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1. UltraTech Cement: With a capacity of 121.35 metric tonnes per annum (mtpa), thiscement and construction company  has plans to increase its capacity to 153.85 mtpa by FY25/FY26.

UltraTech Cements reported revenue growth of 19.5% YoY in Q3FY23, but its EBITDA margins declined 33bps YoY. The rise in revenue was led by an increase in volumes, while margins contracted due to the higher cost of raw materials. The price hike undertaken by UltraTech lagged cost increases, and the increase in energy costs adversely impacted the margins of the firm.

Energy costs (petcoke/coal) have decreased by 30% in CY23.  The benefit of this will start to reflect in Q4FY23. FY24 being an election year, government spending on infra projects is expected to be high. UltraTech might see a jump in volumes due to this. However, in the near term, the company is more focused on volumes and will restrict its price hikes. The stock hasgained 4.27% in the past three trading sessions and shows up in a screener for growth in net profit with an increasing profit margin.

Geojit BNP Paribas says demand for cement remains strong despite inflationary headwinds led by infrastructure and housing sector initiatives. Furthermore, a drop in raw material costs will enhance the company’s margins. Ultratech’s premium brand positioning, pan-India presence and efficient capacity utilization will aid bottom-line growth.

2. One97 Communications (Paytm): This internet & software services stock rose 6.9% on Wednesday after Macquarie upgraded its rating to ‘Outperform’ from ‘Underperform’ and revised the target price to Rs 800 from Rs 450 per share. This implies a potential share price upside of 28.4%. During previous broker downgrades, Macquarie was one of the first brokerages to slash Paytm’s target price to Rs 450 and recommendation to ‘Underperform’. However, Macquarie appears to have changed its mind and turned bullish on the stock. The recent upward target price revision has helped Paytm to show up in a screener of stocks with upgraded recommendation or target price in the past three months. The stock is currently trading 245.1% below its issue price of Rs 2,150 per share.

According to the brokerage, the company has outperformed on the distribution of financial services revenue by a huge margin, while also controlling the overall expenses and charges. This can be observed in its strong operating performance in January-February. The company’s loan disbursement increased by 286% YoY to Rs 8,086 crore, while its gross merchandise value (GMV) witnessed a growth of 41% YoY. Its average monthly transacting users (MTU) also rose 28% YoY in January-February.

Owing to this strong operational performance, Trendlyne’s forecaster estimates the company’s annual revenue to grow by 37.6% to Rs 7,969 crore and its losses to contract by 21.7% to Rs 1,966.9 crore. However, one thing to keep an eye on is Paytm’s NPA levels on loans, as interest rates continue to increase. 

3. Phoenix Mills: This realty company has risen 5.8% over the past week on the back of the street’s positive outlook on its prospects. Post the second Covid wave, the company has witnessed a gradual recovery in demand and footfall across its retail, office and commercial spaces. The firm’s mall portfolio is expected to increase to 14 million square feet (msf) by FY27, from 9 msf in March 2023. The realty company aims to add at least one million square feet of retail space every year. By June this year, the company will be adding three more malls to its portfolio of 11 now. According to reports, the management claims leasing occupancy rates across its malls have improved to 94%-99% as retail consumption improves. The stock shows up in a screener for companies with improving cash flow and high durability. 

Motilal Oswal recently re-initiated its coverage on Phoenix Mills with a ‘Buy’ rating. The brokerage believes that healthy pre-leasing trends across its upcoming malls provide strong near-term visibility on rental growth. It is also especially positive about the firm’s mixed-use strategy, where the company plans to add office spaces on top of or adjacent to its existing and upcoming malls, to improve the blended yield of the assets.

The company expects a consumption boom in India over the coming quarters and plans to expand into newer urban markets across the country. However, medium-term risks like a slowdown in consumption recovery and lower-than-expected leasing demand can impact the company’s expansion plans.

4. Anupam Rasayan India: This agrochemicals company rose over 2.5% in trade on Thursday after it signed a letter of intent (LoI) worth $120 million (Rs 984 crore) with a Japanese chemical company. The LoI is for the supply of new-age advance intermediates for life science ingredients over six years. Commenting on the same, Managing Director Anand Desai says, "This LoI demonstrates the company’s ability to work on a niche molecule with Japanese customers, and strengthens the revenue growth visibility in the coming years.” Trendlyne’s forecaster estimates Anupam’s revenue to grow by 28.2% in FY23. 

The company has been on an uptrend recently, rising around 33% in the past month on the back of a strong outlook. As a result of the uptick in share price, the company features in a screener of stocks  with strong momentum. It has also risen around 56% from its 52-week low of Rs 546.7. Anupam Rasayan has focused on expanding its product portfolio in fluorination chemistry, and plans to launch 14 molecules in the next 12-18 months, and five molecules in Q4FY23. The company also has a robust pipeline of contracts worth Rs 2,620 crore, says KRChoksey.

In addition, Anupam Rasayan has signed a Memorandum of Understanding (MoU) worth Rs 670 crore with the Government of Gujarat to set up three chemical plants, according to media reports. These plants will focus on manufacturing fluorochemicals.

5. Indian Oil Corporation (IOC): This oil marketing & distribution stock has fallen 1.13% in the past week despite announcing new ventures and improving refining capabilities. On Monday, IOC inked a pact with NTPC’s arm to form a joint venture for setting up a renewable energy power plant to meet IOC’s power requirements. Reports suggest that the transition of energy production from fossil-based systems to renewable energy is a good move, given that demand for petrol and diesel will slowly fall as companies shift to renewable energy sources. This is also in line with IOC’s target to increase its green energy share to 12% by 2030 from the current 9%.

On Tuesday, IOC’s board gave in-principle approval to prepare a feasibility report to set up a petrochemical complex at Paradip, Odisha. The estimated cost of the project is Rs 61,077 crore. The project in Paradip will help IOC improve its petrochemical intensity (% of crude oil converted to chemicals) and also reduce import dependency.

IOC’s Chairman Shrikant Madhav Vaida says that the company’s petrochemical intensity is currently at 5%-6%, and it plans to increase it to 10%-12%. He adds that refineries at locations like Panipat and Odisha will see the intensity go as high as 25%. Despite the announcement, the stock fell 1.3% in trade on Tuesday.

However, it has gained 8.2% in the past three months, thanks to a steady fall in crude prices. ICICI Direct maintains its ‘Buy’ call on the company with a target price of Rs 79.9. It recommends keeping the stop loss at Rs 77.7. Geojit BNP Paribas maintains a ‘Hold’ on the stock and expects effective cost optimization and enhanced utilization to aid earnings in the near term. Trendlyne’s consensus recommendation has 16 analysts recommending a ‘Buy’, 8 suggesting ‘Hold’ and 4 ‘Sell’.

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

The top three companies by market cap in the US - Apple, Microsoft and Alphabet - were all started by first-generation entrepreneurs. In India however, two of the top three companies by market cap - Reliance and TCS - are part of family conglomerates. This pattern continues as we go down the list of Indian businesses. 

Tata, Birla and Ambani are well-known names and family-run Indian conglomerates with a significant share of the economy. But do these family-owned businesses do better or worse than average, in financial performance? Do companies whose top management are all in the family, see different outcomes? 

Here we take a look at India’s largest family-run businesses, and how they perform compared to the overall industry. 

To do this comparison, we looked at the Return on Capital Employed (ROCE). The ROCE is a ratio used to evaluate a company’s capital efficiency and profitability, is an effective parameter to compare the performance of companies. It helps us understand how good a company is at generating profits from its capital. 

Investors prefer stocks with stable and rising ROCE (above 20%) over stocks with weak and volatile ROCE (below 10%). Another advantage with the ROCE ratio is that unlike return on equity (ROE), which analyses only profitability on equity, it considers debt along with equity. The companies in focus are capital-intensive and ROCE therefore, offers better insights.

The chart above depicts the ROCE percentage on the Y-axis. The bubble size is linked to the market cap of the company. Five major companies from each family group have been chosen and analysed.  20% ROCE, which is considered a good ratio, has been highlighted on the chart so that we can see which companies perform better or worse. 

We also checked how family groups perform as compared to their sector’s average ROCE. 

Fertilizers, software and services and FMCG are among the sectors with strong ROCE ratios.

Murugappa Group companies log high ROCE

Murugappa Group, founded in 1900, has a presence in auto, sugar, fertilizers, etc. The Tamil Nadu based group is headed by M M Murugappan and currently has the fourth generation of the Murugappa family on the board. 

Most companies in the group, except for Carborundum Universal (18.1%), have very strong returns. Companies with high returns are Cholamandalam Investment & Finance (24.7%), Tube Investments of India (28.6%) and CG Power and Industrial Solutions (43.6%). All three companies have also outperformed their respective sectors by a minimum of 15%. Coromandel International has a high ROCE of 31.1% but did not outperform the fertilizer sector. 

Adani Group struggles in ROCE, Adani Total Gas is the outlier

Founded by Gautam Adani in 1988 for trading commodities, the Adani Group has over the decades, turned into a multinational conglomerate involving multiple businesses. Their meteoric rise has been attributed to the rapid increase in debt the group has taken on, and their closeness to the current government. However, the recent Adani-Hindenburg row made investors cautious about the group.

As seen in the chart, four of the top five companies have weak ROCE values and underperform their respective sectors. Adani Total Gas is the only company with a high ROCE of 24.8%, and that has outperformed its sector, utilities (by 12.1%). Adani Enterprises, Adani Ports & Special Economic Zone, Adani Transmission and Adani Green Energy have ROCE lower than 10%.

Aditya Birla Group: UltraTech Cement, Aditya Birla Sun Life outperform sector ROCE

Aditya Birla group, founded by Seth Shiv Narayan Birla in 1857, is currently chaired by Kumar Mangalam Birla. The group is engaged in sectors like metals, cement and telecom. The major five stocks under the Birla Group have ROCE on the lower spectrum. Hindalco and UltraTech Cement have fairly high returns of 15.6% and 14.6% respectively. UltraTech’s ROCE has outperformed the cement and construction sector by 1.8%. 

Aditya Birla Sun Life AMC, which is not in the top five companies in terms of market cap, outperformed its sector with a strong ROCE of 39.4%. 

Tata Group performs better than its sectors

Established by Jamsetji Tata in 1868, Tata group is India's largest conglomerate. It is currently looked after by the parent company, Tata Sons. Key people in Tata Sons are Ratan Tata and Natarajan Chandrasekaran, among others. 

With strong returns, three of the top five companies in the Tata group have outperformed their respective sectors. Tata Consultancy Services, an IT behemoth, has a ROCE of 52.9%, higher than its sector’s 37.6%, which in itself is a strong percentage. Titan and Tata Steel also have high returns of 29.7% and 28.3% respectively, whereas Tata Motors’s is very low at 1.6%. 

Mahindra Group’s Mahindra Lifespace Developers has negative ROCE

Mahindra & Mahindra, incorporated as Mahindra & Mohammed in 1945 by Jagdish Chandra Mahindra and Kailash Chandra Mahindra, is currently chaired by Anand Mahindra. Besides auto, the Mahindra group is also engaged in IT and finance businesses. Mahindra & Mahindra, Mahindra & Mahindra Financial Services and Mahindra CIE Automotivehave returns above 10% but below 20%. 

Tech Mahindra has a strong ROCE of 23.5%, yet underperformed the software and services sector by 14.1%. On the other hand, Mahindra Lifespace Developers has a negative ROCE of -4.3%, even though it has a positive ROE of 8.6%. The company logged below zero returns on capital as it had negative EBIT for the past three years. 

Most stocks from the Godrej Group underperform their sectors 

Godrej Group was founded by Ardeshir Godrej and Pirojsha Burjorji Godrej in 1897. Its current chairman is Adi Godrej. Only one of the listed companies in the group - Astec Lifesciences - has outperformed its respective sector with strong returns. The other four have returns lower than 20%. The only stock with a high ROCE is Astec Lifesciences (32.1%), a chemicals manufacturer, and it has outperformed its sector by 9.1%. Godrej Agrovet and Godrej Consumer Products come close to the 20% mark with 19.4% and 18.7% respectively.

Most companies in the Jindal Group have strong returns 

The Jindal group was founded in 1952 by B C Jindal for the manufacture of steel pipes and pipe fittings. Since then, it has diversified into packaging films, power generation, etc. Most companies under Jindal have strong returns. JSW Steel, Jindal Steel & Power, Jindal Stainless and Jindal Stainless (Hisar) stand at 24.9%, 25%, 34.9% and 32.7% respectively. But only the latter two have outperformed the metal and mining sector (26.9%). JSW Energy has a ROCE of 11.6%.

Bajaj Group’s Bajaj Auto manages to make the cut above 20%

Bajaj Group, founded by Jamnalal Bajaj in 1926, is currently headed by Niraj Bajaj, Rahul Bajaj and Madhur Bajaj, among others. The group is involved in automobiles, home appliances, insurance, travel and finance. Three of its top five companies have outperformed their sectors. 

Bajaj Auto is the only stock that managed to cross the 20% ROCE threshold. It also outperformed the auto sector by 7%. Bajaj Finance (12.4%) and Bajaj Finserv (11.8%) did better than their sectors by 3.9% and 2% respectively. Bajaj Holdings & Investment has a very low ROCE of 0.6%.

Murugappa Group performs better than other family conglomerates

Among all the groups in focus, Murugappa Group has performed the best in terms of ROCE with most of its companies logging high returns on capital, and also outperforming their sectors. Among the rest, Tata and Jindal group companies have stronger returns on capital, unlike Birla. Adani, Godrej, Mahindra and Bajaj.

As the financial year comes to an end and the result season approaches, we take a look at stocks that analysts are especially bullish about. These stocks have especially high revenue growth estimates in FY23.

This screenerconsists of stocks with high annual revenue growth estimates and target price upside along with price upgrades from brokers over the past three months.

The screener has 57 stocks from the Nifty 500 and nine stocks from the Nifty 50 index. It is dominated by industries like auto parts & equipment, cement & cement products and other industrial products.

Major stocks that show up in the screener are Kotak Mahindra Bank, Coromandel International, Vinati Organics, LTIMindtree, Solar Industries India and InterGlobe Aviation.

According to Trendlyne’s Forecaster, LTIMindtree has the highest revenue growth estimates of 109.6% for FY23. This rise in revenue can be attributed to the merger of Mindtree with L&T Infotech, which was completed on November 14, 2022. The stock has an average target price upside of 15%, with five target price upgrades over the past three months.

InterGlobe Aviation comes in next with a 107.8% estimated growth in revenue for FY23. The airline is planning to start flights to Nairobi, Jakarta and some central Asian destinations and is also waiting for an order of 500 aircraft to be delivered.

Coromandel International has the highest average target price upside of 39% by brokers with an annual revenue growth estimate of 53.4% in FY23. Brokers estimate this rise in revenue on the back of the seven new products launched by the company in FY23. 

You can find more screeners here.

India’s benchmark index, the Nifty 50 has dropped 4.4% over the past month due to weak market sentiment caused by the banking crisis in the US and Europe. Banks like the Silicon Valley Bank (SVB) in the US and Credit Suisse Bank in Europe have faced a crisis where SVB was forced to shut down, and UBS bought Credit Suisse in the midst of a liquidity crunch for $3.2 billion. 

However, despite weak market sentiment, some stocks have bucked the trend and risen over the past month, with a jump in their Trendlyne momentum scores signalling rising buying interest.

This screener shows stocks whose momentum scores are above 50 and have risen sharply compared to the previous month and week.  A stock scoring above 50 is considered to be moving into the bullish zone. Trendlyne’s Momentum Score is calculated for each stock every day based on more than 30 different technical indicators, and helps identify stocks that are bullish or bearish across multiple metrics.

Many stocks in the rising momentum screener belong to the pharmaceuticals and healthcare facilities industries, as these are considered to be defensive and relatively immune to economic slowdowns.

Pharmaceuticals and healthcare facilities stocks like Abbott India, Torrent Pharmaceuticals and Max Healthcare have seen their momentum scores improve by 13.9, 10.2 and 14.9 points respectively. This aided Max Healthcare and Torrent Pharma to jump to the good momentum score classification (Trendlyne momentum score > 50) from a medium classification. 

Oil marketing companies like Bharat Petroleum Corp and paint companies like Berger Paints (India) have been rising since Brent crude price fell below $80 per barrel in December. Drop in crude prices also aids paint stocks as oil is a raw material used to produce paints.

Bharat Petroleum’s Trendlyne momentum score jumped by 16.3 points over the past month, while Berger Paints’ momentum score rose by 13.8 points over the same period helping the stocks to classify in the good momentum score category. Brent crude prices also hit a 15-month low of $ 70.9 per barrel on Tuesday which could help these stocks to rise further.

Godrej Consumer Goods’ momentum score improved by 11.3 points to 65.9 over the past 30 days. The stock touched its 52-week high of Rs 964 on Tuesday and is currently trading above all its SMAs. 

Power Grid Corp has risen 3.4% over the past month aiding the stock’s momentum score jump by 33.6 points. The electric utilities stock rose on the back of four order wins over the past month while also approving a capex of Rs 4,071 crore for expansion in the eastern region and the commission of the transmission system in Kurnool Wind Energy Zone.

See the full screener here.

1. Data Patterns (India): ICICI Direct upgrades its rating to ‘Buy’ from ‘Hold’ on this defence and aerospace electronics company with a target price of Rs 1,555. This indicates an upside of 10.4%. The company’s board has approved the allotment of 40.97 lakh shares through QIP, at an issue price of Rs 1,220.31 per share, aggregating to Rs 500 crore. Analysts Chirag Shah and Vijay Goel “believe that fundraising for working capital and product development will benefit the company in faster execution of existing contracts, and in bidding for more contracts”.

The analysts are optimistic as the defence player has strong order inflows with a healthy pipeline of orders worth Rs 2,000-3,000 crore in the next three years. They also expect electronic components used in Indian defence platforms to be sourced locally, instead of from foreign manufacturers, as indigenisation efforts continue.

Shah and Goel anticipate revenue and profit CAGR of 29.3% and 28.5% respectively over FY22-25.

2. Kalpataru Power Transmissions: Sharekhan maintains a ‘Buy’ call on this electric utilities company with a target price of Rs 695, indicating an upside of 22.3%. “Our interaction with Kalpataru Power Transmission reinstates the positive stance on the company’s capability to accelerate its revenue growth and margin expansion,” say the analysts.
   
   They believe that the company is a leading player with a strong order book (Rs 46,642 crore, up 46% YoY) as well as fresh orders (surpassed order inflow guidance for FY23), which will lead to improved revenue visibility. 

They are also positive about the company due to its merger with JMC Projects. The merger is expected to increase the group’s geographical reach and improve its capability to bid for large-size and more complex projects. According to the analysts, the company also expects a decline in debt and improvement in the working capital cycle thanks to better operating performance and monetisation of non-core assets.

3. PVR: Prabhudas Lilladher retains its ‘Buy’ call on this multiplex company with a target price of Rs 2,096, indicating an upside of 33.1%. Analysts Jinesh Joshi and Stuti Beria expect synergy benefits of Rs 200 crore from the PVR-Inox merger to accrue over the next two years. They expect that the merger will enhance balance sheet strength, enabling rapid expansion into new markets. 

Joshi and Beria believe that the merged entity will lend a size advantage and improve bargaining power with various stakeholders in the value chain, like film distributors, real estate developers, ad networks and ticket aggregators, resulting in material revenue/cost synergies. 

The analysts are also positive about PVR and estimate that it will open 155 screens per annum for the next two years after the merger.

4. LTIMindtree: ICICI Securities maintains its ‘Buy’ rating on this IT consulting & software company with a target price of Rs 5,651, implying an upside of 21%. Analysts Sumit Jain and Aditi Patil are positive about the company’s prospects on the back of strong cross-selling opportunities and its ability to bag larger deals post-merger. They believe that Larsen & Toubro Infotech (LTI) and Mindtree complement each other and this allows them to scale up operations.
   
   According to the analysts, “Mindtree is stronger in front-end digital solutions and LTI shines in back-end ERP-related core transformation solutions.” They expect the company’s EBIT margin to improve by 260 bps over FY23-26 to 18.6%, driven by operating leverage with a higher scale of operations and integration-related synergies. 

Jain and Patil believe that, with their track record of strong management execution, the combined entity’s management is well-equipped to enable industry-leading profit growth in the coming quarters. The analysts expect the firm’s net profit to grow at a CAGR of 18.8% over FY22-25.

5. Tata Motors: Motilal Oswal keeps its ‘Buy’ rating on this automobile manufacturer with a target price of Rs 540, indicating an upside of 31.3%. Analysts Jinesh Gandhi, Amber Shukla and Aniket Desai believe that the Jaguar Land Rover (JLR) brand is on a sustainable growth path and will be one of the key drivers of growth for the company. They add that Tata Motor’s domestic passenger and commercial vehicle business is already on a healthy growth trend. They see the prospects of JLR improving as supply-side pressures subside and demand remains healthy. “As supplies improve, JLR should reach near zero net debt levels by FY25, thanks to improved production, better margins and working capital release,” the analysts say.

Gandhi, Shukla and Desai believe JLR will firmly position itself as a luxury premium brand as it changes its branding strategy and redefines Jaguar with premium launches in the electric vehicle market in CY25. The analysts expect the company’s revenue to grow at a CAGR of 14.2% over FY23-25. 

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

(You can find all analyst picks here)