- Jindal Stainless: This iron & steel company reached its 52-week high of Rs 263.1 per share on Friday last week, ahead of its results on Monday. The stock has risen 22.7% over the past month. Jindal Stainless’ share price rose almost 1% post its Q3 result announcement, despite its net profit declining 27.8% YoY to Rs 314.3 crore in Q3FY23. However, its net profit beat Trendlyne's forecaster estimates by 22.2%, while revenue beat estimates by 8.5%. Its debt to equity ratio fell 80 bps QoQ to 0.53% in Q3. As a result, the company shows up in a screener of stocks with reducing debt.
According to ICICI Direct, the company has good traction from sectors such as railways, automotive and new generation power plants in the domestic market. Additionally, the withdrawal of export duty is likely to boost premium-range volumes in overseas markets. The brokerage maintains a ‘Buy’ rating on Jindal Stainless with a target price of Rs 300, implying a potential upside of 16.7%.
Jindal Stainless has a high rank in Trendlyne’s checklist with a score of 69.6% and is in the buy zone as its current PE is lower than its historical values and its sector TTM PE.
- Coforge: This software and services company has outperformed the benchmark Nifty 50 index by over 10% in the past week, supported by its strong Q3FY23 results. What impressed investors and analysts is the company's net profit beating Forecaster estimates by over 5%. Coforge’s net profit has been rising QoQ over the past eight quarters. In Q3, its net profit rose 13.5% to Rs 228.2 crores, while revenue increased by 4.9%. The company has also announced an upcoming dividend of Rs 19 per share due on February 2. Despite the recent rise in share price due to strong results, Coforge’s TTM PE ratio is trading below its 3-year average PE ratio and its sector PE ratio.
During the Q3FY23 earnings call, Coforge’s management raised its FY23 revenue growth guidance by two percentage points to 22%. It also said that the topline growth in FY24 would be around 15% despite the threat of recession in major economies like the US and Europe. This optimism by management is backed by strong deal wins, which stood at $345 million (highest-ever), up 40% YoY. Another positive factor is Coforge’s attrition rate remaining the lowest in the industry at 15.8% in Q3.
In terms of the geo mix, America makes up over half of the company’s Q3 revenue. Notably, growth from this region is only marginally higher at 1.9% QoQ, impacted by furloughs. However, top-line growth is driven by EMEA (Europe, Middle East, Africa) and ROW, which have grown 6.7% and 5% respectively.
- IDFC First Bank: This bank stock has not particularly enthused investors, even though its net profit doubled (2.15X YoY) to Rs 605 crore in Q3FY23. However, it beats Trendlyne’s Forecaster estimates by 7.9%. Over the week, the stock has gone down nearly 4% in trade. It fell nearly 3.5% on Wednesday as the market traded lower. However, the stock has grown more than 55% in the past six months as it reports a continuous improvement in its financials. The bank shows up in a screener of undervalued growth stocks.
IDFC’s net interest income has surged 28% YoY to Rs 3,285 crore in Q3. Asset quality also sees vast improvement, with gross and net NPAs falling 100 bps YoY to 2.96% and 71 bps to 1.03% respectively. It shows up in a screener of stocks with good quarterly growth in recent results. Although provisions increased 15% YoY in Q3, causing the provision coverage ratio (PCR) to rise to 76.6%, the outlook remains positive as PCR on the higher side means that the bank is well buffered against bad assets. The bank’s PCR ratio has improved across all loan books – corporate, retail and commercial.
Analysts from ICICI Securities and Motilal Oswal recommend the stock with a ‘Hold’ and ‘Buy’ ratings respectively. CLSA has also upgraded its rating to ‘Buy’ from ‘Outperform’. It expects the stock price to rise by 19% in the short to medium term. IDFC is firing on all cylinders with analysts expecting fee income to improve, and credit cost to lower in FY23-24E. Its management expects to achieve credit cost guidance of less than 1.5% for FY23. They also expect loan growth of 25% and maintain a net interest margin of 5.8-6%.
- Sona BLW Precision Forgings: This auto parts & equipment manufacturer rose over 5% on Wednesday after announcing its Q3FY23 results. Its net profit has risen 23.9% YoY to Rs 107.1 crore, beating Trendlyne’s forecaster estimates by 13.6%. The company beating the street’s estimates makes investors upbeat about the stock. Its revenue rose 38.6% YoY on the back of robust growth across all its business segments. Given its healthy performance, the stock shows up in a screener for companies with revenue increasing sequentially for the past four quarters. Also, the stock is currently in the PE Buy zone.
The firm’s robust order book growth has been instrumental in its Q3 performance. Its order book touched 23,800 crore, rising 16.1% QoQ and 35.2% YoY, with new deal wins worth Rs 4,200 crore. During the quarter, Sona BLW won its single largest new order worth Rs 3,350 crore from a global electric vehicle original equipment manufacturer (EV OEM). The project is estimated to be executed in 8-9 years, implying an annual revenue potential of Rs 400 crore, according to ICICI Securities.
The company’s EBITDA margin expanded by 76 bps YoY to 27.2%, led by a favourable product mix as its Battery Electric Vehicle segment’s contribution to revenue moved up to 26%. The firm aims to increase market share in the high-margin EV segment in the coming quarters, which it believes will improve profitability and revenue growth. ICICI Securities expects Sona BWL’s margins to rise till FY25 due to an increasing mix of EV orders, falling commodity costs, rising scale and benefits from the Production Linked Incentive (PLI) scheme.
- KEI Industries: This electrical stock has increased by 32.79% CAGR in the past five years, beating the broader Nifty 500 index by a huge margin. The stock has risen 1.4% after the Q3FY23 results announcement. KEI industries is among India’s top three wire and cable manufacturers, with a product portfolio ranging from housing wires to Extra High Voltage (EHV) cables. KEI derives 85% of its revenue from cables, 10% from EPC, and 5% from wires.
In Q3, KEI industries reported 14% revenue growth, led by 20% increase in cable business volume. Its EBITDA margin has expanded 90 bps YoY. The management foresees no immediate impact of ongoing raw material cost volatility and expects channel inventory to remain at normal levels. PAT has grown 26.96% YoY to Rs 1,288 crore and the management guides 18-20% revenue growth in FY23, backed by pending orders to the tune of Rs 3,400 crore. Pending orders also rose by 14% QoQ in Q3FY23.The stock shows up in ascreener for companies that are efficiently managing assets to generate profits.
Management has guided for a Rs 500 crore plus order book in FY24 with 15% growth in revenue in FY24. The EBITDA margin is expected to be maintained at current levels of 11%. It also sees a capital expenditure to the tune of Rs 250 crore in FY24. Of this, Rs 50 crore is earmarked for brownfield expansion and the rest would be for working capital requirements.
BOB Capitalsees structural growth drivers for KEI as the margin-accretive retail business scales up and as its core cables and EPC businesses benefit from sectoral tailwinds in the form of increased private and public capex.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
