- Bharat Electronics: This public sector defence company has bagged multiple orders worth nearly Rs 16,300 crore in March for the supply of indigenously developed equipment and electronic warfare systems to the Indian Army, Navy and Air Force. These order wins come after the company’s order inflow fell to a two-year low of Rs 3,500 crore during the first nine months of FY23 due to approval delays.
The company is expected to be a major beneficiary of the Centre’s push for reducing defence imports, as it commands a market share of 37% in the Indian defence sector. According to Geojit BNP Paribas, the company’s order book backlog of Rs 50,116 crore provides strong revenue visibility over the next three years. The company shows up in a screener for stocks with consistently high returns over the past five years. According to Trendlyne’s Forecaster, the consensus recommendation from 20 analysts is ‘Buy’.
While the management is optimistic about growth in orders from the defence sector, it plans to diversify into non-defence sectors like healthcare, airports, infrastructure and smart city projects. The firm’s long-term plan is to increase the contribution of its non-defence segment to 25% from 10% of total revenue.
With the rise in demand for locally manufactured defence systems, the company expects these orders to increase in the coming years. To be able to meet the upcoming requirements, it aims to make five new facilities operational in the next two-three years. It has budgeted a capex of Rs 600 and Rs 600-800 crore for FY23 and FY24 respectively. The management expects revenue to grow in the range of 15-20% in FY24, led by large orders and commissioning of new facilities.
- Zydus Lifesciences: This pharmaceutical company reached its 52-week high of Rs 493.2 per share on Wednesday after receiving two US FDA approvals on the same day. The company shows up in a screener of stocks with strong momentum.
Zydus Lifesciences received final approval from the US FDA for its loperamide hydrochloride capsules, used for the treatment of inflammatory bowel disease, on Tuesday. According to IQVIA, the capsule has had an estimated annual sales of $34.7 million in the year ended January 2023 in the US.
The company received final approval from the US FDA for its levothyroxine sodium injection as well on Tuesday. The capsules, used for the treatment of myxedema coma, will be manufactured at its facility in Jarod, Gujarat.
However, it’s not all good news for the company. Earlier in the week (on Sunday), the drug manufacturer announced that it had recalled 55,000 bottles of colchicine tablets after it received an out-of-specification (OOS) result during release testing.
According to Sharekhan, the drug manufacturer stands to gain from strong product launches and volume growth in the US market, as its revenue of Rs 1,925 crore in Q3FY23 contributed to 44% of the total revenues. The brokerage estimates the company’s revenue to grow at a CAGR of 7.5% during FY22-25 and maintains its ‘buy’ rating on the stock with a target price of Rs 572. Trendlyne’s forecaster estimates its revenue to rise by 9.9% in FY23.
- Allcargo Logistics: This logistics company rose over 2.4% on Tuesday after announcing its plan to acquire a 30% stake in Gati-Kintetsu Express for Rs 406.7 crore. Allcargo will buy shares from KWE Singapore (26% stake) and KWE India (4% stake). Gati-Kintetsu Express is a JV of Allcargo’s group company Gati and Kintetsu World Express. Gati deals in overseas courier services, while KWE is a Japanese freight forwarding company.
Allcargo has been on an acquisition spree over the past few months. The company had also bought the remaining 38.9% stake from its partner, ACCI, in the contract logistics business at an enterprise value of Rs 373 crore earlier this month.
In January, it bought a 75% stake in German cargo consolidator Fair Trade for 12 million euros, according to reports. Speaking to the media about the company’s recent acquisitions, Ravi Jakhar, the Chief Strategy Officer said the acquisitions were in line with the company’s strategy to simplify the organisational structure, enhance its growth in the domestic supply chain, and strengthen its position in key strategic markets.
Apart from the acquisitions, the company sold 90% of its logistics parks business to private equity firm Blackstone in February. Allcargo will also sell its non-core customs business.
However, despite a recent rise in its share price, the company is still down 27.3% from its 52-week high of Rs 495 in November 2022. But, it ranks high on Trendlyne’s checklist with a score of 73.9% and shows up in a screener for stocks with high Piotroski scores.
- Jindal Stainless: This metals & mining stock rose 4% in early trade on Wednesday after it announced an acquisition of a 49% stake in Indonesia-based Nickel Pig Iron Co. However, it pared the gains and closed 0.2% lower. Jindal Stainless (JSL) plans to invest $157 million (Rs 1,290 crore) over the next two years to build a facility with a production capacity of 2 lakh metric tonnes. The company’s Managing Director Abhyuday Jindal says that not having backward integration for nickel is a big risk for the nation as we face a deficiency in nickel reserves.
This acquisition will help the company secure the supply of nickel, a critical raw material used in making alloys. Jindal Stainless has a series of other projects lined up. The company has announced an investment of Rs 120 crore to set up rooftop solar projects in Jajpur and Hisar facilities.
Sector growth looks decent for JSL as Bank of America Securities has given a positive stance for the near term. It expects steel demand to bounce back, resulting in higher prices. It also expects export opportunities to improve as export duty on steel has been scrapped.
Although the stock has fallen 5% in the past week, it gained 23.4% in the past three months and outperformed its sector by 3.7% in the past month. Jindal Stainless was a multi-bagger stock last year (gaining nearly 199%) but gained only 43.5% this year. Trendlyne’s Forecaster estimates a 5.7% increase in its annual revenue in FY23.
- Sun Pharmaceuticals Industries: Thispharmaceutical giant expects its revenue to take a hit after reporting a ransomware attack on its system in early March. It reported a breach of some files and theft of company and personal data, impacting operations. The firm has isolated its network and started the recovery process. It is also evaluating the expenses for litigation and insurance. The stockfell nearly 3% the following week.
The firm did a series of acquisitions in Q4FY23, including a 60% stake in Vivaldis Health and Foods for Rs 143 crore in March, US-based Concert Pharmaceuticals for USD 576 million and a minority stake in Agasta Software and Remidio Innovative Solutions.
Lately, Sun Pharma has been focusing on the domestic market to increase its market share. The US and India each contribute 31% of revenue to the company, while emerging markets contribute 19%. It has nearly 9% share of the pharma market in India. Market share growth coupled with new launches for India formulations have led top-line growth in Q3FY23. Focusing on the global specialty portfolio also led to an increase in the margins. The specialty portfolio contributes nearly 13% of its revenue. The stock shows up in a screener for top Indian exporters among listed companies.
According to the management, its US portfolio is expected to grow 4.6%, while the India division should rise 7%. Its chronic portfolio is also expected to see strong growth led by new launches.
ICICI Securities says Sun Pharmaceuticals’ India business will outperform the industry, and global specialty sales will help margin expansion. Meanwhile, profitability will be slightly offset by rising R&D spend.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
