My Newsfeed

Investors usually prefer companies with a high return on capital employed (ROCE) of over 20%, as they are able to efficiently use their capital to generate revenue. In this edition of Chart of the Week, we examine companies that have outperformed their sectors in terms of ROCE in FY23. These companies are from sectors with high ROCE that outperformed the Nifty 50. 

The software and services sector outperformed the Nifty 50’s ROCE by the highest margin in FY23 - by 20.7 percentage points. Companies with the highest ROCE in this sector are Tata Consultancy Services (TCS), Tata Elxsi and Easy Trip Planners, standing at 57.6%, 41.7% and 49.9% respectively. 

TCS’ high ROCE partly came from the sharp rise in its current liabilities, which rose at a three-year CAGR of 17.2%. This rise in current liabilities reduces the capital employed (total assets minus current liabilities), and in turn, boosts returns on capital. According to reports, 27% of TCS' business is currently funded by suppliers/short-term creditors.

Tata Elxsi’s ROCE increased due to robust growth in revenue (27.3% YoY) from software development & services and system integration & support services for FY23. These helped operating profit rise by 25.5% in FY23.

The FMCG sector has outperformed the Nifty 50’s ROCE by 13 percentage points in FY23. Companies with the highest annual ROCE in the sector are Nestle, Procter & Gamble Hygiene & Healthcare and Colgate-Palmolive, achieving 57.8%, 97.3% and 79.3% respectively in FY23. 

To sustain and improve its already high ROCE, Nestle plans to spend a major portion of its Rs. 1,200 crore capex to reduce pressure on over-utilized plants and increase food and chocolates production over 2023. Colgate-Palmolive’s annual ROCE surpassed the sector by 47.5 percentage points in FY23. Despite outperforming the sector, the company's ROCE has been falling for the past two years. 

The Food, Beverage & Tobacco sector has also outperformed Nifty 50’s ROCE by 11.3 percentage points on the back of strong ROCE posted by ITC, VST Industries and Bombay Super Hybrid Seeds. Their annual ROCE stands at 35.8%, 35.7% and 35.6% respectively. 

The Textile, Apparel, and Accessories sector has showcased an impressive performance, surpassing the Nifty 50 by 10.2 percentage points in terms of ROCE. It  was driven by strong ROCE from Page Industries, PDS and Titan, reaching 53.3%, 35.4% and 34.5% respectively in FY23. Despite a high ROCE, Page Industries posted a muted quarter in Q4FY23 due to increased inventory levels during the inflationary period. Its Q4 net profit fell by 58.9% YoY and revenue fell by 12.8%. 

Jhunjhunwala’s top bet, Titan, outperformed its sector by 5.6 percentage points in Annual ROCE. For FY 24-25, the company plans to set up 40+ new stores in the jewelry division and increase its international presence to 25 stores by 2024. It has observed a 157% rise in capital employed (Total Assets - Current Liabilities) over the past five years. For FY23, growth in sales of jewelry and watches helped increase the EBIT margin and ultimately ROCE.

The diversified consumer service sector outperformed the Nifty 50’s ROCE by 6.8 percentage points in FY23. IRCTC, a miniratna PSU, surpassed its sector by 24.3 percentage points. Its EBIT increased in FY23 on the back of robust growth in the catering, rail neer and state teertha segments. By the end of FY23, IRCTC plans to set up rail neer plants in Bhubaneshwar, Vijayawada and Kota, which will increase the production capacity by 3 lakh litres, reaching a total capacity of 19.8 lakh litres.

Despite being capital-intensive industries, metals & mining and chemicals & petrochemicals have managed to outperform the Nifty 50 by 6.4 percentage points and three percentage points, respectively. In the metals & mining sector, Hindustan Zinc was the highest outperformer, while Fine Organic Industries excelled in terms of ROCE in the chemicals & petrochemicals sector.

Finally, CG Power & Industrial Solutions stands out as the top-performing company in the General Industries sector, boasting the highest ROCE among its peers. The company has planned to further increase the production capacity of motors at its Ahmednagar and Goa plants with an investment of Rs 230 crore, and transformers at its Bhopal and Malanpur plants with an investment of Rs 126 crore in FY24.  

1. AU Small Finance Bank: Thisbanking stock has outperformed the Nifty Private Bank index by 14.3% in the past month, and rose 16.4%, according to Trendlyne’sTechnicals. Currently, the stock is trading at an all-time high. In Q4FY23, the bank’s deposits grew by 32% YoY to Rs 69,365 crore. Advances also improved by 26% YoY to Rs 59,158 crore, led by the commercial banking division.
   
   The Net Interest Margin (NIM) of the bank is one of the highest among its peers at 6.1%. However, the margins are expected to decrease due to rising cost of funds and limited scope to raise interest rates. Its bottom line was also aided by lower provisioning.
   
   The gross NPA remains steady at 0.7%, backed by high-rated customers. The bank is also investing in newer product lines like credit cards and video banking. The company shows up in ascreener for consistently high-return stocks in the Nifty 500 for five years.

In its future outlook, AU Small Finance Bank’s management said that it plans o focus on building the asset book and maintaining asset quality. The bank’s CEO, Sanjay Agarwal, expects the asset book to grow 29-30% in FY24, aided by branch expansion and market share gains. Margin compression and elevated cost ratios are expected to put pressure on the return on assets number. 

ICICI Securities suggests that the bank’s high ROA and investments toward franchise build-up will help grow the asset base.Its higher provision coverage ratio of 75% has resulted in lower provisioning, and a focus on retail customers will help in maintaining asset quality.

2. Craftsman Automation: Thisauto part and equipment manufacturer has seen its stock price rise by 12.6% in the past week, while the broader benchmarkNifty Auto increased by 2.6%. The stock is currently trading at a 52-week high, according toTrendlyne’s Technicals. The firm’s revenue grew by 20% and net profit by 37% YoY in Q4FY23. The revenue growth was driven by auto powertrain and AI products. During the quarter, the company maintained a stable EBITDA margin of 21.3%. The profit growth was in part due to lower taxes from the recent tax regime change.
   
   The firm is also in the final stages of validation to supply critical parts for a domestic SUV, starting in July 2023. The firm plans a capex of Rs 320 crore in FY24, against 309 crore in FY23. The capex would be spent on the refurbishment of outdated equipment and semi-automation in material handling. The firm also aims to reduce its debt by Rs 200 crore in FY24, bringing the net debt below Rs 1,100 crore. The stock shows up in ascreener for companies with high TTM EPS growth.

Craftsman Automation’s management has guided a revenue growth of 20% for FY24, aided by higher volumes from new customers and a ramp-up in powertrain orders from Stellantis, an automotive manufacturer based in the Netherlands. However, the projected growth for powertrains in FY24 is lower at 14%, whereas Aluminium and industrial products are expected to grow by 20% or more. Exports are expected to slow down owing to recessionary fears in European markets. In terms of domestic growth, the commercial and passenger vehicle segment is expected to drive the first half of FY24,  while the construction and farm machinery division will fuel growth in the second half.

According toMotilal Oswal, the firm’s track record of market leadership in the auto component industry is uncommon. The firm has managed to create niche products and demonstrated superior capital efficiency, resulting in higher growth numbers than the industry. The brokerage has maintained a ‘Buy’ rating on the company.

3. Kalpataru Power Transmission: This electric utility company’s promoters sold 96.3 lakh shares (nearly 6% stake) worth Rs 467.8 crore in a bulk deal on May 30. Parag Mofatraj Munot (promoter) and two promoter group entities, Kalpataru Constructions and Kalpataru Viniyog, sold their shares at around Rs 485 per share, which was lower than the stock’s opening of Rs 503.9 on Tuesday. ICICI Prudential Mutual Fund picked up nearly 15 lakh shares worth Rs 72.5 crore on the same day. 

Since the promoter sale, the stock has risen 5.8% till Friday. It shows up in a screener for stocks with strong momentum. This uptrend seems to be driven by the firm’s robust order book and healthy business outlook. As of the end of FY23, its order book stood at Rs 45,918 crore, and its order inflow for FY23 grew by 39% YoY to Rs 25,241 crore. Leveraging its presence across diverse geographies and segments, the company is pursuing growth in verticals such as water, metro and airports in both domestic and international markets. The management points out that the merger with its subsidiary, JMC Projects, has enhanced Kalpataru Power’s abilities to bid on larger and more complex projects, leading to cost synergies. The company is focused on divesting its non-core investments to free up capital and reduce debt over the coming quarters. 

ICICI Securities believes that the company is well-placed to benefit from the government’s increased focus on infrastructure, given its strong order pipeline, geographical expansion, and strengthening balance sheet. According to Trendlyne’s Forecaster, the consensus recommendation on the company from 13 analysts is ‘Buy’, with 10 rating it ‘Strong Buy’, two ‘Buy’ and one ‘Hold’. 

4. Torrent Pharmaceuticals: This pharma company rose over 7% and touched an all-time high of Rs 1,884.9 on Wednesday after reporting strong Q4 results. The company posted a net profit of Rs 287 crore during the quarter, led by lower raw material expenses, compared to a net loss of Rs 118 crore in Q4FY22. The loss incurred in the previous year’s quarter was on account of a one-time impairment provision and costs from the discontinuation of its liquid business in the US. 

Despite posting a profit, it missed Trendlyne’s Forecaster estimates by 12%. Torrent’s India revenue, which contributes 59% to total revenue, has increased by 22% YoY, led by growth in chronic therapies and new launches. For FY23, its revenue rose by 13% to Rs 9,620 crore, marking the seventh consecutive quarter of YoY revenue growth. 

Meanwhile, the company’s EBITDA margins have also improved by 286 bps to 29.2%, led by a favourable product mix and lower R&D expenses in the US. The management has guided for margins to improve by 60-100 bps every year due to price increases across markets. It is also targeting 2% volume growth in its base business.  

Following the release of the company’s results, ICICI Securities maintains its ‘Hold’ rating but revises the target price to Rs 1,645 from Rs 1,630. According to the brokerage, Torrent is expected to take a few more quarters to fully realise synergies from the Curatio portfolio. Torrent acquired Curatio Health Care for Rs 2,000 crore in September 2022 to enhance its presence in dermatology.  The analysts also expect higher interest costs and depreciation to affect Torrent’s profitability in the near term. 

5. Page Industries: This other apparels & accessories stock plunged almost 9% and touched its 52-week low of Rs 34,952.6 on May 26 as its Q4FY23 net profit declined by 58.9% YoY to Rs 78.3 crore. Its revenue has also fallen by 12.8% YoY to Rs 969.1 crore, affected by low demand. This caused the company to feature in a screener of stocks with low Piotroski scores, which indicates weak financial performance. 

Revenue and net profit missed Trendlyne’s Forecaster estimates by 15.2% and 42.9% respectively. It has also underperformed its industry in terms of net profit and revenue. Its EBITDA margin witnessed a drop of 10.1 percentage points on the back of increasing raw material, inventory, employee benefit and finance costs. 

According to VS Ganesh, Managing Director of the company, Page Industries saw a reduction in profitability due to higher inventory levels acquired during an inflationary period and lower than optimal capacity utilisation. However, the company has implemented a new inventory management system (auto replenishment strategy or ARS) to better manage its inventory.

Axis Securities maintains its ‘Hold’ rating on the stock with a downgraded target price of Rs 40,000 per share. This indicates a potential downside of 3%. The brokerage believes that the implementation of ARS will affect volume growth and margin expansion in the next two quarters. It expects the company’s profitability to improve only in H2FY24.  

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.

Does it feel like you are living in an economy with a growth rate of 7% - among the fastest in the world? The answer may depend on who you ask.

RBI Governor Shaktikanta Das would be among those saying, "Yes, totally." Speaking at the recent RBI meet, he noted, “Economic activity saw momentum in Q4, based on our high-frequency indicators. I will not be surprised if India's GDP growth is slightly more than 7%.”

On the other side is a top executive running a consumer-facing business in India. At a CNBC TV18 conference, Anuj Poddar, CEO at Bajaj Electricals, highlighted the challenge of achieving growth for the business, saying, “You don’t know how tough it is to get these growth numbers. For the past 4-6 quarters, we have seen a lack of correlation between GDP growth and actual demand.” 

One reason for this disconnect between the economic numbers and consumer behavior on the ground, according to Poddar, is demand weakness at the median income level.

If we look at the change in people's income between FY16 and FY21, middle-income groups and below have seen a fall. The fruits of India's GDP growth aren't being evenly distributed – the richest have seen the most gains, while the poorest are worse off than before. 

Starting from early 2022, it was the higher-income millennials who were driving discretionary spending. Retailers targeting premium consumers enjoyed the benefits. But that spending frenzy has now normalized– how many designer bags can a person buy, after all – and there's been an overall slowdown in private consumption.

 Analyst house Jefferies notes that consumer demand has been mixed across categories.

So what's going on? We take a closer look in this week’s Analyticks:

• Is the party over? Retailers, restaurant chains, jewelry companies see demand slowing down in Q4, but hopes are alive
• Screener: Consumer-oriented companies outperforming their sectors in Q4FY23

Discretionary space sees demand slowdown, but CEOs are hopeful 

According to the Retailers Association of India, retail sales experienced double-digit growth through most of 2022, and until February 2023. However, the growth rate fell to just 6% in March and April due to declines in the beauty and personal care, footwear, apparel, and jewelry segments.  

The decline in discretionary demand started in the second half of FY23 and became more pronounced from February onwards. High inflation was a major factor here, and was especially intense in the value segments, and in tier 2 and 3 cities. These demand-side challenges and higher costs hit the bottom-line growth of retailers and restaurants in Q4. Jewelry makers in comparison, did much better. 

Indian retailers: Revenue growth holds up but profit growth falters

Big and diversified retailers like Reliance Retail (part of Reliance Industries) and D-Mart posted healthy revenue growth in Q4, thanks to a low base in last year’s quarter and store expansions. The store count for these players rose by over 14% YoY in Q4FY23. 

For Reliance Retail, the store area in million sqft terms jumped by over 55% in Q4, indicating that growth in the top line was primarily thanks to aggressive expansions, while same-store sales growth contributed little. 

Among major categories, the grocery segment grew the fastest in Q4, while the fashion and lifestyle segment, which is discretionary by nature, saw softer YoY sales growth of 19%, despite the low base effect. 

Even with strong revenue growth, the net profit growth for big retailers was modest at best. D-mart's margins were impacted by lower contributions from the general merchandise and apparel segment.Meanwhile, Reliance Retail faced profit growth challenges due to higher expenses from rapid expansions. 

Some fashion retailers were badly hit. Aditya Birla Fashion posted a net loss in Q4 owing to lackluster sales growth, higher marketing spends, and the lack of rental rebates (given to retailers by mall owners during Covid). In contrast, Trent clocked a net profit growth of 40% in Q4.

Commenting on the demand trends, Ashish Dikshit, Managing Director at ABFRL, said, “If you recall our earlier conversations, I had said that the lower end of the market was more affected. Now, it looks like a more widespread slowdown.”

Footwear retailers faced a similar challenge of decent sales growth but weaker bottom-line growth. Higher operating costs due to store expansions, marketing expenses, and losses from the newly acquired brand FILA affected the profitability of Metro Brands. 

Looking ahead, premium footwear retailer Metro Brands predicts slow near-term sales growth. The management at ABFRL expects a pick-up in consumer sentiment only during the festive season in the second half of the year. 

Quick service restaurants: Same-store sales growth cracks, profitability dips

Jubilant Foodworks, a major player in the Quick Service Restaurant (QSR) industry, posted muted revenue growth of 8% this Q4, entirely driven by store additions. The like-for-like growth, which represents growth in existing stores, was negative for Domino's. Devyani International also reported negative same-store sales growth for Pizza Hut. 

The profitability of QSR majors suffered deeply due to input cost pressures and negative operating leverage. Negative operating leverage occurs when a company fails to generate enough sales to cover its fixed costs. Quick service restaurants have continued to expand, resulting in higher costs, but sales have not kept up due to weak consumer demand. 

Gems and Jewellery: Some sparkle despite challenges

Titan Company saw strong revenue growth in Q4, aided by a low base effect and healthy buyer growth. The Tanishq brand stores clocked SSSG (same store sales growth) of 19%, supported by the rise in gold prices. However, the management noted a period of dull demand between March and mid-April. 

Kalyan Jewellers also saw decent top-line growth, helped by store additions in non-south markets. But its mainstay market of south India clocked only 4% revenue growth in Q4. 

Jewelry demand picked up during Akshay Tritiya, and remained steady during the wedding season. However, in an interview with Business Today, Ajoy Chawla, CEO of the Jewellery division at Titan, said, “The trend is good. But volatility in demand is high, maybe due to high gold and diamond prices and the reopening of various sectors like travel.”

Demand may take its own sweet time to recover

With retail inflation now declining, consumer-facing companies are anticipating a revival in spending. But the recovery will be a gradual one. Ritesh Tiwari, CFO at Hindustan Unilever, sums this up, “Consumers expect that inflation will be stubborn. This impacts their confidence in spending money, which is why volume growth will be gradual.”

Ashish Goenka, CFO at Jubilant Foodworks, echoes similar sentiments, saying, “This cyclical demand takes 2 to 3 quarters to come back. And I think it's anybody's guess at this moment as to when we will start seeing a full recovery”. 

Overall, the C-Suite expect a resurgence in demand in H2FY24 and rare hopeful that the current challenges are temporary. India's economic recovery, they believe, just needs some time to reach their consumers.

Screener: Consumer companies which outperformed their sectors in a difficult quarter

In this week’s edition, we take a look at consumer discretionary stocks that have performed well despite the sluggish demand trends we discussed above. This screener features stocks that have outperformed their respective sectors in terms of net profit and revenue growth in Q4, as well as price changes in the past quarter.

Major stocks in the screener are Titan, Tata Motors, Trent, Indian Hotels, Godrej Properties, Cera Sanitaryware, BLS International Services and Amber Enterprises. 

Indian Hotels achieved the highest revenue growth of 86.4% YoY for Q4FY23, outperforming the hotels and tourism sector by over 45 percentage points. The company’s revenue per available room of Rs 8,000 was 70% higher than the industry average.  It also outperformed the sector returns by nearly 5 percentage points in the same period.

Trent’s consolidated revenue for Q4FY23 jumped by over 60% YoY, outperforming the retail sector by 39 percentage points. This growth was backed by the stellar growth of the Zudio format. The company also outperformed its sector returns by over 15 percentage points in the past quarter.

Tata Motors’ revenue jumped 35% YoY in Q4FY23, surpassing the growth of the automobile sector by nearly 12 percentage points. It also exceeded the sector’s net profit growth, aided by a strong product mix and comparatively lower product prices. 

You can find some popular screenershere.

Signing off this week,

The Trendlyne Team

1. UNO Minda: KRChoksey upgrades its rating on this auto parts & equipment manufacturer to ‘Buy’ from ‘Accumulate’ with a target price of Rs 680, implying an upside of 21.5%. According to Trendlyne’s Forecaster, the consensus recommendation on the stock is ‘Buy’ from 19 analysts, including 14 that are ‘Strong Buy’, three ‘Buy’ and two ‘Hold’.
   
   In Q4FY23, the company’s net profit increased by 26.5% YoY to Rs 182.7 crore, while revenue grew by 19.6%. Analyst Abhishek Agarwal is optimistic about the company's long-term growth prospects due to the easing of supply chain shortages and its focus on the electric vehicle (EV) segment. “The company is well set to see sustained revenue growth with a couple of CAPEX plans in line, and by catering to the expected demand from different original equipment manufacturers,” he adds. 

Agarwal expects the firm to benefit from the multi-fold growth expected in the EV segment, particularly in  two-wheelers and three-wheelers. The analyst sees the robust order book of Rs 1,000 crore in the company's EV vertical and the management’s plan to invest an additional Rs 500 crore over five years towards EV as key positives. He expects the firm’s revenue to grow at a CAGR of 25% over FY23-25. 

2. Route Mobile: HDFC Securities maintains its ‘Buy’ rating on this internet software & services company with a target price of Rs 1,735, implying an upside of 20.2%. According to Trendlyne’s Forecaster, the consensus recommendation on the stock is ‘Buy’ from five analysts, which includes four that are ‘Strong Buy’ and one ‘Hold’. In Q4FY23, the company’s net profit surged by 122.4% YoY to Rs 101.6 crore and revenue jumped by 61.1% YoY. 

Analysts Amit Chandra and Vivek Sethia believe the company posted better than expected revenue growth and margin expansion in a seasonally weak quarter. They note that the decline in billable transactions and new product sales due to seasonality was offset by better realisations, market share gains and new client additions.

The analysts believe the launch of new products like Trusense (used for identity and fraud detection) will aid growth. They also expect the firm to see organic growth of 18% in FY24 “led by strong tailwinds in the domestic termination business and expansion of international operations.” Chandra and Sethia project a CAGR of 18% for revenue during FY23-25.

3. PI Industries: Axis Direct keeps its ‘Buy’ rating on this agro-chemicals manufacturer with a target price of Rs 3,800, implying an upside of 9.4%. According to Trendlyne’s Forecaster, the consensus recommendation on the stock is ‘Buy’ from 25 analysts, including 14 that are ‘Strong Buy’, five ‘Buy’, four ‘Hold’ and two ‘Strong Sell’. In Q4FY23, the company’s net profit rose 37.3% YoY to Rs 280.6 crore and revenue grew 12.2% YoY. 

Analysts Prathamesh Sawant and Shivani More maintain a positive outlook on the company’s prospects, even though it missed their revenue estimates by 10.8%. They attribute this shortfall to a slowdown in domestic growth due to industry-wide high inventory problems. However, they believe the company’s brand value in the custom synthesis manufacturing (CSM) segment remains strong, and the management has a bright outlook for it. 

The analysts also anticipate improved margins in the traditional portfolio in the coming quarters due to the “introduction of new value-added branded products and acquisitions in the pharmaceuticals space, which will add to inorganic growth in the medium to long term”. They estimate the firm’s net profit to grow at a CAGR of 20.8% over FY23-25. 

4. Motherson Sumi Wiring India: ICICI Direct keeps its ‘Buy’ call on this auto parts manufacturer with a target price of Rs 70, indicating an upside of 21.4%. According to Trendlyne’s Forecaster, it has a consensus recommendation of ‘Buy’ from 12 analysts, including eight that are ‘Strong Buy’, three ‘Buy’ and one ‘Strong Sell’. In Q4FY23, the company’s profit increased by almost 3x YoY to Rs 138.5 crore, while its revenue grew by 12.4% YoY. 

Analysts Shashank Kanodia and Raghvendra Goyal remain positive due to the company's impressive return ratio (RoCE 42.2%), the growing electrification of vehicles, and the potential for increased content per vehicle in the domestic auto market.

The analysts expect a net sales CAGR of 16.5% in FY24-25 on the back of OEM ramp-up, focus on premiumisation and a greater share in utility vehicles. They believe, “Motherson Sumi Wiring’s asset-light model with expandable capacity, along with operating leverage gains, will push margins.”

5. Krishna Institute of Medical Sciences (KIMS): Edelweiss maintains a ‘Buy’ call on this healthcare facilities provider with a target price of Rs 1,935. This indicates an upside of 20.6%. According to Trendlyne’s Forecaster, the stock has a consensus recommendation of ‘Buy’ from six analysts, including five that are ‘Strong Buy’ and one ‘Hold’. In Q4FY23, the company reported a net profit growth of 15.6% YoY to Rs 93.3 crore and revenue growth of 52.6% YoY. According to analysts Thakur Ranvir Singh and Harsh Shah, “The YoY growth in revenue was driven by a rise in in-patient volume, out-patient volume and ARPOB.”

The analysts remain positive on KIMS due to its healthy expansion plan, improved occupancy, and higher operating margin, with a focus on operational efficiency. They expect an annual capex of Rs 700–800 crore over the next two-three years, with plans to add 1,600 beds during FY24-25. 

Singh and Shah remain cautious regarding lower occupancy due to the closure of the Karim Nagar facility and assume that the new facilities may have low occupancy during the first year of its operations.

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

(You can find all analyst picks here)

1. Deepak Nitrite: This chemical manufacturer rose by 9.5% in trade on Wednesday, marking its highest single-day gain in over 26 months. This uptrend follows the company’s announcement that its subsidiary, Deepak Chem Tech, has signed an MoU with the Gujarat Government to invest around Rs 5,000 crore in the state over the next four years. The company plans to manufacture specialty chemicals like phenol, acetone and bisphenol in Dahej and Nandesari, Gujarat.
   
   This sharp surge in the stock price comes despite the company’s subdued performance in Q4FY23. Its net profit has fallen 12.5% YoY to Rs 233.9 crore due to high input costs. Its revenue marginally increased by 4.8% YoY in Q4. However, it beat Trendlyne’s Forecaster profit estimates by 5.8%. The stock also shows up in a screener for companies with increasing net cash flows over the past two years.
   
   Going forward, the company plans to become the largest producer of solvents, as it believes this will help it benefit from import substitution. To achieve this goal, the management is aggressively expanding the firm’s production capacity. However, the expansion plans have encountered project delays, with the management announcing a delay in three of its projects. This includes the debottlenecking of its phenol plant, which was supposed to be commissioned in Q4FY23. It has now been delayed to Q1FY24. Similarly, the commissioning of its methyl isobutyl ketone (MIKB) and methyl isobutyl carbinol (MIBC) plants has been delayed by one quarter to Q1FY25. Only the commissioning of its photo chlorination and fluorination units seems to be on track.
   
2. EIH: This hotel company rose 7.5% on May 18 and touched its 52-week high of Rs 218.5 per share as it posted a 5.7x growth in net profit to Rs 84.4 crore in Q4FY23. Revenue has shot up 111.7% YoY to Rs 637.1 crore, driven by industry-leading revenue per available room (RevPAR) of Rs 15,284. This growth has exceeded Trendlyne’s Forecaster estimates by 20.7% for revenue and 6.4% for net profit.

The company’s net cash flow turned positive for the first time in the past five quarters, owing to a reduction in debt. This has helped the company show up in a screener of stocks with improving return on capital employed (RoCE) in the past two years. EIH also leads the industry in RevPAR and average room rate (ARR), demonstrating its ability to command a premium.

MD and CEO Vikram Oberoi, expects further growth in occupancy levels and ARR, backed by strong domestic demand and the recovery of foreign occupancy in the winter season.

According to ICICI Direct, profitability is expected to remain healthy due to strong ARR and occupancy levels, particularly in key cities like Mumbai and Delhi with consistent demand. The broker has upgraded its rating on the hotel company to ‘Buy’ from ‘Hold’ with a target price of Rs 240, implying a potential upside of 18%.

3. Dixon Technologies: This consumer electronics company has risen 10% since announcing its results on Tuesday evening and 20.6% over the past week till Friday. Its PE ratio is 85.3 (above the industry median), but it is trading below its 3 and 5-year historical PE averages. In Q4FY23, its net profit increased by 28.1% YoY to Rs 80.6 crore, while its revenue grew by 3.8% YoY. It beat Trendlyne Forecaster’s revenue and profit estimates by 1.5% and 9.6% respectively. The firm also shows up in a screener for companies with improving cash flows and high durability scores. 

This healthy Q4 performance was led by growth in home appliances and mobile business verticals. An increase in revenue contribution from original design manufacturers (ODM) has aided in margin improvement. Its EBITDA margin expanded by 110 bps YoY to 5.1%. But the growth in the white goods and lightning segments was subdued due to weak demand. 

Despite the healthy performance in Q4 and the stock’s uptrend, analysts’ views on the company’s prospects differ. While BoB Capital Markets maintains a ‘Buy’ rating on the firm due to its dominant position in the electronics manufacturing space and growing revenue contribution from the ODMs, ICICI Securities maintains its pessimistic outlook toward the company. It believes weakness in demand for white goods and durables will impact revenue growth in the near term.

The management expects to deliver ‘industry-leading’ growth in FY24 on the back of its robust order book, new client additions, and increasing production capacity. It expects further expansion of the EBITDA margin in FY24 given the increasing contribution from the ODM business and its backward integration efforts. 

4. Aditya Birla Fashion & Retail (ABFRL): This retailing company hit a new 52-week low on Tuesday after reporting a net loss of Rs 187 crore in Q4FY23, compared to a net profit of Rs 43.6 crore in Q4FY22. This was due to an increase in expenses, which offset the demand for its apparel and lifestyle products. The company features in a screener of stocks with declining profits for the past three quarters. However, its revenue has increased by 26.2% YoY, beating Trendlyne’s Forecaster estimates by 3.9%. 

The company’s management states that the overall demand continues to be weak in the value and premium categories, which could likely affect the SSSG (same-store sales growth) and new store additions, especially for Pantaloons. Jagdish Bajaj, Managing Director, said, “The performance in metro cities continued to remain strong, but sales in Tier-2 and Tier-3 cities remained sluggish as inflationary pressures and weak consumer sentiments impacted demand.”

On the bright side, the Lifestyle brand posted its highest-ever Q4 revenue of Rs 1,535 crore, led by robust retail and strong e-commerce performance, while the Pantaloons segment has grown by 18% YoY, with an SSSG of 13% during the quarter.

Following the company’s results, ICICI Securities has downgraded its rating to ‘Add’ from ‘Buy’ and lowered the target price to Rs 220. The brokerage expects increased competitive intensity from online/offline players and a slower improvement in the profitability of emerging business. As a result, the company features in a screener of stocks where brokers have downgraded the target price or recommendation in the past month. 

5. Narayana Hrudayalaya: This healthcare facilities provider has risen 9.3% until Friday after posting results on Monday. It also touched its new all-time high of Rs 880.8 on Wednesday. In Q4FY23, Narayana Hrudayalaya’s profit rose 151.2% YoY to Rs 173.1 crore, while its revenue increased by 30.1% YoY. It beat Trendlyne’s net profit Forecaster estimate by 11.5%. The company’s YoY profit growth also beat its industry’s profit growth of 41.4% YoY. The multispeciality private hospital appears in a screener for stocks with growth in quarterly profit and profit margin. 

According to Emmanuel Rupert, Managing Director and Group CEO, Narayana Hrudayalaya achieved its highest-ever revenue and profitability due to a rise in patient footfalls, along with improvements in the specialty and payor mix. He added, “The performance improvement is supported by the growth in business across our flagship units, other hospitals, and newer hospitals, in addition to the increased contribution of international patients.” The average revenue per occupied bed has increased by 11% YoY to Rs 36,986 per day.

The management expects the India business to grow at the current pace and has guided an aggressive capex of Rs 1,100 crore for FY24.

ICICI Direct maintains a ‘Buy’ call on the healthcare facilities provider on the back of improved occupancy levels, ramp-up in new hospitals, and consistent performance at the Cayman Islands facility. According to Trendlyne’s Forecaster, the company has a consensus recommendation of ‘Strong Buy’ from nine analysts, of which five are ‘Strong Buy’, three ‘Buy’ and one ‘Hold’.

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.