Stock market analysis and stories by Satyam Kumar

Articles by Satyam Kumar

TREND | 15 Apr 2024

Smart money moves: Which stocks did mutual fund managers buy in March 2024?

As India heads into election season, markets have been seeing a lot of volatility. While the Nifty 50 saw gains early in the year, March saw the index closing lower amid worries about stock market valuations, global geopolitical tensions and rising oil prices.

While banking and finance stocks were leading the rally over the past year, the last few months have seen real estate and general industrials gain traction. A pick-up in exports in FY25 is expected to boost manufacturing, metals and industrials in the coming quarters.

Indian equity mutual funds saw a net inflow of Rs 22,633 crore in March. All categories, except for small cap funds saw net inflows as investors pulled out money from smallcaps for the first time in the last two and half years. For the equity category, the total inflows in FY24 stood at Rs 1.8 lakh crore, up 25% YoY.

Stocks with increasing MF holding - SAIL, Crompton Greaves, Max Health, Aster DM, Prestige

SAIL eyes growth with capacity expansion

Steel Authority of India (SAIL) is in the business of making steel and is one of the Maharatnas among India’s Central Public Sector Enterprises. The company owns five steel plants at Bhilai, Rourkela, Durgapur, Bokaro and Burnpur (Asansol) and three special steel plants at Salem, Durgapur and Bhadravathi. It also owns a Ferro Alloy plant at Chandrapur.

The firm posted volume growth of 9% YoY in 9MFY24 to 12.5 million tonnes (MT). The company plans to maximize volume further to counter falling prices. It is also planning additional capex in phases, starting with an expansion of 4.5 MT in its IISCO plant, and by 3 MT at Bokaro. With a current steel capacity of 20.6 MT, SAIL is aiming to reach 35 MT steel capacity by FY32.

Fund managers who bought shares of SAIL

Fund managers who added shares of Steel Authority of India to their portfolios include Alok Singh for Bank of India ELSS Tax Saver Fund, Sanjeev Sharma and Vasav Sahgal for Quant Mid Cap Fund, and Abhishek Bisen and Hiten Shah for Kotak Equity Savings Fund. Fresh buys were done by Manish Lodha and Abhinav Khandelwal for Mahindra Manulife Small Cap Fund, and Dhimant Shah and Rohan Korde for ITI Focused Equity Fund.

Crompton Greaves stands to gain from the hot summer

Crompton Greaves Consumer Electricals (CROMPTON) is a home appliances manufacturer with a focus on the fans business, which generates around 45% of its revenue. The pump business contributes 22%, while Crompton’s appliance and lighting business constitutes around 16% each. Its Butterfly Gandhimathi acquisition and other new products add 13% and 15% respectively to the total sales.

As the summer season approaches its peak, the company stands to gain with its strong presence in the mass category, with fans priced below Rs 2,000. With its current market share at 27-28%, the company hopes to gain additional share by focusing on its premium & super premium fans, and better channel mix. However, product diversification is very crucial for the overall growth of the company.

Fund managers who bought shares of Crompton Greaves

Fund managers who added shares of Crompton Greaves Consumer Electricals to their portfolios include Neelesh Surana for Mirae Asset ELSS Tax Saver Fund, Roshi Jain and Dhruv Muchhal for HDFC Flexi Cap Fund, Kiran Sebastian and R. Janakiraman for Franklin India Opportunities Fund. Fresh buys were done by Manish Gunwani and Viraj Kulkarni for Bandhan Flexi Cap Fund and Anand Sharma and Sharmila D’mello for ICICI Prudential Housing Opportunities Fund.

Max Healthcare has the highest ARPOB among its peers

Max Healthcare Institute (MAXHEALTH) is primarily engaged in the business of healthcare services through its clinics, multi-specialty and super-specialty hospitals. Operating mainly in metro/tier-1 cities, they have 17 healthcare facilities with over 3,500 beds in NCR Delhi, Haryana, Punjab, Uttarakhand and Maharashtra. Apart from hospitals, they also have a home care and pathology business under the name Max@Home and Max Labs respectively.

With occupancy level at or above 75% for the past 3 years and consistent growth in ARPOB (average revenue per occupied bed), Max Healthcare boasts the highest operating EBITDA margins among its peers at 28%. The company plans to add six new facilities to its existing network. At the same time, the company is also exploring inorganic opportunities to expand.

Fund managers who bought shares of Max Healthcare

Fund managers who added shares of Max Healthcare Institute to their portfolios include Bhavin Vithlani and Pradeep Kesavan for SBI Magnum Midcap Fund, Venkatesh Sanjeevi and R. Janakiraman for Franklin India Equity Advantage Fund, and Aditya Khemani and Amit Ganatra for Invesco India Large&MidCap Fund. Fresh buys were done by Niket Shah and Ankush Sood for Motilal Oswal Midcap Fund, and Shreyash Devalkar and Ashish Naik for Axis ELSS Tax Saver Fund.

Aster DM Healthcare trades at cheap valuations post GCC divestment

Aster DM Healthcare (ASTERDM) has a chain of hospitals in India and the Gulf Cooperation Council (GCC). However, on December 1, 2023, the company announced its plan to sell its GCC business for over a billion dollars. After the sale of its GCC business for $1.3 billion (approx Rs 10,846.3 crore), the company announced a dividend of Rs 118 per share with April 23 set as the record date for the payout.

With an operating profit margin of 20%, the company has guided for margin improvement of 300-400 bps over the next three years. Key drivers for growth will be the faster ramp up of its new Whitefeild unit and occupancy scale-up at its existing hospitals. Given the growth profile, the hospital chain has been trading at cheap valuations compared to its peers. With investors looking for cheaper stocks in an expensive market, the company has rallied 20.5% in the past month.

Fund managers who bought shares of Aster DM Healthcare

Fund managers who added shares of Aster DM Healthcare to their portfolios include Chirag Setalvad and Dhruv Muchhal for HDFC Small Cap Fund, R. Janakiraman and Sandeep Manam for Franklin India Smaller Companies Fund, and Bhavesh Jain for Edelweiss Nifty Smallcap 250 Index Fund. Fresh buys were done by Samir Rachh and Kinjal Desai for Nippon India Small Cap Fund, and Sankaran Naren and Dharmesh Kakkad for ICICI Prudential Value Discovery Fund.

Prestige Estates rise on the back strong demand for residentials

Prestige Estates Projects (PRESTIGE) is a realty company based out of Bangalore, India. This real estate development business operates in the residential, office, retail and hospitality segments. Prestige has completed over 300 projects and delivered over 180 million square Feet, and has another 170 million square feet under development.

In FY24, the company has posted sales bookings at Rs 21,040 crore, which is up 63% YoY. Over the same time, the company has seen annual collections of Rs 11,954 crore, up 22% YoY. This was on the back of strong demand for its residential properties and higher average per square feet realisation. Future growth prospects look intact, given the increasing demand for residential properties and its launch pipeline.

Fund managers who bought shares of Prestige Estates

Fund managers who added shares of Prestige Estates Projects to their portfolios include Neelesh Surana and Ankit Jain for Mirae Asset Large & Midcap Fund, Niket Shah and Ankush Sood for Motilal Oswal Flexicap Fund, and Gopal Agrawal and Dhruv Muchhal for HDFC Multi Cap Fund. Fresh buys were done by Amit Ganatra and Taher Badshah for Invesco India Contra Fund, and Venugopal Manghat and Cheenu Gupta for HSBC Midcap Fund.

Stocks with increasing MF holding - Star Health, Suven, Aavas Fin, Quess Corp, MGL

Star Health hopes to drive market share growth with PhonePe partnership

Star Health and Allied Insurance (STARHEALTH), a banking and finance firm headquartered in Chennai, is India's first Standalone Health Insurance provider. It provides coverage ranging from health, personal accident and overseas travel insurance. The company has a market share of 33% in the retail health segment. It has one of the largest health insurance hospital networks in India, with more than 12,820 hospitals as of 31 March, 2022.

Star Health’s revenue growth moderated to 16.4% YoY in Q3FY24 due to its retail and corporate health insurance segments. Star Health & Allied Insurance also entered a strategic partnership with PhonePe to offer insurance policies. With this partnership, Star Health’s health insurance policies will be available, with monthly and annual payment options, on the PhonePe app.

Fund managers who bought shares of Star Health

Fund managers who added shares of Star Health and Allied Insurance to their portfolios include Shobhit Mehrotra and Srinivasan Ramamurthy for HDFC Retirement Savings Fund, V Srivatsa and Sunil Patil for UTI Aggressive Hybrid Fund, Ankush Sood and Rakesh Shetty for Motilal Oswal Focused Regular Growth Fund,and Atul Penkar and Dhaval Joshi for Aditya Birla Sun Life ELSS Fund. Fresh buys were done by Mittul Kalawadia and Sharmila D’mello for ICICI Prudential ELSS Tax Saver Fund.

Suven Pharma merges with Cohance Lifesciences to strengthen its CDMO space

Suven Pharmaceuticals (SUVENPHAR) is a pharma company incorporated in 2018, and is engaged in the business of development and manufacturing of new chemical entity-based Intermediates, active pharmaceutical ingredients, specialty chemicals and formulated drugs under contract research and manufacturing services.

In Q3FY24, Suven Pharmaceuticals net profit dropped by 56.6% YoY due to lower revenue and higher inventory costs while revenue declined by 36.2% YoY to Rs 234.2 crore as both the specialty chemicals and pharma segments were impacted. It recently announced a merger with Cohance Lifesciences to strengthen its position in the contract development and manufacturing organisation space. The merger aims to enhance Suven’s overall capacity, and expand its product offerings to customers.

Fund managers who bought shares of Suven Pharmaceuticals

Fund managers who added shares of Suven Pharmaceuticals to their portfolios include Kedar Karnik and Abhishek Singh for DSP Equity & Bond Fund, Amit Premchandani for UTI Value Fund,and Amey Sathe and Aditya Bagul for Tata Flexi Cap Fund. Fresh buys were done by Swapnil Mayekar and Rakesh Shetty for Motilal Oswal Nifty Smallcap 250 ETF, and Mayur Patel for 360 ONE Flexicap Fund.

Aavas Financiers to benefit from upcoming interest rate cuts

Aavas Financiers (AAVAS), formerly known as Au Housing Finance, is engaged in the business of providing housing finance in India. The company has 351 branches in 13 states spread mainly across north and west of India. However, Rajasthan, Maharashtra, Gujarat and Madhya Pradesh comprise 69% of its total geographic distribution.

With borrowing costs at a peak, the company’s margins are currently under pressure. The cost of borrowing increased 73 bps YoY to 7.6% in FY23, but yields increased only marginally by 47 bps YoY to 13.1% due to competitive pricing pressures. However, the company stands to benefit from the rate cut cycle which is expected to start in FY25.

Fund managers who bought shares of Aavas Financiers

Fund managers who added shares of Aavas Financiers to their portfolios include Roshan Chutkey and Sharmila D’mello for ICICI Prudential Banking and Financial Services Fund, Harsh Sethi for SBI Nifty Smallcap 250 Index Fund, and Harsha Upadhyaya and Abhishek Bisen for Kotak Multicap Fund. Fresh buys were done by Anand Laddha and Dhruv Muchhal for HDFC Capital Builder Value Fund, and Karthik Kumar and Mayank Hyanki for Axis Nifty Smallcap 50 Index Fund.

Quess Corp’s demerger to improve valuations

Quess Corp (QUESS), promoted earlier by Fairfax Financial Holdings through its Indian arm, Thomas Cook India, is an integrated business services provider. The company provides technology-enabled staffing and managed outsourcing services across processes such as sales and marketing, customer care, after-sales service, back office operations, etc. It is spread over nine countries and reportedly serves over 3,000 clients.

In Q3FY24, the company reported a revenue increase of 8.4% YoY but net profit declined 27.4% due to higher employee costs. Quess Corp announced a demerger on February 16, into three entities, namely, Quess Corp (workforce management), Digitide Solutions (insurance technology and human resource organization), and Bluspring Enterprises (facility management and industrial services). The demerger aims to improve valuations and enable a focus on pure-play verticals.

Fund managers who bought shares of Quess Corp

Fund managers who added shares of Quess Corp to their portfolios include Manish Gunwani and Rahul Agarwal for Bandhan Core Equity Fund, Hardick Bora and Sanjay Bembalkar for Union Small Cap Fund, Chandraprakash Padiyar and Meeta Shetty for Tata Large & Mid Cap Fund, and Arun Agarwal and Nirman Morakhia HDFC Nifty Smallcap 250 Index Fund. Fresh buys were done by Swapnil Mayekar and Rakesh Shetty for Motilal Oswal Nifty Smallcap 250 ETF.

Mahanagar Gas to benefit from the increasing adoption of CNG

Mahanagar Gas (MGL) is a city gas distribution utilities firm operating in Mumbai, its adjoining areas, and the Raigad district of Maharashtra. The company distributes CNG for use in motor vehicles, and PNG for domestic households and commercial/industrial use. Nearly 70% of the company’s revenue is from CNG sales. The firm has 319 CNG stations under its banner.

In Q3FY24, its net profit grew by 84.3% YoY to Rs 317.2 crore despite a 5.3% YoY fall in its revenue. Margins improved due to a 22.5% decline in input CNG prices. The government plans to raise the share of natural gas in India’s energy mix to 15% by 2030, up from the current 6%. This is expected to boost MGL’s prospects.

Fund managers who bought shares of Mahanagar Gas

Fund managers who added shares of Mahanagar Gas to their portfolios include Dhaval Gala and Dhaval Joshi for Aditya Birla Sun Life PSU Equity Fund, Shreyash Devalkar and Mayank Hyanki for Axis Small Cap Fund,and Amit Premchandani for UTI Value Fund. Fresh buys were done by Sandeep Manam and Rajasa Kakulavarapu for Templeton India Equity Income Fund and Shiv Chanani and Miten Vora for Baroda BNP Paribas Value Fund.

The Baseline

10 Apr 2024

Chart of the week: The biggest wealth destroyers of FY24

By Satyam Kumar

Over the past year, the Indian equity market has seen remarkable growth, highlighted by the Nifty 500 index rising 39.1% in FY24. But as always, the rising tide lifted some boats higher, while others sprung leaks. In this edition of Chart of the Week, we take a look at companies that saw big declines in their share prices, underperforming the index and eating into investors' wealth in FY24.

At the end of FY24, 45 Nifty 500 companies feature in the Wealth Destroyers screener, which looks for negative share price changes in the past year. The chemicals and petrochemicals sector had a difficult year and dominates this list with the highest number (eleven) of wealth destroyers. These include UPL, Navin Fluorine International, Atul and Aether Industries among others.

Retailing and logistics companies also faced challenges with above-average inflation in FY24, which peaked in July 2023 at 7.4%. However, central banks worldwide are trying to bring inflation down by keeping interest rates higher. Still, rising geopolitical tensions, and crude production cuts by OPEC+ have kept inflation sticky.

Regulatory issues trigger sell-off in Paytm and Rajesh Exports

In the gems and jewellery industry, which rose 78.4% in the past year, Rajesh Exports depreciated by 50.7%. The company is 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.

Similarly, internet software and services company, One97 Communications faced a significant 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. However, the stock has been stabilizing after its Founder & CEO, Vijay Shekhar Sharma resigned from the Payments Bank board. At the same time, the company also withdrew its nominee and the bank’s future business is to be led by a reconstituted board. The company’s share price has gone down 39.1% in the past quarter.

Weak demand and Chinese competition hurt the chemical industry’s profits

The chemical sector faced continued price pressures in the past year, mainly due to a weak and erratic monsoon. As a result, major agrochemical company UPL posted a net loss of Rs 1,217 crore in Q3FY24, compared to a profit of Rs 1,087 crore in Q3FY23.

Another contributing factor was a sharp decrease in price realisation, and higher supplies from Chinese competitors as Covid-related restrictions eased.

Commodity chemicals company, Navin Fluorine International declined due to industry-wide channel destocking and inventory reductions. As a result, the company’s net profit fell 26.8% YoY to Rs 78 crore in Q3FY24. Navin Fluorine’s share price has slumped by 25.8% in the past year. Meanwhile, specialty chemicals company, Atul is down 14% in the past year, with a fall of 15.1% in the past quarter. This company has also witnessed its net profits fall 32.5% YoY in Q3FY24.

Sticky inflation eats into logistics and retail companies' revenue

As inflation in India peaked in 2023, people started paring down their discretionary spending. As demand softened, footwear company Campus Activewear saw its net profit contract 48.4% YoY in Q3FY24 at Rs 24.9 crore. At the same time, Vedant Fashions, also known as Manyavar, witnessed its sales in 9MFY24 increase only marginally to Rs 1,050 crore. However, the company saw its net profit in 9MFY24 fell 25.4% YoY to Rs 320 crore. This ethnic wear manufacturer witnessed its share price fall 24.8% in the past quarter because wedding-related consumption remained muted in FY24, unlike FY23, due to the lower number of wedding dates and the broader impact of consumption slowdown.

Meanwhile, logistics company Allcargo also declined 15.4% in the past year. This is because their net profit in Q3FY24 fell by 93% YoY to Rs 11 crore. This was on the back of significant losses incurred in some of the markets in the US and Germany. The company expects global trade to revive in Q2FY25.

Edible oils company, Adani Wilmar’s share price slumped after the Hindenburg report came out on January 24 last year, which alleged that the Adani group was manipulating and inflating stock prices. Making matters worse, Wilmar’s net profit in 9MFY24 went down by 76% YoY to Rs 122 crore. The company’s revenue in 9MFY24 decreased 13% YoY to Rs 36,539 crore. This contraction in revenue was mainly due to weak demand in the edible oil segment (contributing 75% to its revenue) and lower product prices.

A cancelled merger creates major hurdles for Zee Entertainment

Finally, media company Zee Entertainment has fallen 28.8% in the past year and 46.2% in the past quarter mainly because Sony Group’s India unit called off its proposed merger amid questions around fund diversion and corporate governance.

Adding to its woes, Reliance Industries entered into a joint venture with Walt Disney on February 28 to merge Viacom18 and Star India. This deal which resulted in a media behemoth worth Rs 70,352 crore, will negatively impact Zee as it would be difficult for the company to scale up its market share. The lesson here is that even in a rising economy and a surging stock market, there are many stumbles – self-inflicted and otherwise.

The Baseline

04 Apr 2024

Chart of the week: Finance, construction stocks among those with the highest analyst growth estimates for FY24

By Satyam Kumar

As the financial year ends, investors are eager to see the FY24 report cards of companies. But there are already predictions from analysts of who the top-rankers will be, ahead of the final quarter’s result season.

In this edition of Chart of the Week, we take a look at the sectors and companies that analysts believe will come out on top. These have the highest growth estimates for revenue and earnings per share (EPS) for FY24.

The reference here is this screener of stocks with the highest Trendlyne’s Forecaster growth estimates in annual revenue and EPS in FY24. We have selected stocks with the highest Forecaster estimates from the most dominant sectors.

Banking and finance sector companies estimated to post strong revenue growth in FY24

The banking and finance sector has multiple companies with the highest Forecaster estimates for revenue and EPS in FY24. Lending company CreditAccess Grameen caters to low-income households lacking access to formal sources of financing. Trendlyne’s Forecaster estimates annual revenue growth for FY24 at 43.4% for CreditAccess, with EPS growth of 71.8%. Analysts at ICICI Securities believe that the company’s deeper penetration in rural areas, focus on increasing geographic coverage & diversifying product segments will help growth. In Q3FY24, the company had added 17 new branches, taking its total count to 1,894.

Two other big winners in this space are capital markets companies such as Angel One and ICICI Securities, which are beneficiaries of the bullishness around the Indian stock market. Angel One is Angel Broking, post its rebranding and an aggressive focus on derivatives. Forecaster estimates Angel One’s annual revenue to increase by 45.2%. At the same time, Forecaster estimates ICICI Securities’ revenue to grow by 42.4% and EPS to rise by 48.1% in FY24.

Construction stocks’ order book near all-time highs on the back of robust execution

With their order book near all-time highs, construction companies such as Ahluwalia Contracts, Kalpataru Projects and PSP Projects are benefiting from strong order inflows. This is because of a 33% YoY rise in government spending on infrastructure at Rs 10 lakh crore in FY24 and a strong economy. Forecaster estimates Ahluwalia Contracts’ revenue growth of 33.5% in FY24, with EPS growth of 31.5%. Meanwhile, it estimates Kalpataru Projects’ annual EPS to increase by 50.9%.

Trendlyne’s Forecaster estimates PSP Projects to post annual revenue growth of 31.2% in FY24, with EPS growth of 16.1%. The company says it’s confident of achieving a Rs 26 billion revenue target for FY24 with 11-12% EBITDA margins. However, since the start of FY24, it has witnessed increasing debt levels. In Q3FY24, debt stood at Rs 478 crore. With a few projects nearing completion, the company plans to reduce it meaningfully.

Consumer demand drives growth in the electronics and automobile sector

Moving to the consumer durables sector, Dixon Technologies is a major beneficiary of the Make in India scheme, with additional support from the government’s production-linked incentive schemes. Trendlyne’s Forecaster estimates revenue growth for Dixon Technologies at 51.4% YoY in FY24, with EPS growth at 54.7%. Meanwhile, Polycab India is benefitting from growing industrial demand for wires and cables as various real estate projects nears completion.

Consumer electronics company Voltas stands to gain from consumer demand, especially in the cooling space, due to extreme weather conditions. At the same time, premiumisation of products has led to better margins. Forecaster estimates Voltas’ FY24 revenue growth at 23.5%, with EPS growth of 62.3%.

Automobile company Tata Motors witnessed strong demand across all segments in FY24. Forecaster estimates its revenue growth in FY24 at 26.5%, with EPS growth of 1,671%. The significant rise in EPS is mainly due to a jump in sales volumes in its luxury vehicles segment. Also, the margin expansion for Jaguar Land Rover to above 8% in FY24E along with a 50% debt reduction (on a consolidated basis) will help achieve bottom-line growth. In FY23, the company posted a consolidated net profit of Rs 2,414.3 crore, compared to a loss in the previous years. Trendlyne’s Forecaster estimates the revenue growth of auto components companies such as Samvardhana Motherson and UNO Minda at 25.8% and 23.4% respectively in FY24.

Healthcare facilities company Max Healthcare witnessed its bed occupancy stabilise at 75% levels in 2024. Motilal Oswal expects average revenue per occupied bed to increase by 8% YoY in FY24. Forecaster estimates the company’s revenue growth at 50.4%, with EPS growth of 20.7%. Meanwhile, Apollo Hospitals currently has bed occupancy above 65%, Forecaster estimates revenue growth of 15.4%, with EPS growth of 20.5% in FY24. On the other hand, leisure facilities company, Wonderla Holidays’ is focusing on enhancing customer experience and adding new parks every 3-4 years to drive growth.

Strong order book and international orders in general industrials drive growth

Finally, general industrial companies stand to benefit from a strong order book on the back of domestic as well as international orders. Triveni Turbine witnessed export sales growth of 35% YoY to Rs 190 crore in Q3FY24. The company is seeing a surge in order bookings from the Middle East, North Africa, Europe, Turkey, and the Americas. This has led Forecaster to estimate annual revenue growth of 34.6%, with EPS growth of 40% in FY24. Trendlyne’s Forecaster estimates Bharat Forge’s revenue to grow at 21.3%, with EPS growth at 87.7% in FY24.

Meanwhile, ABB India is witnessing demand from civil construction players engaged in building public infrastructure assets as they are focusing on high-quality products, which is helping margins. Forecaster estimates the company’s annual revenue growth for FY24 at 21.8%, with EPS growth of 17.7%.

The Baseline

19 Mar 2024

Chart of the week: Some mainline IPOs deliver strong gains, but SMEs have the biggest winners and losers

By Satyam Kumar

The Indian IPO market typically slows down in the six months before the Lok Sabha elections. But 2023-24 has bucked the trend due to increased market confidence, and greater certainty around the election result – most analysts predict a comfortable win for Prime Minister Modi and the BJP.

In the last six months alone, 49 companies have collectively raised Rs 41,000 crore via the IPO route, according to Trendlyne’s IPO dashboard. As interest rates remain high, many companies are going public to fund their operations and growth. The market’s recent track record of strong listing gains has also drawn investors to IPO offerings.

But if there is a suspiciously loud party happening, authorities tend to sit up and notice. In the case of IPOs, it’s the SEBI regulator. On March 11, SEBI Chairperson Madhabi Puri Buch expressed concerns about manipulation in the Small and Medium Enterprises (SME) segment of the capital markets, and the possibility of over-stretched valuations.

In this edition of Chart of the Week, we take a look at Trendlyne’s IPO Dashboard to analyse top-performing and worst-performing mainline and SME IPOs in terms ofcurrent gains/losses, along with their listing gains/losses in the past six months.

BLS E-Services & Tata Technologies saw the biggest listing gains, but have fallen since

BLS E-Services is a digital service provider that offers services to major banks in India, assisted e-services, and e-governance services at the grassroots level. This company gavestellar listing gains of 171% over its issue price, but has fallen since. It is currently trading at 141% over its issue price.

Operating primarily in the automotive space, Tata Technologies is an engineering and R&D company. It listed on the bourses on November 30, 2023, with gains of 163%. It currently trades at a premium of 110% over its issue price. Profit booking by investors looking for IPO gains and a high valuation gap (at the time of listing) compared to its peers have contributed to this decline. Its offer for sale of 609 lakh shares was oversubscribed by 69 times.

IREDA, Motisons Jewellers, and Azad Engineering are the best performers overall

The top performer among mainline IPOs is the Indian Renewable Energy Development Agency (IREDA) which listed at a premium of 88% and is currently trading at 302% above its issue price. This financial institution plays a strategic role in the government’s renewable energy initiative. With an issue size of Rs 2,150 crore, it was oversubscribed by 38.8 times and listed on the bourses on November 29, 2023.

Motisons Jewellers and Azad Engineering also lead the pack in terms of current gains after listing at a premium of 88% and 29% respectively. Both companies raised capital to reduce their debt obligations and fund working capital requirements.

For the top-performing SME IPOs, the sky seems to be the limit

Goyal Salt raised Rs 18.6 crore to invest in product quality and marketing. Its fresh issue of 49 lakh shares was oversubscribed by 267 times. The company listed at 258% premium and is currently up 318% from the issue price.

Leading the pack in the SME segment is Trident Techlabs with current gains 483% above its issue price. The company listed on the exchanges on December 29, 2023, posting stellar listing gains of 194%. This SME is involved mainly in engineering and power system solutions. The company raised Rs 16 crore with a fresh issue of 46 lakh shares mainly to fund its working capital requirement. Trident’s IPO was oversubscribed by 502 times.

Australian Premium Solar (India) specialises in manufacturing solar panels and provides end-to-end solutions for residential, agricultural, and commercial applications. The company posted listing gains of 172% and currently trades 286% above its issue price. Its fresh issue of 52 lakh shares was oversubscribed by 432 times listed on the bourses on January 18, 2024.

SAR Televentures, with a listing gain of 100% over its issue price, focuses on installing and commissioning 4G and 5G towers, Optical Fibre Cable (OFC) Systems, and dealing in network equipment. The company raised Rs 24.8 crore to support its provisions and install 4G and 5G towers. The stock currently trades at a premium of 275%, after listing 101% over its issue price.

With plans to set up a manufacturing facility, Amic Forging raised Rs 34.8 crore. Their fresh issue of 28 lakh shares was oversubscribed by 269 times. The stock listed on the bourses on December 6, 2023, at a premium of 99%, and the company is currently trading 390% above its issue price. As the name suggests, the company specialises in manufacturing forged components catering to various industries.

Credo Brands and Vrundavan Plantation trade at steep discounts post-listing

Worst performers among SMEs sink deeper than mainline

After looking at the top-performing IPOs, let’s take a look at mainline and SME IPOs which are trading at deep discounts to the issue price.

Credo Brands Marketing raised Rs 550 crore via an offer for sale (OFS). The company’s promoters were looking to exit. Its offer for sale of 196 lakh shares was oversubscribed by 52 times. On December 27, 2023, the company posted a moderate listing gain of 12%. However, the company is currently trading 37% below its issue price as investors booked profits after listing.

Capital Small Finance Bank started operations as India’s first small finance bank (SFB) in 2016. The company has a strong presence in semi-urban and rural areas with a branch-based operating model. It intends to use the proceeds from the fresh issue to strengthen its capital base and fulfil future capital needs. The SFB listed at a discount of 7%, and currently trades 28% below its issue price.

Suraj Estate Developers has been in the real estate business since 1986, developing properties in both residential and commercial sectors in South Central Mumbai. The company raised Rs 400 crore via a fresh issue to settle debt obligations, and acquire land and development rights. The stock is trading 20% below its issue price, after listing at a discount of 7%.

Muthoot Microfin is a microfinance institution that offers small loans to female customers, particularly in rural areas of India. Muthoot Microfin raised Rs 960 crore through a combination of fresh issue and OFS. The company will use the net proceeds from the fresh issue to strengthen its capital base and fulfil future capital needs. The company listed at a discount of 9% and currently trades 30% below the issue price.

Consumer electronics company EPack Durables is the second-largest room air conditioner original design manufacturer in India in terms of the number of units manufactured in FY23. With a promoter holding of 42.6% post-IPO, the company listed at a discount of 10% to its issue price and currently trades 30% lower than its issue price.

Worst-performing SME IPOs lose half their value

When looking at the best and worst performing SME and Mainline IPOs, one thing stands out: high risk equals high rewards. SME IPOs tend to have higher listing and current gains, but also have the worst listing and current losses.

Some SME IPOs have already lost nearly half their value since listing. Investors need to do their due diligence on IPOs, especially during a rising market, when the companies tend to make use of the positive sentiment in the market for listing.

Vrundavan Plantation is mainly engaged in the nursery business, and stands out as the worst-performing IPO. It has declined 61% below its issue price after listing at a discount of 6% on November 6, 2023. The company raised Rs 15.3 crore for the repayment of its working capital and unsecured loans. Its fresh issue of 14 lakh shares was oversubscribed by 18 times. However, the issue had not garnered any subscriptions from qualified institutional investors.

Advertising and media company Graphisads raised Rs 53.4 crore mainly for repayment of provisions and to meet working capital requirements. After listing at a moderate discount of 4.6%, the company currently trades 54% below its issue price.

Meanwhile, Italian Edibles with its wide range of confectionery foods under its OfCour’s brand has two manufacturing units in Indore. The company has raised Rs 26.7 crore proposing to set up another manufacturing unit and repayment of borrowings. The company trades at a discount of 48% below its issue price.

Vivaa Tradecom is trading at a discount of 49% to its issue price. The company is mostly engaged in the apparel and accessories business. It listed at a discount of 17% on October 12, 2023.

Lastly, sugar company MVK Agro Food Product listed on the bourses at a discount of 31%, and went further down, currently trading at a discount of 47% below its issue price. The company raised Rs 66 crore to set up a greenfield unit for manufacturing ethanol, and generation and bottling of Bio-CNG and fertiliser.

The Baseline

13 Mar 2024

India leads market rally among countries headed for elections

By Satyam Kumar

Voters will choose a new government in several countries across the world this year, in 2024. These elections could shape the global economy and geopolitics for years to come.

This year’s election-bound countries represent nearly half of the world's population and Gross Domestic Product (GDP). We take a closer look at how these countries have been performing in the lead-up to the polls.

India’s flagship index is up 2.5X in the past four years, US and Japan indices double

India is gearing up for its Lok Sabha elections in April-May this year. The current ruling party, the Modi-led Bharatiya Janata Party (BJP), is the frontrunner in the polls and is looking for a third term. The BJP government has spent Rs 23 lakh crore on infrastructure in the past three years (FY22-24) as part of the ‘Infra Push’. It has also implemented various production-linked incentive (PLI) schemes to encourage manufacturing in the country. Additionally, reforms to enhance the ease of doing business and initiatives to bolster manufacturing have added to India's growth.

India’s young population overtook that of China’s last year. With over 66% of its population of working age (between 18 and 64 years old), India has a rare demographic dividend that will help it produce goods at a faster pace, and drive technological innovation. The 'China-plus-one' strategy could also benefit India as companies worldwide seek to reduce their dependence on Chinese players.

India’s GDP growth rate came in at 7.5% in 2023, the highest among major economies. The nation’s flagship index, Nifty 50, delivered returns of 162% over four years, outperforming all other major global indices. The country’s GDP growth has been stable for the past five years, except during the Covid period when it declined by 5.8%.

Japan's Nikkei 225 hits a new peak

Japan’s Nikkei 225 made a new all-time high after 34 years crossing 40,000 yen for the first time on March 4, as global investors bet on a long-overdue recovery from deflation. In 2023, Japan witnessed a GDP growth of 1.9%, improving on 2022’s 1% increase. Its benchmark index, Nikkei 225, has risen by 41% over the past year and by 110% over the past four years, led by strong earnings. A key driver for this rebound is inflation, and the country’s expected exit from negative rates later this year.

In December 2023, three Japanese government ministers stepped down amid a corruption scandal involving alleged kickbacks of 500 million yen ($3.4 million) in the Liberal Democratic Party. Following this, there's been speculation about a general election later this year after the party's leadership vote in September.

US sees resilient growth, but faces sticky inflation and high interest rates

Coming to the largest democracy in terms of GDP, the United States witnessed GDP growth expansion in 2023 at 2.5%, compared to 1.9% in 2022. This growth came even though the Federal Reserve has been raising interest rates since March 2022. Most of the country’s stock rally in 2023 came from the Magnificient Seven. They made up about two-thirds of the S&P 500's gains last year. Top gainer Nvidia is up 370% since the start of 2023. S&P 500 has posted 98% returns in over four years. It also rose 26.4% last year, boosted by optimism around artificial intelligence and Fed rate cuts. The Fed has indicated that it’ll cut rates later this year, as they see inflation falling below 2%.

The US presidential election, scheduled for November 5 this year, will be a rematch between the current Democratic President Joe Biden, and former President Donald Trump. The sniping between the two candidates is already well underway, with Biden attacking Trump numerous times last week in his State of the Union address, and Trump using various Instagram filters on Biden’s face in his response.

GDP growth slows in European region, UK faces mild recession

The European Union (EU) has seen a decline in GDP growth over the past two years due to high inflation and reduced demand. In 2023, the EU’s GDP growth rate was only 0.4%. As a result, equity market returns moderated, with the Eurostoxx 600 rising 8.2% in the past year and 57% over four years. The European Central Bank has kept interest rates unchanged at 4.5% to reduce inflation below 2%. The European Parliament election is scheduled from June 6 to 9 this year.

Similarly, the United Kingdom’s (UK) GDP growth slowed down to 0.1% in 2023 from 4.3% the previous year. As a result, the FTSE 100, UK’s flagship index, fell by 3.6% over the past year. It rose by 35% over four years. Markets took a hit last year as the UK slipped into a mild recession in the second half of 2023.

The general election in the UK is scheduled for January 28, 2025, after the Parliament dissolves on December 17, 2024. However, Prime Minister Rishi Sunak recently said: "My working assumption is we'll have a general election in the second half of this year."

Mexico’s benchmark index delivers 59% returns over 4 years, South Africa struggles

Mexico’s GDP growth slowed to 3.2% in 2023, down from 3.9% the previous year. Its benchmark index, IPC Mexico, has delivered 59% returns over four years, in line with other economies with contracting GDP growth. Over the past year, the index has seen a marginal increase of 1.5%. Its general elections are set for June 2.

South Africa will face general elections on May 29, which may see the African National Congress lose its majority for the first time. Its GDP growth dropped from 1.9% in 2022 to 0.6% in 2023. The economic downturn is evident in its flagship index, South Africa Top 40, which declined 7% over the past year.

South Korea, one of the fastest-aging countries in the world, will conduct its legislative election on April 10. The election is crucial for ruling President Yoon Suk Yeol, as it marks the midpoint of his tenure. The country’s GDP growth has been declining for the past two years, at 2.6% in 2022 and 1.4% in 2023, compared to a growth of 4.3% in 2021. The nation’s flagship index KOSPI delivered moderate returns of 10.9% last year and 52% over four years.

In the run-up to elections, economies with falling inflation and healthy GDP growth have seen resilient markets.

On the other hand, struggling economies like the UK and South Africa have seen weak sentiment in their markets. India shines, with its strong domestic consumption and high GDP growth. A single-party win in the upcoming elections would be a boost for investors.

The Baseline

07 Mar 2024, 07:20PM

Trendlyne’s momentum screener delivers 135.8% returns over two years

By Satyam Kumar

Gone are the days when data strategies were useful mainly to institutional investors, leaving retail investors to follow in their footsteps. Thanks to financial tools like Trendlyne’sbacktesting feature, retail investors now have the same access to data, enabling them to develop investing strategies that have proven to outperform the market in the past.

Screeners help investors identify stocks that excel across multiple metrics. The Trendlyne momentum score, for example, looks at several technical parameters like simple and exponential moving averages, the relative strength index, the average true range, etc across different time frames to identify highly bullish stocks. This scoring system allows investors to shortlist stocks for swing trading.

In this edition of the Chart of the Week, we analyse one momentum screener: ‘Stocks with Highest Trendlyne Momentum Scores and High Volumes’’. This screener searches through the NSE & BSE-listed stocks to identify those with a market cap of Rs 500 crore and above that exhibit positive momentum scores. It is optimised to highlight the top 20 stocks with the highest momentum scores.

The screener backtest, covering the period from January 1, 2022, to March 2, 2024, evaluates the weekly performance of this strategy. The screener has given a cumulative return of 135.8% over two years and two months when stocks are changed weekly. In contrast, the Nifty 500’s cumulative return stands at 37.1%.

The heatmap presents a period analysis, showcasing the strategy's weekly returns from Q1CY22 to Q2CY24. The data reveals that this approach delivered positive returns in 73 out of 113 weeks.

The strategy had its maximum drawdown of 24.8% from Week 2 of Q1CY22 to Week 11 of Q2CY22. The term ‘maximum drawdown’ represents the biggest observed loss from a portfolio’s peak to its lowest point before a new peak is attained.

This strategy is automated and does not have a stop loss set. So the drawdowns here show the maximum loss potential under this approach. Introducing a stop loss can reduce periods of negative returns and lower the maximum drawdown.

Currently, the screener features stocks such as Waaree Technologies,Anand Rathi Wealth,Tourism Finance Corporation of India,Paisalo Digital, and more.

In the course of the backtest,Gensol Engineering gave the highest returns of 169.1%.

Renewable stocks lead in highest returns

Gensol Engineering tops momentum screener performance over two years

Let’s now explore the stocks that have achieved the highest returns over the past two years, as identified by the High Momentum screener’s backtest. Gensol Engineering was part of the screener from June 24, 2022, to September 9, 2022, delivering a return of 200%.

Meanwhile, 63 Moons Technologies entered the screener on December 10, 2021, and exited on January 7, 2022. During this period, the company gave a return of 63%.

Industrial machinery company, Lloyds Engineering Works, remained in the screener for two weeks, from December 24, 2021, to January 7, 2022. During this period, the company gave 60% returns.

Waaree Renewable Technologies, an electric utilities company, was in the screener from January 20, 2024, to February 2, 2024. During this period, its stock price rose by 48%. The company received two orders worth Rs 991 crore and Rs 1,401 crore in February.

Finally, Adani Power was active in the screener for more than a month, delivering returns of 44%. The stock entered the screener on April 1, 2022, and exited on May 6, 2022.

Waaree Technologies and Anand Rathi Wealth post 400%+ returns in the past year

Waaree Technologies leads in one-year gain among active stocks

Let’s now focus on the yearly and quarterly price change % of stocks currently active in the screener. Waaree Technologies' stock price rose by 706% in the past year and 237% in the past quarter. Since its inclusion in the screener on February 9, 2024, the firm has yielded a return of 38.1%.

The capital markets company, Anand Rathi Wealth, reported a 400% rise in its stock price over the past year and a 47% increase in the past quarter. Meanwhile, non-banking financial company Paisalo Digital also rose by 209% in the past year and 93% in the past quarter. It has been active in the screener for the past two weeks as well and has provided 22% returns in this period.

Mangalore Refinery and Petrochemicals surged by 370% in the past year and 92% in the past quarter. In Q3FY24, it posted a net profit of Rs 301.1 crore, compared to a loss of Rs 195 crore in the same period last year.

Lastly, defence company NIBE’s share price rose by 329% in the past year and 126% in the past quarter, following a memorandum of understanding with Munition India to manufacture and supply hardware for ammunition exports.

In conclusion, this screening strategy focused on high momentum has identified stocks that can potentially deliver quick returns, as suggested by the maximum upside of 169%. It also consistently held an average stock count of 19.4, implying diversified investment.

It’s important to keep in mind that these are automated strategies. Investors should do their own portfolio reviews and make adjustments based on the entries and exits of stocks. And as always, past returns don't guarantee future outperformance.

The Baseline

05 Mar 2024

5 stocks to buy from analysts this week

By Satyam Kumar

1. UNO Minda:

Geojit BNP Paribas maintains its ‘Buy’ call on this auto parts manufacturer with a target price of Rs 792, indicating an upside of 24.7%. Analyst Saji John says that Q3FY24 revenue exceeded expectations, fuelled by growth across all segments. Revenue has grown by 20.9% YoY, while profit increased by 19.4% YoY to Rs 193.5 crore.

John says, “Despite near-term challenges from reduced volumes and macroeconomic headwinds, we believe the stability in commodity prices and chip supplies augurs well for the company.” He points out that the company is in the process of expansion of its existing product portfolio from lighting, acoustics etc to areas like seating, and adding new product lines. The annual order value from EV OEM is Rs.3,292 crore.

The analyst points out that UNO Minda’s product diversification and the success of new products enhance its visibility. He forecasts a revenue growth of 17% CAGR over FY24-26, considering the expected stability in demand, diversification efforts, and an increase in content per vehicle.

2. Kalpataru Projects International:

Sharekhan maintains a ‘Buy’ rating on this construction and engineering company with a target price of Rs 1,140, indicating an upside of 14%. Analysts at Sharekhan say, “Kalpataru Projects’ robust order book and tender pipeline, merger synergies, and easing cost headwinds should improve performance.”

The analysts are upbeat as Kalpataru’s current order book stands at an all-time high of Rs 51,753 crore. The management also expects an order inflow of over Rs 6,000 crore during Q4FY24. Saudi Aramco has reportedly issued a letter of intent for about 16 engineering, procurement and construction packages worth $10 billion for the expansion of its Master Gas System. The analysts are optimistic about the company’s chances of securing the lowest bid for three of these packages.

The company’s entry into new projects such as underground tunneling and construction of data centers, airports, and industrial plants is likely to help growth momentum. The analysts forecast net sales to grow at a CAGR of 11.8% over FY24-26.

3. Pitti Engineering:

KR Choksey maintains a ‘Buy’ rating on this small-cap electrical equipment manufacturer with a target price of Rs 1,027. This indicates an upside of 30.6%. In Q3FY24, the company’s revenue rose by 24.2% YoY to Rs 296.9 crore, while its net profit increased 9.8% YoY. However, the EBITDA margin fell 130 bps YoY to 15%. Analyst Unnati Jadhav believes that moderation in profitability was due to staffing ahead of capex deployment.

Jadhav highlights the 25.4% QoQ growth in the company's order book to Rs 898 crore due to new orders from sectors such as rail, wind energy, and power. She says, “Increasing exposure to high growth sectors could propel future prospects.”

Jadhav is upbeat about the ongoing capex of Rs 120 crore, with Rs 85 crore already spent in the past nine months. She expects the company’s merger with Pitti Rail to boost margins, driven by a 19% volume expansion. Jadhav forecasts a revenue CAGR of 13.8% and a net profit CAGR of 36.5% over FY24-26.

4. Aurobindo Pharma:

Axis Direct recommends a ‘Buy’ call on this pharma company with a target price of Rs 1,185, indicating an upside of 10%. In Q3FY24, the company reported a 90.6% YoY growth in profit to Rs 936.3 crore, beating the brokerage’s estimate by 12.6%, Its revenue also increased by 15.6% in the same period. Analyst Neeraj Chadawar and his team attribute this growth to stable demand and new product launches. They say, “Aurobindo's diverse range of approved products has enabled it to effectively manage price erosion, maintaining a neutral impact overall.”

Going forward, the analysts are optimistic about the potential of the new China plant and Vizag plant to boost injectable supplies in the Europe market, contributing to mid-teen margin improvements. They are also positive about the growth from generic injectables Eugia, which currently brings in $520 million, and the launch of Pen-G API, expected to add $100-150 million in external sales in FY25-26).

On the back of changes in the product mix and a decrease in raw material costs, the analysts estimate the EBITDA to be in the range of 18% to 20% from FY24 to FY26.

5. Union Bank of India:

ICICI Direct assigns a ‘Buy’ call on this bank, with a target price of Rs 180. This indicates an upside of 15.4%. Analyst Vishal Narnolia says, “Union Bank of India has delivered steady growth during 9MFY24, with gains spread across all segments.” He expects an improved balance sheet, capital adequacy, and healthy liabilities to support the bank’s business expansion efforts and digital enhancement plans.

Narnolia predicts stable margins at 2.9-3% in FY24-26, driven by healthy CASA at 34.4% of deposits, repricing of deposits, and recent capital raising. He believes that the moderation in slippages and healthy coverage at 92.5% will keep credit costs low, which should gradually improve the return on assets (RoA) to 1-1.1% in FY24-26. The bank’s management is optimistic about further declines in non-performing assets (NPAs).

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

(You can find all analyst picks here)

The Baseline

29 Feb 2024

Chart of the week: Internet software, realty firms see profit and revenue surge, chemical stocks struggle

By Satyam Kumar

Following the Q3 results season, we turn to Trendlyne’s results dashboard to assess the performance of various industries, and identify top performers as well as those that struggled. We also check drivers of positive or negative industry sentiment. This edition of Chart of the Week looks at the YoY growth in revenue and net profit for Q3FY24 across industries and their large-cap stocks.

Leading the pack in terms of revenue and profit growth for the quarter are internet software and services, realty, and consumer electronics industries.

Zomato, PB Fintech drive growth in internet software and services

The internet software and services industry registered an average net profit growth of 292.6% YoY and revenue growth of 33.2% YoY in Q3FY24.

This surge was helped by Zomato and PB Fintech, which saw net profit rise 139.8% and 143.6% YoY, respectively. Additionally, 21 of 31 stocks in the industry posted a profit increase during the quarter.

Zomato’s profit boost was on the back of its quick-commerce arm Blinkit, which saw a 27% QoQ revenue growth. Its food delivery segment’s revenue also increased by 10% QoQ, helped by a higher take rate of 20.1% (up 70 bps QoQ) after introducing a platform fee.

PB Fintech’s revenue rose by 42.8% YoY, driven by its insurance and credit businesses, which grew by 44.3% and 35.5% YoY, respectively.

The realty industry posted an average net profit growth of 211% YoY in Q3FY24, with a 21.4 % YoY improvement in revenue amid strong customer demand. Key contributors included Macrotech Developers, Phoenix Mills, and Brigade Enterprises respectively, with their net profit up by 24.4%, 58.4%, and 29.2% YoY. The industry’s revenue boost was largely due to Macrotech Developers and Brigade Enterprises reporting record pre-sales of Rs 3,410 crore (up 12% YoY) and Rs 1,520 crore (up 51% YoY), in Q3FY24. Phoenix’s mall consumption went up by 25% YoY to Rs 3,300 crore with rising income levels and urbanisation, while its rental income was up 33% YoY to Rs 447 crore during the quarter.

The consumer electronics industry also saw its net profit and revenue improve by 172.5% YoY and 29.7% YoY during the quarter. Dixon Technologies (India), Voltas, and Blue Star contributed to this growth with their profits up by 85.8%, 72.5%, and 71.9% YoY, respectively. This growth was supported by major policy changes and production-linked incentive (PLI) schemes by the Indian government to attract large global players into this space. Dixon Technologies in particular, saw its revenue double on a YoY basis in Q3FY24, thanks to its mobile and electronic manufacturing segment, with a growth of 251% YoY to Rs 3,214 crore. Voltas and Blue Star also reported net profit growth on festive sales and rise in demand for air conditioners.

While these three industries celebrated robust Q3FY24 results, others like commodity chemicals, fertilizers, and agrochemicals faced declines in both revenue and net profit during the same period.

Weak demand and Chinese competition dampen chemical industry’s revenue

The chemical industry faced continued price pressures in Q3FY24, while inventory rationalisation by end-user agrochemical companies is coming to an end. Weak demand and ongoing Chinese dumping resulted in subdued revenues and margins.

The agrochemicals industry was impacted the most, recording a 125.8% YoY decline in average net profit and a 21.3% YoY fall in revenue. UPL, Bayer Cropscience, and Sumitomo Chemical India saw revenue declines of 27.7%, 8% and 28.1% YoY, respectively. This downturn was due to a sharp decrease in price realisation, pressured by higher supplies from China as Covid-related restrictions eased.

Meanwhile, the commodity chemicals industry saw a 53.4% YoY plunge in average net profit and a 7.6% YoY fall in revenue during the quarter. Tata Chemicals and Navin Fluorine International reported significant profit drops of 59.6% YoY and 26.8% YoY, respectively. The decline in net profit was mainly due to industry-wide channel destocking and inventory reduction.

The fertilizers industry also saw a 67.3% YoY decline in net profit, while its average revenue decreased by 32.9% YoY during Q3FY24. Coromandel International and The Fertilisers and Chemicals Travancore faced sharp decreases of 56.2% YoY and 81.7% YoY in net profit during the quarter.

The Baseline

20 Feb 2024

5 stocks to buy from analysts this week with high upsides

By Satyam Kumar

1. Royal Orchid Hotels:

Edelweiss maintains its ‘Buy’ rating on this hotel company with a target price of Rs 535. This indicates an upside of 26.4%. Analysts Amit Agarwal and Rishith Shah say, “Given the traction from domestic demand, the revival in meetings, conferences and exhibition activity, and constrained supply additions in the industry, we expect average room rate to trend upwards, with occupancy at near-optimal levels.” In Q3FY24, Royal Orchid’s revenue grew by 13.2% YoY to Rs 86.6 crore, while its net profit increased by 1.1% YoY to Rs 15.4 crore.

The analysts note that the company added 990 rooms in the past year, taking the total to 5,795. They expect the company to add around 2,300 rooms across 38-40 hotels by the end of FY25. As a large part of these room additions are under the asset-light model, Agarwal and Shah project the firm’s RoCE (Return on Capital Employed) to improve from 25.6% in FY23 to 28.8% in FY26. Benefiting from sectoral tailwinds, they predict a CAGR of 21% for revenue and 20% for profit after tax over FY23-26.

2. NTPC:

ICICI Direct maintains its ‘Buy’ rating on this electric utilities company with a target price of Rs 400. This implies an upside of 15.7%. In Q3FY24, its net profit grew 7.9% YoY to Rs 5,155.3 crore. Analyst Chirag J Shah says, “The company’s vision is to become a 130 GW+ company by 2032, with 60 GW expected from renewable energy.”

Shah is optimistic about NTPC – it is the only company that has added coal-based capacities over the past five years, reaching an installed base of 73,000 MW on a consolidated basis. NTPC has 9,300 MW of coal-based plants under construction. The analyst expects them to be commissioned by FY25-26. This will lead to an 11% growth in generation, supported by strong power load factors.

NTPC aims to produce 45-50% of its capacity from non-fossil fuels by 2030, and is targeting 60 GW of renewable capacity by 2032, according to Shah. He points out that the management is confident about reaching 20,000 MW of renewable capacity by FY26. He notes that the company is trying to diversify into green hydrogen and nuclear power through a joint venture with Nuclear Power Corporation of India.

3. Prestige Estates Projects:

HDFC Securities maintains its ‘Buy’ rating on this realty company with a target price of Rs 1,390, indicating an upside of 19.4%. Analyst Parikshit D Kandpal is upbeat about Prestige Estates registering its second-highest-ever presales by value and volume in Q3FY24, at Rs 5,320 crore, up 111% YoY, and 5.5 million square feet (msf), up 88% YoY, respectively. But, its revenue fell 16.1% YoY to Rs 1,970.5 crore, while net profit dropped by 9% YoY to Rs 116.3 crore in the quarter, mainly due to a decline in completions.

Kandpal believes that presales were supported by launches being at the highest ever, with new projects totalling 14.6 msf. This included Prestige City Hyderabad, which contributed Rs 2,400 crore to presales with its 12.6msf saleable area. He expects the company to launch its first project in NCR, Prestige Bougainvillea Gardens, in Q1FY25, with a saleable area of 3.1 msf. With Rs 16,330 crore in presales achieved in 9MFY24, the analyst forecasts that the company will surpass Rs 20,000 crore in presales in FY24.

4. Ashok Leyland:

KR Choksey maintains its ‘Buy’ rating on this commercial vehicles company with a target price of Rs 221. This indicates a potential upside of 27.8%. Analyst Unnati Jadhav believes that Ashok Leyland will continue to benefit from the government’s focus on infrastructure, replacement demand, improved freight demand, and a shift towards higher tonnage vehicles. The company’s revenue grew by 6.6% YoY to Rs 11,119.5 crore in Q3FY24, while its net profit increased by 75.6% YoY to Rs 560.2 crore.

Jadhav notes that elections in major states during Q3FY24 led to a slowdown in the company's revenue growth by affecting sales volumes. However, she adds that the gross margin for the quarter expanded by 403 bps YoY and 130 bps QoQ to 27.8%, helped by softening steel prices and pricing discipline leading to improved realizations. She forecasts a revenue CAGR of 8.2% and an adjusted net profit CAGR of 37.3% over FY23-26.

5. HG Infra Engineering:

Geojit BNP Paribas maintains its ‘Buy’ rating on this construction and engineering company with a target price of Rs 1,120, indicating an upside of 19.5%. Analyst Antu Eapen Thomas is upbeat about the company’s growing opportunities in road projects and its significant order book of Rs 9,626 crore, which is twice its trailing twelve month revenue.

In Q3FY24, its revenue grew by 15.1% YoY to Rs 1,368.4 crore, while net profit declined by 22% YoY to Rs 102 crore, mainly due to increased input costs and employee expenses.

Thomas notes the company’s well-diversified order book: 51% from EPC orders, 37% from hybrid-annuity model projects, and 12% from railway projects. He expects a dip in order inflow in Q4FY24 due to the upcoming general elections but expects any shortfall to be compensated in FY25.

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

(You can find all analyst picks here)

The Baseline

05 Feb 2024

5 auto and construction stock picks from analysts this week

By Satyam Kumar

This week, we look at the stock picks from analysts from automobiles & auto components, and cement & construction sectors.

1. Mahindra & Mahindra:

Motilal Oswal reiterates its ‘Buy’ call on this car and utility vehicle manufacturer with a target price of Rs 2,005, indicating an upside of 17.7%. Analysts Amber Shukla and Aniket Desai believe that headwinds like a weaker monsoon made for a challenging FY24 for the tractor industry, but they expect FY25 to be better, led by favourable festive timings.

The analysts are also positive about the company’s two new arms, set up to expand its electric SUV and LCV fleets. The company has earmarked an investment of Rs 10,000 crore for these electric vehicle subsidiaries.

Shukla and Desai remain optimistic on the back of Mahindra & Mahindra’s focus on launching new models and achieving healthy margin growth in its core business. Despite predicting growth moderation in some of its verticals, they say “the company is still better placed to outperform across all its verticals”. The analysts estimate a revenue and profit CAGR of 12.5% and 17%, respectively, over FY24-26.

2. Maruti Suzuki India:

HDFC Securities maintains its ‘Buy’ rating on this car manufacturer with a target price of Rs 12,887, indicating an upside of 23.6%. Analysts Aniket Mhatre and Maitreyee Vaishampayan say, “On the back of its aggressive launch spree over the last few quarters, Maruti Suzuki continues to be the market leader in the utility vehicles segment.” In Q3FY24, the company’s net profit jumped 34.1% YoY to Rs 3,206.8 crore (beating the brokerage’s estimate by 11%), while its revenue increased by 15.3% YoY to Rs 34,509.2 crore.

The analysts note a margin improvement in Q3 by 210 bps to 12.3% (against their estimate of 11.5%), led by lower commodity costs, reduced royalties and positive forex impact. They attribute the decrease in the current order backlog to 215k units (from 250k units in Q2FY24), to the improved availability of semiconductors.

Mhatre and Vaishampayan are optimistic about the company as the management aims to launch 10 new models by 2030, including six EV models. With rising exports and higher plant utilisation, they expect the EBITDA margin to expand by 240 bps over FY24-26.

3. Exide Industries:

ICICI Direct maintains its ‘Buy’ rating on this auto parts and equipment manufacturer with a target price of Rs 380, indicating an upside of 9.3%. In Q3FY24, its net profit grew by 7.7% YoY to Rs 240.3 crore, while its revenue increased by 12.7% YoY to Rs 3,863.3 crore. Analyst Shashank Kanodia says, “The automotive division witnessed a broad-based uptick, showing signs of demand recovery, while the industrial segment benefitted from large investments in sectors such as renewables, telecom, and infrastructure.”

Kanodia is optimistic as Exide has an early-mover advantage in the new-age lithium-ion battery business, highlighted by its joint venture (JV) with Leclanché SA (an energy storage solutions provider). This JV aims to set up electric vehicle battery assembly operations with a capex outlay of Rs 6,000 crore for a 12 GWH capacity, expected to be operational in CY25. However, the company faces competition from other established and new players in this space, such as Amara Raja Energy.

Kanodia believes that the firm is an industry leader in the lead-acid battery space. He expects steady growth in this segment in the near-to-medium term, driven by healthy auto OEM sales, increasing industrial use, and export opportunities. The analyst projects margin expansion of 12.5%, up from the current 11.5%, if raw material prices remain stable.

4. Larsen & Toubro:

BOB Capital Markets maintains its ‘Buy’ rating on this construction and engineering company with a target price of Rs 4,200, indicating an upside of 25.7%. In Q3FY24, its net profit grew by 15.5% YoY to Rs 2,947.4 crore, while its revenue increased by 18.7% YoY to Rs 55,965.6 crore. Analysts Vinod Chari, Swati Jhunjhunwala, and Arshia Khosla say, “The company posted a strong order inflow of Rs 76,000 crore in Q3, driven by infrastructure and hydrocarbon projects.”

Larsen & Toubro has increased its FY24 order inflow and revenue growth guidance to 20% and the high teens (17-19%), respectively, as it ended 9MFY24 with a record order book of Rs 4.7 lakh crore.

Despite a 50 bps YoY dip in EBITDA margin to 10.4% in Q3, which dragged the YTD margins to 7.5%, the management expects to complete all legacy orders this year and has guided for an FY24 EBITDA margin band of 8.3-8.5%. It also predicts sequential margin improvements over the next four quarters.

5. Shree Cements:

Axis Direct upgrades its rating on this cement products manufacturer to ‘Buy’ with a target price of Rs 31,470. This indicates an upside of 16.8%. In Q3FY24, the company’s net profit grew by 148.8% YoY to Rs 701.9 crore, while revenue increased by 20.1% YoY to Rs 5,370.6 crore. Analysts Uttam K Srimal and Shikha Doshi say, “Shree Cements posted robust results, exceeding our expectations, due to better demand in its operating regions and higher realizations from higher merchant power sales.”

The company’s EBITDA margins have improved to 25%, and the analysts expect it to improve further on the back of a better product mix, higher sales of premium products, brand-building exercises, and cost optimisation. They believe the company's capacity expansion move will allow it to compete with its larger peers and strengthen its market presence. They expect volume growth of 10% CAGR over FY24-FY26, and remain bullish on the cement demand, thanks to infrastructure and housing investments.

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

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