By Tejas MDIt’s a great time to be a stock market investor. The benchmark Nifty 50 is up 11.7% post election, and has risen 26.4% in the past year. In fact, between June 25 and July 4, records fell left and right as the Nifty hit its lifetime high in every single trading session and closed in the green for a fifth straight week.
So right now, most investors are looking at their portfolios and feeling like geniuses. Over 50% of Nifty500 stocks are near their 52 week highs. In this bull market, losers are few. But how long will the party last?
Analysts are divided on this. While some think this is the best time to invest in the Indian stock market, many are skeptical.
Kotak Securities expects Nifty 50 companies’ Q1FY25 profit to be flat YoY and decline 10.7% QoQ. Downbeat Q1 results could lead to a correction in a stock market many already find too hot, according to Bloomberg.
The results season will dictate the market direction, alongside the Union budget on July 23. We take a look at five growth stocks that are expected to stand out from the pack.
In this week’s Analyticks,
- Q1FY25 pre-results special: Five companies set to zoom with high growth, even in a weak results season
- Screener: Upcoming results for Nifty500 stocks which delivered 10%+ revenue and profit growth in FY24
The big winners: Five stocks expected to top the Q1FY25 results season
Analysts have been picking their favourite stocks ahead of the Q1FY25 results. Among these, we shortlisted five Nifty 500 companies that are predicted to post especially high revenue and net profit growth both YoY and QoQ in the June quarter, according to Trendlyne’s Forecaster. What’s more? These companies already set the bar high with strong results in Q4FY24.
Growth stocks in focus are from five different industries
All five stocks in focus, Apollo Hospitals Enterprise (AHEL), Natco Pharma, Varun Beverages (VBL), KPIT Technologies, and Bajaj Auto are from different industries.
Except for Apollo Hospitals, all stocks have risen sharply over the past year, and have also outperformed the Nifty 50.
Only Apollo Hospitals lags Nifty 50 in the past year
As a result of the upswing, the Trendlyne Momentum scores for these companies range from neutral to high, indicating buying interest in the market. However, low Valuation scores for Apollo Hospitals, Varun Beverages and KPIT Tech are a sign that they may be expensively priced.
Natco Pharma top of the five, with good Durability, Valuation and Momentum scores
These companies also have high durability scores, thanks to strong financials and management stability.
AHEL’s hospitals and labs to drive growth, but expensive valuation raises concerns
Apollo Hospitals, the first hospital to be included in the Nifty 50 index, is expected to see a sharp rise in revenue (+54.6%) and net profit (139.7%) YoY in Q1FY25.
Apollo Hospital’s revenue to grow both YoY and QoQ in Q1FY25
Healthcare services like hospitals, and diagnostics & retail health segments are expected to increase margins and drive revenue. The company’s digital business, which includes Apollo 24x7, is still spending more than it earns, and is expected to breakeven in the next six to eight quarters.
Apollo’s competitive advantage lies in its omnichannel brand presence: it's no longer just a hospital. From clinics, hospitals and diagnostics to pharmacies (online and offline), vertical integration is helping the company to acquire customers from one business unit to another.
Analysts are positive about the company as it is adding new beds, increasing high-margin surgeries, and broadening its test menu in the diagnostics segment.
However, analysts believe the hospital’s recent fundraising of Rs 2,475 crore through private equity firm Advent International for its Apollo 24/7 was lower than expected. When the fundraising announcement came out on April 29, the stock fell 8% intraday. But the share price has recovered since, as investors look ahead to its Q1FY25 results. With high profits expected, the company’s PE is also elevated at 103 but is in the neutral zone according to its historical averages.
Landmark anti-cancer drug boosts Natco Pharma, generic weight loss drugs in the pipeline
This pharma company is a specialist in complex generic products, with a focus on high-risk, high-reward drug launches in the US. Natco's export formulations make up 81% of its total revenue. This segment grew 35% in Q4FY24, mainly due to its anti-cancer drug gRevlimid.
Analysts expect these gains to continue in Q1FY25, and for a few more quarters. The stock has a PE of 15.6 and is in the PE Strong Buy Zone indicating that it is currently trading far below its historical PE.
gRevlimid sales to drive Natco Pharma’s topline in Q1FY25
To offset slowing sales from Revlimid down the line, the management plans to launch 6-7 more niche products. Drugs in the pipeline include generic Ozempic and Wegovy - the blockbuster weight loss and antidiabetic drugs - and gLynparza (anti-cancer). Natco is also banking on new first-to-file (FTF) opportunities as other companies' drug patents expire.
The company is also focusing on acquisitions in emerging markets. The management plans to use its cash in hand (Rs 2,004 crore available) to fund acquisitions. Rajeev Nannapaneni, CEO of Natco Pharma said, “Emerging markets give you more broad-based earnings, and consistent earnings. Acquisition there is the way to go. Acquisitions in India in comparison, are very expensive.”
Varun Beverages continues its momentum, expansion in Africa set to be the next growth driver
Varun Beverages is the largest bottler of PepsiCo's beverages globally, outside the US. This company’s share price has nearly doubled in the past year and has jumped by 6.7X in the last three years. VBL’s revenue and net profit are expected to rise by 31.8% and 34.1% YoY in Q1FY25. However, the company is in the PE Sell Zone indicating that it is currently pretty expensive and trading above its historical PE.
Lower input prices drive margin higher in Q4FY24
Varun Bev plans to increase its international revenue (20% of its sales volume now) and is expanding its footprint in Africa through capacity expansions, acquisitions and licensing rights from PepsiCo. In the Q4FY24 earnings call, Ravi Jaipuria, VBL’s Chairman, mentioned that the Africa business unit is expected to be a major growth engine in revenue and profitability.
But a growing threat for the company is its rival Coca-Cola's plan to sell a part of its bottling business, Hindustan Coca-Cola Beverages (HCCB). Coca Cola is eyeing an investment of about US$ 800 m to US$ 1 billion in a bid to grow its business and capture market share in India.
Demand for EVs and passenger vehicles fuels KPIT Tech’s growth
ThisIT software company hasrisen by an impressive 61.6% in the past year, outperforming theNifty IT by 24.5 percentage points.KPIT Technologies provides engineering solutions for firms in the booming CASE (Connected Autonomous Shared and Electric) auto segment. KPIT Tech’s revenue and net profit areexpected to rise both YoY and QoQ in Q1FY25.
However, the company is in the PE Sell Zone and is currently trading above its historical PE.
Rising EV demand to help KPIT Tech’s topline growth
For FY25, the revenue growth guidance for the IT sector overall is weak. Tier-1 companies are expected to post low single-digit growth, and Tier-2 high-single-digit growth. But KPIT Tech is expected to see 22.4% revenue growth in FY25.
S.B. Ravi Pandit, Co-Founder and Chairman believes that the outperformance is due to the company’s focus on the mobility industry.
The growth in the mobility & autonomous space is driving revenue for KPIT. Feature development and integration for auto bodies and auto electronics was the fastest-growing segment for KPIT in Q4FY24, with a rise of 29.4% YoY. This segment contributes to 62% of the total revenue. The company plans to build more domain expertise by adding more capabilities through joint ventures and acquisitions.
Analysts expect Bajaj Auto’s exports to rebound, add to topline growth
The auto & auto components sector has had a pretty good year, with the sector rising 76.6%. But Bajaj Auto has outperformed its sector, and risen 105.9% over the same period. Despite this rise, the TTM PE ratio of this stock (34.5) is lower than its industry average of 39.4.
Domestic sales have outshone exports in the past year for Bajaj Auto. The 125+ cc segment, which contributes to 75% of the domestic revenue, drove revenue growth on the back of new product launches.
Overall sales are up, despite muted exports. The company’s export volumes in FY24 were at 65% of the peak seen in FY22. However, analysts expect export markets to recover from the macroeconomic issues they faced in the last two years. This gives Bajaj a lot of room to grow.
Analysts expect Bajaj Auto’s exports to recover in Q1FY25
Analysts also expect growth from domestic premiumisation and export recovery within 3-Wheelers (3W) as the company expands its footprint in CNG 3W and e-autos.
Screener: Upcoming results for Nifty500 companies which delivered strong FY24 net profit and revenue growth
Finance and IT stocks rise ahead of Q1 results
As the results season starts, we take a look at rising stocks which already saw high growth in net profit and revenue for FY24. This screener shows companies whose share prices are rising as results come up, and with over 10% net profit and revenue growth in FY24.
The screener is dominated by stocks from the asset management, banking, NBFC and IT consulting & services industries. Major companies that feature in the screener are Persistent Systems, Elecon Engineering, HDFC Life Insurance, HDFC Asset Management, Crisil, L&T Technology Services, Anand Rathi, and Havells India.
Persistent Systems has risen 20.4% over the past month. This IT software & services company’s net profit increased by 18.7% YoY to Rs 1093.5 crore in FY24, driven by improved sales, strong product development, and a well-balanced portfolio mix in the healthcare and BFSI segments. KR Choksey believes that the company’s financial performance will continue to beat its larger IT peers, but may witness a relative slowdown in FY25. Trendlyne’s Forecaster expects its net profit to grow by 32.4% YoY in Q1FY25.
HDFC Life Insurance has risen by 10.9% over the past month ahead of its results, scheduled to be released on July 15. This life insurance company’s net profit grew by 15% YoY to Rs 1,574.1 crore in FY24 due to a higher-than-expected boost in its unit-linked insurance plans (ULIPs). Geojit BNP Paribas expects the company’s cross-selling with HDFC Bank to grow; its reach in tier 2 & 3 cities is also set to improve. Trendyne’s Forecaster estimates its net profit to grow by 25.2% YoY in Q1FY25.
You can find more screeners here.
