drag on the economy.

Higher steel prices & anti-dumping duty help steel makers

In November 2023, the metal index posted a monthly gain of 8.8%. This rise came after steel-producing constituents witnessed a significant uptick in their share prices as they benefitted from the surging steel prices. This rise in steel prices was due to a rapid decline in inventories and a recovery in end-consumer demand. Since November 2023, companies like Steel Authority of India (SAIL), Tata Steel and JSW Steel have risen 110.3%, 49.5% and 27.5% respectively.

Another factor that is playing in their favour is the higher tariff imposed by governments across the globe to curb Chinese dumping. India saw a 62% rise in steel imports from China to India between April and July 2023, compared to the same period last year. The Indian government imposed an anti-dumping duty of $613 per tonne on flat base steel wheels from China for five years. Similarly, the US government on May 14 raised tariffs on some steel and aluminium products to 25%, citing China's "unfair" policies that were harming workers and businesses in the US. The rising anti-China mood in the commodity market has boosted Indian metal stocks, a trend that is likely to continue in the coming quarters.

The Baseline

16 May 2024

Chart of the Week: Consumer Durables and General Industrials emerge as top gainers in the past quarter and year

By Satyam Kumar

Indian equity markets have stood out as a bright spot in the global investment landscape. India’s flagship index Nifty 500 has delivered gains of 34% in the past year, outperforming global counterparts like Nikkei 225, S&P 500 and others. However, volatility has spiked recently, with India VIX surpassing the 20-point mark, reaching its highest level since early 2023. The surge in volatility can be attributed to concerns that the ruling party might win fewer seats than initially expected. Analysts also worry about lower voter turnout, heightening the possibility of negative surprises.

Given the recent volatility, it is important to look at both the past quarter and past year to assess the performance of stocks and sectors. In this edition of Chart of the Week, we dive into Trendlyne’s indices and sector dashboard to identify the top-performing sectors. We also take a look at the companies driving growth within each sector. Simultaneously, we identify the reasons for the stocks that have demonstrated resilience over the long term and during periods of heightened volatility.

It's crucial to examine the sectors that have thrived despite recent volatility. Analysing sectors helps diversify investments, make informed decisions, and grasp broader trends. So we have selected the top nine sectors over the past quarter as well as the past year, highlighting the stocks that have contributed the most to the sectoral gains.

Consumer Durables, Realty & Auto stocks benefit from rising demand in premium segments

Consumer Durables stands out as the top-performing sector, after posting a 355% gain over the past year. Polycab India gained from the demand surge in real estate and infrastructure sectors, marking a 42.9% rise in the past quarter and a 91.8% surge over the past year. Similarly, Dixon Technologies (India) rose 34.1% in the last quarter and surged 191% in the past year. Dixon Technologies has benefitted from the manufacturing boost buoyed by the ‘Make in India’ initiative and the ‘China+1’ strategy. In the ‘China+1’ strategy, companies are shifting a significant portion of their manufacturing from China to other developing nations like India, Indonesia, Bangladesh, etc.

Likewise, electrical appliances manufacturer Havells India, saw a 25.2% uptick in its share price in the last quarter, accounting for 20.7% of the sector's 18.9% gains during the same period. This growth was largely fueled by increased demand for summer appliances due to rising temperatures nationwide and the uptick in discretionary spending among Indian consumers.

The Realty sector soared by 124% in the past year, driven by heightened demand for luxury residences as appetite for a higher standard of living increases. DLF, Macrotech Developers, and Prestige Estates Projects were major contributors, with respective gains of 90.2%, 130.7%, and 211.8% over the past year.

However, the realty sector's gains moderated in the last quarter as presales consolidated due to a lack of new launches. Despite this, the sector managed a 6.9% increase, with Prestige Estate Projects and Godrej Properties accounting for more than half of the gains. These companies benefited from increased realisations per square foot in metropolitan areas and their expansion in tier-I and tier-II cities.

The automobile and auto components sector has been consistently rising with gains of 14.4% in the past quarter and 71% in the past year. This was driven by higher sales in the premium segment and stable raw material prices, resulting in higher realisations. However, sluggish monsoons impacted sales in the entry-level segment, with surges observed only during festive seasons. Tata Motors and Mahindra & Mahindra emerged as consistent gainers, contributing to over one-third of the sector's gains in both the last quarter and the past year.

Rising demand for electricity drives utilities, mining and general industrials higher

According to Trendlyne’s Sector and Indices Dashboard, the metals and mining sector has risen 18.2% in the past quarter and 85% in the past year. In terms of total production, India's mining sector grew by 7.5% in FY24 with robust demand in steel, cement, and aluminium industries, highlighting strong economic activity. Hindustan Zinc was the best-performing stock in the past quarter as it rose 68%. Coal India also outperformed its peers in the past year with 90% gains as production rose 10% on an annual basis driven by demand from thermal power plants.

Meanwhile, the utilities sector, which is a direct beneficiary of rising electricity demand, rose 7.1% in the past quarter and 116% in the past year. NTPC has consistently contributed to sectoral growth as it gained 9.4% in the past quarter and 101% in the past year.

State-run NTPC has announced plans to add 5 gigawatts (GW) of installed capacity in FY25. Of this, the company plans to install 3 GW of renewable energy capacity and the remaining 2 GW of thermal power capacity.

General Industrials, on the other hand, is the best-performing sector in the past quarter with gains of 24.6%. Siemens, ABB India, and Hindustan Aeronautics (HAL) are the top sector drivers with each contributing 16%, 15% and 13.1% to the sectoral rise. If we look at the performance over the past year, the sector has risen by 120%. Bharat Heavy Electricals (BHEL), HAL, and Suzlon Energy are the highest contributing stocks as they rose 162.2%, 240.3% and 377.8% in the past year. Rising demand for heavy electrical equipment from the utilities sector drove BHEL and Suzlon Energy higher.

Similarly, defence company HAL witnessed its order book swell over Rs 94,000 crore at the end of FY24 as it received orders for its armoured helicopters and fighter jets amid rising geopolitical tensions.

Industry leaders such as Indigo, Bharti Airtel and Dmart drive sectoral gains

The transportation sector surged by 95% in the past year. Adani Ports & SEZ and InterGlobe Aviation (Indigo) emerged as key drivers, responsible for over 50% of the sector’s total growth. While Adani Ports has posted moderate gains amid high volatility in the past quarter, Indigo soared by 29.4%, contributing 67.5% to the sector's 10% gains in the same period. The expansion of new airports has improved connectivity which in turn has increased the preference for air travel, resulting in a rise of air passenger traffic to pre-COVID levels. In addition, stable fuel prices and expansion into international routes have also played a role in Indigo's share price uptick.

The telecom services sector, which rose 16.6% in the past quarter, switched places in the chart with the commercial services and supplies sector as their major contributor, Adani Enterprises which gained 48% in the past year, consolidated in the past quarter. Bharti Airtel, contributing 68.4% to the telecom sector's rise, gained as Chairman Sunil Mittal indicated a potential tariff hike post-elections in Q2. This strategic move aims to enhance their RoCE (return on capital employed) amidst substantial investments in 5G and increased customer acquisition costs.

Meanwhile, the retailing sector demonstrated steady growth, advancing 18% in the past quarter and 76% over the past year. Trent and Avenue Supermarts (Dmart) emerged as consistent performers, accounting for over 90% of sectoral gains in both periods. The continuous momentum in discounted mass-consumer products and the surge in urban consumer spending due to rising income levels have driven the sales volume of retail giants like Dmart and Trent.

The Baseline

14 May 2024

5 stocks to buy from analysts this week

By Satyam Kumar

1. ICICI Bank:

KR Choksey maintains a ‘Buy’ rating on this bank with a target price of Rs 1,355, indicating a potential upside of 20.1%. In Q4FY24, the company's revenue surged by 24.6% year on year to Rs 67,181.7 crore, while its net profit grew by 29.2% YoY to Rs 12,728.6 crore. Analyst Unnati Jadhav is optimistic as the bank's performance was in line with expectations. She suggests that lower-than-expected provisions led net profits to rise in Q4, exceeding estimates by 2%.

Jadhav identifies the retail loan segment as a key growth driver for the bank – it recorded significant growth of 19.4% YoY and 3.7% QoQ. The retail loan portfolio constitutes 46.8% of the total portfolio. She anticipates the cost-to-income ratio to rise to 40.5% for FY26 due to ongoing investments in branch expansion and digital banking strategies. Jadhav estimates a profit CAGR of 14.5% over FY25-26, and a 16.4% CAGR in advances.

2. TVS Motor Company:

Geojit BNP Paribas maintains a ‘Buy’ rating on this 2/3-wheeler manufacturer, with a target price of Rs 2,265, indicating an upside of 9.5%. In Q4FY24, the company reported a revenue growth of 23.5% YoY, coming just shy of the Rs. 10k crore mark to Rs 9,999 crore. It also saw a 15.1% YoY increase in its net profit to Rs 387 crore. Analyst Antu Eapen Thomas attributes the Q4FY24 revenue jump to strong volume growth, a superior product mix, and improved realisation.

Thomas notes that the EBITDA margin met their expectations, rising by 105 basis points YoY to 11.3%, supported by softening raw material prices and effective cost control measures. He highlights the company's outperformance compared to its peers in Q4, with market share in the motorcycles segment rising by 50 basis points to 13.7% due to urban commuter growth and a strong product mix in the 125 cc category.

Thomas is optimistic as the company plans to launch several new products ranging from 5KW to 25KW on the EV platform by FY25. He notes that the company aims to expand its dealer network from 400 to 800 by year-end and currently derives 10% of its volume from EVs.

3. KPR Mill:

Sharekhan reiterates its ‘Buy’ rating on this textiles company with a target price of Rs 965, suggesting a potential upside of 19.9%. In Q4FY24, the company's revenue experienced a 12.7% YoY decline to Rs 1,708.6 crore, while net profit increased by 1.9% YoY to Rs 213.6 crore.

Analysts at Sharekhan attribute this rise in net profit to improved EBITDA margins, which increased by 332 basis points YoY to 19.7%. They express optimism as lower raw material costs contributed to a 541 basis points YoY rise in gross margins.

Analysts at Sharkhan note, “In the medium to long term, the China+1 factor, the likely signing of the free trade agreement (FTA) with the UK, and increasing opportunities in the US market provide scope for consistent growth in its high-margin garment business (~40% of the total revenue).” They are bullish on the company as the brownfield capacity addition of 30 million pieces is set to be completed by H1FY25. Following the expansion, analysts expect that the company will produce 40 million pieces per quarter in H1FY25 and 45 million pieces per quarter in H2FY25.

4. Kajaria Ceramics:

ICICI Direct maintains a ‘Buy’ rating on this tiles company with a target price of Rs 1,440, indicating a 24.1% upside. In Q4FY24, the company's revenue grew by 3.5% YoY to Rs 1,258.3 crore. However, its net profit declined by 5.2% YoY to Rs 102.4 crore. Analysts Bhupendra Tiwary and Hammaad Ahmed Ulde attributed this profit decrease to relatively lower tile prices, which impacted margins. During Q4FY24, tile sales volumes increased by 5.5% YoY to 29.6 million square meters (MSM).

Tiwary and Ulde are optimistic as the management outlined a 3-year plan to achieve a volume of 150 million square meters (MSM) of tiles by FY27, implying a volume CAGR of 11.5% and a tiles revenue CAGR of around 11% over FY25-27, reaching Rs 5,500 crore. They note the company’s intentions to expand its presence in tier-II and tier-III cities. Kajaria has indicated that demand recovery is likely post-elections, in Q2FY25. With stable gas prices and benefits driven by operating leverage, they anticipate EBITDA margins to improve to 16% and 16.5% in FY25 and FY26, respectively, from the current 15.3% in FY24.

5. Aarti Drugs:

Axis Direct maintains its 'Buy' rating on this pharmaceutical company with a target price of Rs 570, indicating an upside of 20.8%. In Q4FY24, the company witnessed a 16.4% YoY decline in revenue to Rs 621.1 crore, while its net profit decreased by 15.7% YoY to Rs 47.3 crore. But analyst Ankush Mahajan highlights that the company surpassed expectations on a sequential basis, with a 2.3% revenue growth and 34.4% net profit growth QoQ in the March quarter.

Mahajan is optimistic as the company's gross margins improved by 282 bps QoQ due to a better product mix and declining input costs. He also noted a 227 bps QoQ improvement in EBITDA margin, driven by operating leverage from enhanced capacity utilisation.

Mahajan is also positive as the company announced a greenfield project for dermatology products at its Tarapur facility, with plans to ramp up operations by H1FY25. He expects growth in the API segment due to an anticipated positive shift in the export landscape, supported by likely interest rate cuts, low stock levels, and rising demand.

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

(You can find all analyst picks here)

The Baseline

08 May 2024

Chart of the Week: Public capex, rising discretionary spend drive Nifty500 gains in FY24

By Satyam Kumar

The Nifty 500 gained 39.1% in FY24, and 17% since our last analysis of top Nifty500 contributors in October 2023. Higher government spending on infrastructure and railways has made Indian Railways Finance Corp. (IRFC), REC, and Larsen & Toubro the most consistent performers, taking them to the top 15 of highest Nifty500 contributors.

In the past month, the Nifty500 has been trading sideways as Nifty VIX, representing the market volatility, rose sharply by 50% over the same time period. What traders call the ‘fear gauge’ has been rising amid concerns that the ruling party may win fewer seats than initially expected.

In this edition of Chart of the Week, we look at the top 15 stocks that drove the Nifty500’s rise in FY24. These stocks accounted for 26.6% of the Nifty500’s 39.1% gain, which translated to an overall contribution of 10.4 percentage points.

To understand which were the top stocks that drove the surge in the index, we tracked the change in market capitalization for stocks in the Nifty500 and compared it to the total change in the index market cap.

PSU stocks increase their contribution to the Nifty500 index

Among the 15 stocks on our list, three belong to the public sector, specifically the banking and finance domain. Within this sector, IRFC and REC represent financial institutions, while the Life Insurance Corporation of India is from the life insurance industry. The top performer among the three, IRFC rose 458% in FY24, contributing 3.4% to Nifty500’s gains. Meanwhile, LIC of India and REC registered gains of 70.7% and 295.3% in the past fiscal year driving the Nifty500 higher by 1.7% and 1.4% respectively.

Hindustan Aeronautics, a defence company, has risen sharply by 153.2% in the past fiscal year, contributing 1.4% to Nifty500’s gains. The company reported revenue growth of 11% YoY to Rs 29,810 crore in FY24 benefiting from the government’s defence outlay in the budget, which rose by 13% YoY to Rs 5.9 lakh crore in FY24. UBS expects the company’s order book to triple to Rs 2.4 lakh crore by FY26, from that of Rs 80,000 crore at the end of FY23.

Meanwhile, construction company Larsen & Toubro witnessed a 76.4% rise in FY24, contributing 1.6 percentage points to Nifty500’s annual gain. This growth was fueled by the government’s increased infra spending, with a 33% higher allocation of Rs 10 lakh crore for capex in the infrastructure sector in the FY24 budget. In addition, order inflow from international markets from the hydrocarbon and infrastructure segment in Saudi Arabia and the Middle East also boosted its growth.

Reliance and Bharti Airtel gain from market consolidation in the telecom space

In FY24, the oil and gas company Reliance Industries’ share price increased 32.2%, contributing 2.6% to the Nifty500’s overall gain. The company’s EBITDA for FY24 increased 16.1% YoY to Rs 1,78,677 crore, driven by significant growth in its retail and telecom divisions.

Similarly, telecom company Bharti Airtel saw its share price rise by 64.2% in FY24, contributing 1.8% to Nifty500’s gains. The company’s consistent market share expansion and organic improvements in average revenue per user have boosted the company’s profit margins. The company also stands to benefit from a probable tariff hike post-election in H1FY24, as indicated by Chairman, Sunil Bharti Mittal.

Meanwhile, IT major Tata Consultancy Services added 1.4% to Nifty500 as its share price surged 24.4% over the past fiscal year. In FY24, the company witnessed a 25.2% YoY increase in deal wins, with a total contract value amounting to USD 42.7 billion.

Top Adani Group companies surge to pre-Hindenburg levels

Three Adani group companies have made it to the top 15 list, as they rise above pre-Hindenburg levels. The three stocks, namely Adani Enterprises, Adani Ports & SEZ, and Adani Power witnessed impressive gains of 99.7%, 126.1%, and 207.1% respectively in FY24.

However, this surge was also due to a lower base after a substantial correction in the share prices of Adani Group stocks, after allegations from Hindenburg Research that accused Gautam Adani of stock manipulation and accounting fraud.

Even though Adani claimed that the accusations were false, the conglomerate is making an effort to address issues highlighted in the report by repaying debt and reducing promoter share pledges. Investments from GQG Partners, and securing projects such as Dharavi redevelopment have also played to their advantage.

Rising consumer demand drives realty and auto stocks higher

DLF, a realty company, gained 157% in FY24, helping drive Nifty500 higher by 1.4% in the fiscal. This was led by a demand surge for residential properties across top cities in India. The company sold 1,113 luxury apartments priced above Rs 7 crore in Gurugram, generating Rs 7,200 crore in just three days after launch.

In the automobile space, high demand drove Bajaj Auto and Tata Motors' share prices higher by 141% and 147% contributing 1.5% and 2% respectively to Nifty500’s gains in FY24. Meanwhile, rising discretionary spending and the introduction of platform fees fueled Zomato’s share price growth of 262% in FY24. This resulted in the company’s contribution of 1.7% to Nifty500’s gains in the past fiscal year.

The Baseline

02 May 2024

Chart of the Week: The biggest misses by institutional analysts over the past year

By Satyam Kumar

Retail investors often rely on analysts to navigate the ups and downs of financial markets and help them spot potential winners. But predicting stock prices is tough. Many things can go wrong – such as a worse than expected monsoon (which hurt Deepak Fertilisers) or a regulatory move against a company (RBI vs PayTM).

This Chart of the Week takes a look at Nifty 500 stocks over the past year, and compares their actual performance to the Forecaster share price estimate from analysts one year ago, in April 2023. We have selected stocks where analysts made the biggest misses, whose share price performance diverged the most from the 12 month forecast in April 2023.

Asia’s oldest exchange stock leads the rally

BSE, formerly the Bombay Stock Exchange, rose 518.1% in the past year, compared to Forecaster’s 12-month upside estimate of 17.8% in April 2023. The exchange’s revenue in Q3FY24 has grown 76.1% YoY to Rs 431.4 crore, while its net profit during the same period went up by 109.5% YoY to Rs 108.2 crore. These improvements were primarily driven by market share gains in the derivatives segment. The exchange's strategic decision to shift the expiry day of their derivatives contracts, such as Sensex and Bankex, from Thursday to Friday, and subsequently to Monday for Bankex, has contributed significantly to its increased market share.

Capital markets company, Anand Rathi Wealth has also benefited from the rising interest in the Indian equity market among the domestic as well as international investor community. The stock has risen 365.8% in the past year, beating the Forecaster estimates of 24.7% by a huge margin. The wealth manager’s assets under management stood at Rs 59,351 crore in FY24, up 52% compared to Rs 38,993 crore at the end of FY23.

PSUs give outsized returns in FY24

The S&P BSE PSU Index has gained 97.3% in the past year, as per Trendlyne Technicals. This rise of the PSU index was backed by a government capex push of Rs 10 lakh crore. These and other government initiatives are a big boost to the infrastructure sector, and this is reflected in the share prices of PSU stocks. In the Union Budget of 2023-24, the Indian Railways received a capital outlay of Rs 2.4 lakh crore.

Indian Railway Finance Corporation (IRFC) rose 460.6% in the past year, compared to the Forecaster estimate of 24.8% at the start of FY24. This Navratna PSU borrows funds from financial markets to fund the acquisition/creation of assets that are leased out to the Indian Railways. The rise came mostly after the government announced plans to boost Indian Railways by introducing high-speed trains like Vande Bharat and dedicated freight corridors.

Similarly, another PSU operating in the construction and engineering industry, Ircon International also benefited from the government's plans to lay dedicated freight corridors. This company has an order book of Rs 29,400 crore, with 72% of it coming from the railways, 21% from roads, and remaining from other sectors. With promising revenue visibility for the upcoming years, Ircon has given returns of 296.8% in the past year beating Forecaster’s estimate of (16.1%) in April ’23.

Erratic, weak monsoon hurts Deepak Fertilisers and UPL

Commodity chemical manufacturer Deepak Fertilisers & Petrochemicals has gained only 2.3% in the past year, compared to Forecaster’s 86% estimated in April ’23. This moderation in its share price was mainly because the company has seen consistent underperformance in sales in FY24, with profits declining in its fertilisers segment. This was mainly due to weak and erratic monsoons over the past year. In Q3FY24, the company’s revenue declined 33.1% YoY to Rs 1,863.8 crore, while its net profit declined 76.9% YoY to Rs 57.6 crore. Looking at its profitability in the past three quarters, the company in its fertilizers segment reported a net profit of Rs 42.3 crore in Q2 and reported a net loss of Rs 68.7 crore and Rs 0.8 crore in Q1 and Q3 respectively.

Similarly, agrochemical company UPL also posted a net loss of Rs 1,217 crore in Q3FY24, compared to a profit of Rs 1,087 crore in Q3FY23. This resulted in a decline of 29.1% in the past year, contrary to Forecaster’s estimated upside of 38.3%.

Adani Energy & Rajesh Exports disappoint analysts the most

Adani Energy Solutions, an electric utilities firm, saw a significant decline in its share price following the release of the Hindenburg report on January 24 last year. The report accused the Adani group of manipulating stock prices, which adversely affected investor confidence in the company. Adani Energy also saw a 9.5% year-on-year decrease in net profit to Rs 1,137 crore. This led to the stock rising marginally by 7.1%, missing Forecaster’s estimates of 229.2% upside, predicted at the start of FY24.

Gems and Jewellery company, Rajesh Exports declined 43.1% in the past year, contrary to Forecaster’s estimated upside of 97.2% in April ’23. The company is reportedly involved in various compliance issues, including instances of missing documents during earnings filings, which were further compounded by declining revenues. Their net profit for Q3FY24 slumped 97% YoY at Rs 12.4 crore. According to Trendlyne’s Technicals, Rajesh Exports fell to a 5-year low at Rs 261 on March 28, 2024.

One97 Communications, an internet software and services firm, faced a major setback following the Reserve Bank of India’s (RBI) directive on January 31. The RBI ordered Paytm Payments Bank to cease banking services due to persistent non-compliance concerns. The stock has been stabilizing after its Founder & CEO, Vijay Shekhar Sharma resigned from the Payments Bank board. However, the company’s share price has gone down 42.1% in the past year, compared to Forecaster’s estimated upside of 42.2% in the starting of the previous fiscal.

The Baseline

29 Apr 2024

5 stocks to buy from analysts this week - April 29, 2024

By Satyam Kumar

1. Welspun Living:

Sharekhan maintains its ‘Buy’ rating on this textiles company with a target price of Rs 181. This indicates an upside of 19.3%. In Q4FY24, the company’s net profit rose by 16.4% YoY to Rs 146 crore, and its revenue increased 19.2% YoY to Rs 2,616.7 crore. Analysts at Sharekhan are positive as the company stands to benefit from India signing a free trade agreement (FTA) with the UK, which will help boost revenue in the long term.

Management has given cautious guidance for the near term given the geopolitical tensions. However, the analysts are confident of long-term growth prospects due to large opportunities in the export markets, entry into the home textile segment, and benefits from the ‘China + 1’ strategy.

Analysts at Sharekhan forecast a 10-12% revenue growth in FY25 driven by fashion towels and flooring segments, coupled with capacity additions. They maintain EBITDA margin guidance at 15-15.5% for FY25.

2. Nestle India:

Axis Direct maintains a ‘Buy’ call on this packaged foods manufacturer with a target price of Rs 2,880, indicating an upside of 14.8%. In Q4FY24, the company’s profit increased 12.4% YoY to Rs 934.2 crore and its revenue grew by 8.8% YoY. It reported EBITDA margins of 25.7%, up 289 basis points YoY. Analysts Preeyam Tolia and Suhanee Shome say, “Nestle delivered resilient all-round performance, driven by growth across all categories, with a healthy balance in product mix, pricing, and volume growth.”

Tolia and Shome are positive about the company due to its efforts toward rural penetration and premiumization in its core categories, and differentiated product launches by adding new categories like Nespresso and Purina Pet Care. They believe the firm’s direct-to-customer platform and its focus on a fast-growing nutraceutical portfolio will help it increase demand. They expect Nestle sales and profit to grow at 13% and 18% CAGR respectively over FY24-25. The analysts are also optimistic about Nestle’s joint venture with Dr Reddy’s to launch a nutritional portfolio.

3. Hatsun Agro Products:

ICICI Securities upgrades this packaged foods manufacturer to a ‘Buy’ call with a target price of Rs 1,190. This indicates an upside of 8.3%. In Q4FY24, the company’s net profit rose by 108.7% YoY to Rs 52.2 crore and its revenue increased 14.4% YoY to Rs 2,049 crore. Analysts Aniruddha Joshi, Manoj Menon, Karan Bhuwania, and Nilesh Patil are optimistic due to its strong volume-led revenue growth and no price hikes in the past year. The analysts noted that the company reported 10-quarter high gross margins of 30.7% on the back of deflationary trends in raw material prices.

The analysts expect margin expansion to continue in FY25 due to lower milk prices, higher revenue share of ice cream, accumulation of low-priced inventory, and improved capacity utilisation at the Solapur and Govindapur facilities. They estimate EBITDA margin to be 12.1% in FY25 compared to 11.3% in FY24. The company has introduced two chocolate brands, Hanobar and Havia in FY24 which analysts believe to be margin and value accretive in the medium-term.

4. HDFC Asset Management:

KRChoksey maintains a ‘Buy’ rating on this asset management company with a target price of Rs 4,235, indicating an upside of 12.3%. In Q4FY24, the company’s net profit increased 43.8% YoY to Rs 540.8 crore, and its revenue went up by 33.5% YoY to Rs 851.3 crore. Analyst Unnati Jadhav is upbeat as assets under management went up 39.1% YoY to Rs 60,730 crore driven by a higher tilt toward equity-oriented assets. In FY24, the company expanded its product offerings by launching five new funds. Also, it has enhanced its passive front by launching five index funds and two ETFs.

According to the management, the employee cost for FY24 increased by 13.0% YoY as it included an ESOP cost of Rs 47 crore. However, Jadhav is optimistic as management expects ESOP costs to reduce in FY25 to Rs 20 crore. At the same time, she believes that the company will continue to invest in its digital infrastructure to support its distribution partners. In FY25-26, Jadhav expects revenue and profit CAGR of 21.5% and 19.7% respectively.

5. Patel Engineering:

Hem Securities initiates a ‘Buy’ call on this construction and engineering company with a target price of Rs 80. This indicates an upside of 26.2%. The analyst Mudit Jain believes the firm’s order book of Rs 19,134 crore and its book-to-bill ratio of 4.3X provide multi-year revenue visibility.

Jain says, “Patel Engineering being the leader in hydroelectric EPC projects is expected to get a good amount of orders in this space.” The firm has 42 hydropower projects with an aggregate capacity of 18,034 MW under construction. He believes that around 27,000 MW of hydropower projects will be announced in the coming years and expects the company to win major orders from this pipeline.

Jain notes that the order inflow was muted during the quarter mainly due to the Lok Sabha elections. However, the management is confident that order awarding will be robust post elections. They have guided for 15-20% growth in the order book for FY25. The analyst expects the small-cap company to post decent numbers going forward on the back of increased execution, and expects order inflows to increase.

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

(You can find all analyst picks here)

The Baseline

25 Apr 2024

Chart of the Week: Capital goods, consumer services see highest inflows from FPIs in FY24

By Satyam Kumar

In FY24, a rising Indian equity market saw net foreign portfolio investment (FPI) inflows amounting to $25.3 billion (approx. two lakh crore), surpassing other emerging market peers, as reported in RBI’s ‘State of the Economy’. Sectors like capital goods, consumer services, automobiles, and financial services emerged as top choices for FPI investments, collectively accounting for over 60% of the total foreign inflows, according to NSDL data. This trend underscores the importance of FPI activity as a measure for retail investors seeking insights into strong-performing sectors.

In this Chart of the Week, we take a look at sectors with the highest FPI activity in FY24. Throughout the year, FPIs consistently poured money into capital goods companies, with a total inflow of Rs 46,935 crore. The consumer services sector was the second favourite among FPIs with a net investment of Rs 32,186 crore.

Metals and mining, on the other hand, witnessed the highest FPI outflow of Rs 8,531 crore in FY24. The FMCG sector saw cyclical FPI investments: an inflow of Rs 10,621 crore from April to July 2023, followed by a divestment of Rs 15,521 crore from August 2023 to February 2024, influenced by El Niño conditions and rural consumption worries.

Capital goods, auto and consumer services emerge as favourites

More than half of the total investment of around Rs 2 lakh crore by FPIs went into capital goods, auto and consumer services sectors. Capital goods companies have benefited from a robust order backlog and a steady inflow of fresh orders. This growth was supported by higher commodity prices and increased government infrastructure spending, as well as production-linked incentive (PLI) schemes.

Consumer services ranked second in FPI interest, with heavy inflows in the final two months, with FPIs purchasing stocks worth Rs 12,179 crore in February and March. Auto stocks also caught the attention of FPIs, attracting investments worth Rs 29,862 crore in FY24. This was propelled by strong OEM sales, new product launches, and favourable raw material prices, all of which gave profit margins a boost.

The financial services sector was doing quite well until interest rates went steadily higher and the RBI tightened loan requirements in November 2023. The sector observed mixed FPI inflows, with inflow of Rs 51,947 crore in H1FY24, followed by an outflow of Rs 23,154 crore in H2FY24. In the past year, public sector banks also garnered attention as analysts highlighted their cheap valuation compared to private banks.

Healthcare and Telecom witness rapid expansion amid positive consumer sentiment

The healthcare sector, comprising the pharma and hospitals industry, witnessed an inflow of Rs 16,687 crore in FY24. The pharma industry's growth was driven by international market launches, steady domestic operations, and improved margins. Similarly, hospitals saw increased bed occupancy and growth in average revenue per occupied bed, alongside steady capacity additions, leading to higher net income and revenue visibility.

FPIs were net buyers worth Rs 15,277 crore in the telecom sector in FY24, supported by healthy subscriber additions and a gradual uptick in average revenue per user (ARPU). However, sector performance consolidated due to marginal expansion in ARPU, due to the absence of price hikes in the past year. Also, added capex costs with the 5G rollout and network densification kept debt levels elevated giving rise to higher finance costs.

IT and FMCG sectors see muted investment

FPIs injected a net amount of Rs 5,931 crore into the information technology (IT) sector in FY24. This inflow is comparatively lower than other sectors as hiring at IT companies was at all-time lows during the past year, as margins grew stressed and clients renegotiated contracts. Indian tech firms, particularly IT services companies, faced pressure due to their reliance on the slowing North American market for over 60% of their revenue.

The FMCG sector also saw muted investor interest as FPIs added stocks worth Rs 1,341 crore in FY24. Topline growth remains muted due to subdued demand, particularly in the mass end of the segment. Lower crop yields after a below-average monsoon have affected rural demand.

Oil and metals sectors see net FPI outflow in FY24

The oil & gas sector saw a net selling of Rs 5,774 crore in FY24. Market volatility resulting from OPEC cuts and geopolitical factors, such as supply chain disruptions due to the Israel-Hamas conflict and drone attacks on Russian oil refineries by Ukraine, contributed significantly to this trend. Brent Crude futures have risen by 13.4% year-to-date.

Lastly, the metals and mining sector saw the highest FPI outflow of Rs 8,531 crore in FY24. Indian companies in this sector face major hurdles because of the dumping of steel at cheaper rates and sub-standard imports from China. Here, dumping refers to an abrupt increase in supply, which was seen from April to July 2023, where steel imports from China to India rose 62% YoY. However, the government took measures to curb Chinese imports in September 2023, where they imposed a five-year anti-dumping duty targeting specific types of Chinese steel. Anti-dumping duty is a tax levied on imported goods that the government believes are priced below fair market value. The industry is also expected to address production gaps in 2024 and reduce dependence on imports, supported by policy reforms, incentives, and large-scale expansion plans by industry giants such as Tata Steel, Vedanta, and JSW Steel.

These FPI trends in different sectors reflect both global economic factors and sector-specific challenges in India, highlighting the importance of understanding market dynamics for investors to make better investment decisions. Looking ahead, developments in sectors such as IT, finance and FMCG will be closely watched, as they navigate through higher interest rates and volatile customer spending.

The Baseline

17 Apr 2024

Chart of the week: Family-owned listed firms are top buyers of electoral bonds

By Satyam Kumar

The ruling Bharatiya Janata Party (BJP) had introduced the electoral bonds scheme, amid significant controversy, in 2018. This scheme allowed corporate houses and individuals to anonymously donate funds to political parties.

The BJP had defended the scheme, saying that it will take out black money from politics. But in February 2024, the Supreme Court of India ruled that political funding cannot be anonymous and ordered the government to discontinue the scheme. The State Bank of India (SBI) was required to release electoral bonds data to the public. The Supreme Court noted that infringement of the Right to Information is not justified to curb black money.

In this Chart of the Week, let's take a look at how some of the biggest names in the Indian stock market turned out to have invested heavily in electoral bonds until February 2024, when the Supreme Court of India banned it. India's apex court noted that corporate contributions are ‘purely business transactions made with the intent of securing benefits in return’.

If we take a closer look at the top contributors, all the top donors are family-owned firms looking to pass the leadership baton to their kids. These donations to political parties can help them develop strong relationships with political parties, and in turn cement their dominance in their industries via friendly regulation. This can also act as entry barriers for other smaller players.

According to the data released by the Election Commission of India, the Modi-led Bharatiya Janata Party received funding of Rs 6,061 crore via electoral bonds. This constitutes 47.5% of the total funds donated.

Reliance and Adani Group buy bonds through their subsidiaries

Starting with Qwik Supply Chain, the third-largest donor to political parties using electoral bonds donated Rs 410 crore. Out of the total Rs 410 crore, Rs 375 crore went to the BJP, Rs 25 crore to Shiv Sena, and the remaining Rs 10 crore to the Nationalist Congress Party. According to Press Trust of India, Qwik Supply Chain, registered at Navi Mumbai's Dhirubhai Ambani Knowledge City, has connections to family-owned Reliance Industries. However, a spokesperson for Reliance Industries stated: “Qwik Supply Chain is not a subsidiary of any Reliance entity.” The Reliance Group in August 2023 announced that Isha, Akash and Anant have been appointed to the board of directors at Reliance Industries.

The Adani Group, which is believed to have close ties with the ruling party, contributed a total of Rs 55.4 crore. This includes donations from ABC India and three subsidiaries of the Welspun Group. According to a press release, the Adani Group holds a 65% shareholding in Adani Welspun Exploration Ltd through Adani Enterprises. As a family-owned business, Gautam Adani’s two sons, Karan and Jeet Adani hold crucial positions in Adani Group companies.

Environmental violations main concerns for Sun Pharma and Vedanta

Family-owned mining company Vedanta has faced criticism for environmental violations across its mining and oil & gas projects in India. The company purchased electoral bonds worth Rs 441 crore. Reports suggest that the company’s electoral bonds buying spree could have been key to the recent weakening of environmental regulations.

Of the total 441 crore paid out, more than half went to the BJP, while Rs 125 crore went to the Indian National Congress, Rs 40 crore to Biju Janata Dal, and the rest to other political parties. Anil Agarwal, who was a successor to the company, passed on to him by his father D P Agarwal, has recently said that the company will be run only by professionals. However, his kids still hold high-profile positions in the subsidiaries.

Similarly, pharma company Sun Pharmaceutical Industries contributed Rs 32 crore to BJP through electoral bonds, purchased via one of its subsidiaries, Sun Pharma Laboratories. Sun Pharma has also faced allegations of environmental violations. This drug manufacturing company is also mainly family-owned. Aalok Shanghvi, son of Dilip Shanghvi, holds the position of Executive Director in the company.

Major telecom industry players bought electoral bonds

Telecom services company Bharti Airtel and its subsidiaries purchased bonds worth Rs 234 crore in total. The Bharti group donated Rs 150 crore to the ruling party through two sets of bonds purchased before and after the government introduced a new law concerning the auction of satellite spectrum. The law allowed the spectrum to be assigned through an administrative order, doing away with the need for competitive auctions. This ultimately benefited Bharti Enterprises, because OneWeb India, a subsidiary of international company Eutelsat OneWeb, with Bharti Enterprises as its majority stakeholder, was the first to meet the prerequisites for spectrum application.

This family-owned company has appointed Shravin Mittal, son of Sunil Mittal, as the Managing Director of the family’s investment arm, Bharti Global and Director at Airtel Africa.

Meanwhile, Aditya Birla Group, led by Kumar Mangalam Birla, donated Rs 556 through Essel Mining and Industries, and other subsidiaries. Many analysts indicated that the company wanted favours from the government related to its debt in the joint venture Vodafone Idea. Coincidentally, shortly after the donation of Rs 100 crore in February 2023, the centre announced the conversion of debt of Rs 16,000 crore into equity, resulting in the Indian government becoming the largest shareholder with a 33% stake in the company.

Kotak and Torrent’s contributions point to major anti-competitive favours

The Kotak family group led by Uday Kotak has purchased electoral bonds and donated Rs 60 crore only to the BJP. Uday Kotak was in a dispute with the RBI regarding his stake in Kotak Mahindra Bank, which exceeded the limit set by the central bank, which started in 2013. In December 2018, Kotak Mahindra Bank took the RBI to court over the issue. Thirteen months later, in January 2020, the RBI agreed to a proposal from the private bank in an out-of-court settlement. Infina Capital, a company belonging to the Kotak family group, purchased electoral bonds worth Rs 35 crore in the months leading up to the settlement.

In April 2021, Infina Capital purchased additional bonds worth Rs 25 crore to support the ruling party. This coincided with the RBI's announcement of fresh guidelines allowing Uday Kotak to continue as the Managing Director and CEO of Kotak Mahindra Bank for another 32 months.

Torrent Group, led by Samir and Sudhir Mehta purchased bonds worth Rs 184 crore. Torrent Power and Torrent Pharmaceuticals, both listed entities of the Torrent Group, donated Rs 76 crore and Rs 61 crore, respectively, to the BJP. Consequently, the Torrent group received special privileges from the Devendra Fadnavis government in 2019 exempting them from property tax of Rs 285 crore.

It's apparent that electoral bonds can serve as a means for corporate family entities to gain favors from the government, especially considering the 100% tax benefits associated with donations.

India has long had a problem with such crony capitalism - wealth built via close corporate-government ties accounts for 8% of India’s GDP and rising. Practices like electoral bond buying worsen such cronyism further by undermining competition, and entrenching the dominance of these companies.

The Baseline

16 Apr 2024

5 stocks to buy from analysts this week - April 16, 2024

By Satyam Kumar

1. Endurance Technologies:

Hem Securities reiterates a ‘Buy’ call on this auto parts manufacturer with a target price of Rs 2,219, indicating an upside of 20.8%. Analyst Abhishek Sharda say, “Endurance Technologies has a very strong positioning in the two-wheeler market and it is a very good proxy for the Indian two-wheeler industry.”

Sharda is optimistic about the company due to its strong order wins both in Europe and India. Order wins from India stood at Rs 940 crore in 9MFY24 and orders from Europe were 29 million euro. The analyst expects the orders to peak in FY26.

Sharda believes that the company has a diverse revenue profile in terms of geography, products and vehicles. He also believes that it is ready for the trend shift towards electric vehicles. Sharda expects EBITDA margins to improve on the back of improving capacity utilisation. He concludes, “Endurance Technologies will continue to focus on emerging technologies to grow its portfolio through both organic and inorganic routes.”

2. Coforge:

Sharekhan maintains a ‘Buy’ rating on this IT consulting and software company with a target price of Rs 7,670. This indicates an upside of 42.1%. Analysts at Sharekhan point to the company’s strong order book and large deal pipeline. “The company is well placed to deliver a top quadrant performance in FY25,” they note. Coforge has strong revenue visibility with an order book of $974 million as of Q3FY24 (up 15.8% YoY) to be executed over the next year.

Analysts are also optimistic as the company plans to raise Rs 3,200 crore from qualified institutional placements (QIP). Coforge intends to use these funds purely for mergers and acquisitions. They expect this to help the company quickly expand into new verticals such as cyber security, data services, and cloud operations. They also expect a sharp uptick in Coforge’s EBITDA margins in Q4FY24 owing to deal ramp-ups. Analysts at Sharekhan expect sales and profit CAGR of 17% and 32% respectively over FY24-26.

3. Glenmark Pharmaceuticals:

KRChoksey maintains a ‘Buy’ rating on this pharmaceutical company with a target price of Rs 1,266, indicating an upside of 21.3%. Analyst Unnati Jadhav is upbeat as the completion of the sale of Glenmark Lifesciences strengthens the balance sheet and earnings prospects of the company. She expects this deal to help Glenmark Pharma to become a ‘brand-led’ organization, with a focus on the core therapeutic areas of dermatology, respiratory, and oncology. She believes the total debt of Rs 4,953 crore will be repaid in FY25 from the proceeds of the deal, which in turn will save finance costs and boost earnings.

Jadhav is optimistic as the company has shown higher than market growth for the months of January and February 2024 for the India pharma market (IPM). While IPM growth was 9.5% YoY for January 2024, Glenmark Pharma grew 20.2% over the same period. In February 2024, the company reported 11.3% YoY growth vs overall IPM growth of 9.0%. She attributes this to changes in the distribution model involving stock point consolidation and channel inventory rationalization in the domestic business. Going forward, Jadhav expects this move to improve Glenmark’s operating margins and working capital.

4. Shalby:

ICICI Direct maintains a ‘Buy’ rating on this healthcare facilities company with a target price of Rs 320, indicating an upside of 18.7%. Analyst Siddhant Khandekar is upbeat as the company introduced the asset-light franchisee model to expand its hospital business into newer geographies. The company owns 10 multispecialty hospitals and 6 franchisee hospitals with a 2,362 bed capacity. Khandekar expects the company to expand its Shalby Centre for Orthopaedic Excellence (SOCE), an asset-light franchisee model, across India. It has established six such models across the country and expects to add 40 more over the next 4-5 years.

Khandekar believes that the company is trading at a cheap valuation compared to other PAN-India players. He is optimistic as the headwinds faced in FY24 in Shalby’s implants business look transitory. The company plans to expand its business beyond the US and India to improve profitability going forward.

5. Man Infraconstruction:

Axis Direct initiates a ‘Buy’ call on this construction and engineering company with a target price of Rs 270. This indicates an upside of 28.8%. Analysts Eesha Shah and Preeyam Tolia are optimistic about the company on the back of its healthy project pipeline and strong execution capabilities.

Man Infraconstruction has invested Rs 700 crore in real estate projects, covering a portfolio of 4.6 million square feet. The firm also maintains zero level of inventory of completed projects. The firm is expected to generate a revenue of Rs 1,343 crore with a net cash surplus of Rs 350 crore in FY24 (whereas its peer, Brigade Enterprises is expected to generate revenue of Rs 4,200 crore with a net debt of Rs 2,140 crore). The analysts believe that this asset-light model for a real estate developer makes it an attractive company in the segment.

The analysts like the company due to its order book and project pipeline. Currently, the firm has 2 million square feet of ongoing projects and 3.7 million square feet of upcoming real estate projects. Its EPC business order book stands at Rs 1,047 crore.

Shah and Tolia say that the company exhibits a very low debt book for a real estate developer. They conclude, “Due to its asset-light business model, it can scale up without significant capital pressure, thereby improving the bottom line in coming years.”

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

(You can find all analyst picks here)

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