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The month of October sparkled for Indian investors, with the Nifty 50 rising nearly 5% to cross the key level of 18,000 last week. It is now just 3% shy of a life-high. ICICI analysts predict that the Nifty will near 18,900 by December end. That would be quite a new year.

Global indices are also showing some spirit despite inflation fears. The US Dow Jones index posted a 14% rise – its best month in 46 years.

The US Federal Reserve delivered an expected 75 bps rate hike on Wednesday, taking the federal funds rate from 3.75% to 4%, its highest level in 15 years. But what investors were looking for from the Federal Reserve Chairman Jay Powell was any sign that the Central Bank plans to slow rate hikes going forward.

Fed watchers study Jay Powell with as much intensity as a mother may study a young child with a stomach ache. They parse everything from his expressions, his sighs, to his carefully chosen words. Before the meeting, Lloyd Blankfein, the former CEO of Goldman Sachs, joked that the Fed would be sitting with a thesaurus to find a word that meant both "pause" and "not pause".

Jay Powell managed to pull this off by disappointing everyone. He said that it was "very premature to think about pausing", but also said that the Fed "may slow the pace of increases."

Central Banks like the Fed and the RBI are caught between two fires: raise rates too fast and you trigger a recession, but go too slow and you worsen inflation. More rate hikes by the RBI could impact several sectors, and we look at one such sector this week. 

In this week’s Analyticks, 

• Young rockets: Private Midcap banks see growth momentum in Q2, as they benefit from rate hikes
• Screener: Stocks outperforming the Nifty50 and their sector post results, with rising operating profit margins and cash flows 

India's private mid-cap banks beat the index

The banking sector has outperformed the benchmark index comfortably in the past month, quarter, and half-year. Banks are taking advantage of the Reserve Bank of India (RBI) raising the repo rate. RBI has raised the key rate by 190 bps since May to 5.9%. And high inflation levels mean that more hikes are on the way. 

How does this help banks? Banks want the best of both worlds - they are quick to hike interest rates on loans (which adds to their income) but are slow to hike deposit rates (which they pay to account holders). So rate hikes by the RBI helps banks improve their net interest margin, since they benefit from the difference between the bank’s interest income and the interest they pay to their lenders. 

However, banks cannot benefit from this for too long, as they need to hike rates on deposits eventually. Higher interest rates also bring down loan growth, especially in retail sector lending, which is mainly consumption driven. Companies also postpone their spending plans when interest rates are high, as businesses have to shell out more money to service loans. 

So despite a sunny outlook by both analysts and banks, we are cautious. There are several factors that are potential roadblocks to rising net interest margins and strong loan growth. 

Mid-cap banks join the party, and outperform their bigger peers

Mid-cap banks’ share prices are sharply up on the back of improving net interest margins, strong loan growth, and asset quality. The banks in focus–IDFC First Bank, Federal Bank, Karur Vysya Bank, and RBL Bank–outperformed the Nifty 50 by at least 12%, with Karur Vysya Bank leading the pack. 

Over the past quarter, the stock performance of these banks has been even more impressive. 

The rise in share price has come with strong results over the past three quarters. Q2FY23 results did not disappoint either. The revenue and net income of these banks rose sharply.

Several tailwinds like rising repo rates and strong loan book growth from high retail consumption, have helped banks post strong Q2 results. 

Housing and vehicle loans were the star segments for banks in Q2. 

But is this demand sustainable?  Housing and vehicle loans may become less attractive with rising interest rates and analysts predicting more hikes in the coming months. In addition, according to CMIE data, new investment proposals by the private sector have been falling since Q1FY23. This could slow loan growth. 

As if on cue, RBL Bank’s business loans (12% of the loan mix) decreased by 21% YoY in Q2FY23 and IDFC First Bank’s corporate banking loan book is yet to reach pre-covid levels. However, IDFC First’s management has guided a 25% loan book growth in FY23. Federal Bank and RBL Bank expect their loan books to grow over 15%. 

The net interest margin (NIM) has been on the rise for all four over the past five quarters and accelerated in the last two-quarters, thanks to the rising repo rate. 

NIM of the banks in focus rose both YoY and QoQ in Q2FY23. IDFC Bank enjoys the highest NIM among the four at 5.98%. Its management is confident about maintaining NIM at 6% in FY23. 

Key ratios paint a bright picture

Banks provide several health-check metrics to assess asset quality, risk levels, etc. One key ratio is the gross non-performing assets (GNPA), which helps us understand the level of non-performing assets relative to total advances. This ratio has been on the decline for the past five quarters for the banks in focus, indicating a significant improvement in asset quality. 

All four banks have also made rising provisions in case of future losses.

Another positive factor for these banks is their improving CASA ratio. The CASA ratio is the ratio of deposits in current and saving accounts to total deposits. The higher the CASA ratio, the better. A higher percentage indicates a lower cost of funds because banks do not usually give any interest on current account deposits, and the interest on saving accounts tends to be very low. 

Current valuations look attractive, but there are potential roadblocks

Despite a sharp run-up in share prices, three out of the four banks in focus are in the PE buy zone. 

According to Trendlyne’s DVM classification, IDFC First Bank and Karur Vysya Bank are strong performers (high on DVM scores) and are also in the PE buy zone – meaning that their PE ratios now are lower than historical levels.

While the outlook is strong for these banks, investors should keep in mind key risks going forward. Rising interest rates may slow down loan growth. Loan growth is also dependent on consumption-driven retail loans (especially in the housing sector), and rising mortgage rates could hurt demand in this sector.

Corporate loan books could also get affected as private companies cut back on spending due to fears of an economic slowdown and rising interest rates. 

Screener: Stocks Outperforming the Nifty50 and their Sector, with rising Operating Profit Margin and Cash Flow

At a time of rising interest rates, having a healthy cash flow is important for companies to keep interest payments and debt low. This screener reflects stocks that are outperforming the Nifty 50 index and their sectors over the past month with a rise in operating profit margin and cash flow from annual operating activities. It also lists companies with TTM PE lower than their sector PE.

The screener results are dominated by the Banking and Finance sector with the Software & Services, General Industrials and Utilities sectors also turning up. Major stocks featured in the screener are Union Bank of India, Axis Bank, Persistent Systems, CG Power and Industrial Solutions, and Angel One.

Union Bank of India has the highest YoY growth of 126.6% in operating profit in Q2FY23. The company also saw a rise in annual cash flow of 77% in FY22. The stock outperformed the Nifty 50 index and the Banking and Finance sector over the past 90 days by 15.3% points and 13.5% points respectively. It also has a trailing twelve month PE of 6.1, which is lower than the sector average PE of 28.8.

Axis Bank has an 80.4% YoY growth of operating profit in Q2FY23. The bank has seen its annual cash from operating activity rise 122.7% in FY22. Over the past 90 days, the stock has outperformed the Nifty 50 index and the Banking and Finance sector by 18.3% points and 16.4% points respectively. It has a lower trailing twelve month PE than its sector of 15.2.

CG Power and Industrial Solutions has an operating profit growth of 51.7% YoY in Q2FY23. The company saw a rise in annual cash flow of 77% in FY22. Over the past 90 days, the stock has outperformed the Nifty 50 index and the General Industrials sector by 5% points and 4.2% points respectively. It also has a trailing twelve month PE of 41.1, which is lower than the sector average PE of 51.2.

You can find more screeners here.

1. Varun Beverages: This soft drink bottler’s stock has improved 10% in the past three days and touched a new 52-week high on Thursday. The rise in share price could be attributed to robust Q2FY23 results. A strong rise in net profit and operating profit margin despite an inflationary environment excited investors. With this rise in stock price, Varun Beverages features in a screener that lists companies whose share prices are trading above short-, medium-, and long-term moving averages. 

Revenue rose 33% YoY and net profit increased by 58.7% in Q2. While a 24% YoY volume growth led revenue growth, a 7% rise in realisations on the back of price hikes led to increased profits. In addition, its higher-margin energy drink, Sting, was the star product in Q2, driving both top line and margins higher. The management said Sting’s overall realisation was higher than the average realisation by 65%, helping the EBITDA margin rise 140 bps YoY to 22%. 

Brokerages like Axis Direct, ICICI Direct and Motilal Oswal raised their target prices after the Q2FY23 results announcement. Brokerages are positive about the company on the back of its expanding distribution network and product mix shift towards higher margin products like ‘Sting’. 

2. Bandhan Bank: This bank’s stock has been falling for the past 90 days. Looking at the technicals, the stock fell 17% in the past three months and 10% on Monday alone after reporting a 74.6% QoQ dip in net profit to Rs 209.3 crore. It missed Trendlyne’s Forecaster estimates by 72%. Although the bank’s profitability is positive considering its reported a net loss of Rs 3,008.6 crore in Q2FY22, this has not enthused investors as many key metrics including asset quality have worsened. It shows up on a screener of bearish stocks with low Trendlyne Momentum scores and falling RoE for the past two years.

The bank’s fall in net profit can be attributed  to an increase in provisions which almost doubled to Rs 1,279 crore in Q2FY23. A rise in provisions indicates that the bank has a higher pool of stressed loans. It has had some slippages in loan books despite no restructuring in the last two quarters. Overall, slippages amounted to Rs 3,954 crore with the maximum slippage (Rs 3,624 crore) coming from the EEB (Emerging Entrepreneur Business) segment. Bad loan write-offs stood at Rs 3,539 crore.

On the positive side, Bandhan Bank’s advances grew 17.4% YoY to Rs 95,834 crore. Despite muted Q2 growth, analysts maintain a sturdy rating and expect the bank to perform well in H2FY23. Consensus estimates from analysts show 17 analysts recommending a ‘Buy’ on the stock with five recommending ‘Hold’ and one recommending ‘Sell’. Emkay Global expects the bank to deliver an RoE of 20-22% by FY24-25E. The management offered a positive outlook in their earnings call, expecting to report better earnings in Q3 and Q4 with improving asset quality.

3. Supreme Industries: This plastic processing company’s stock rose over 8% since announcing its results on October 31. This upswing comes despite a 64.1% YoY drop in net profit, with its EBITDA margin contracting 905 bps YoY to 7.1% in Q2FY23. This led the company to miss Trendlyne’s Forecaster profit estimates by 48.9%. The drop in profitability is due to inventory losses as polymer prices fell.  

However, the stock surged as the street has a positive outlook on the company’s prospects. This mostly comes on the back of the management raising its volume growth guidance to 20% from 15% for FY23. The firm’s top-line growth was supported by a 9% volume growth in Q2 due to softening resin prices. Also, the management believes that the price of Polyvinyl Chloride (PVC) resin dropping by 38% since April augurs well for volume growth from H2FY23. PVC-based products contributed around 80% of the firm’s sales volume in Q2. The company, while increasing its volume growth guidance, has lowered its operating margin guidance to 12-12.5% from 15% for FY23.

For H2FY23, the management expects robust demand for its piping products on recovery in rural demand and declining commodity and polymer prices. The stock shows up on the screener for companies that benefit from lower crude oil prices. According to ICICI Direct, the company’s piping segment’s volume will grow at a CAGR of 19% over FY22-24 on the back of a recovery in demand from the agriculture, housing, and infrastructure segments. Supreme Industries plans to incur a capex of Rs 700 crore in FY23, which will mostly be used to increase production capacity.

4. FSN E-Commerce Ventures (Nykaa): This internet platform company posted a surge in its net profit, up  251.1% YoY to Rs 4.1 crore, and revenue grew 39% YoY to Rs 1,230.8 crore in Q2FY23, as a result of new launches and festive demand. But its revenue and profit missed Trendlyne’s Forecaster estimates by 0.3% and 30.5%, respectively. Nykaa’s gross merchandise value (GMV) also rose 45% YoY to Rs 2,345.7 crore during the quarter, with Fashion GMV contributing 26%.  

Falguni Nayar, Executive Chairperson, Managing Director, and CEO, said, "Consumer demand for premium beauty, personal care, and wellness is showing signs of buoyancy as we gear up for a promising H2FY23.”

However, the company has been underperforming ahead of the expiry of the one-year lock-in period for its pre-IPO shareholders on November 10. It hit a 52-week low in the past week due to a large sell-off, especially from foreign investors. 

On the bright side, several brokerages are optimistic about the company because of strong Q2 results. Foreign brokerage Jefferies said the company delivered better than estimates on the GMV, revenue, and EBITDA but maintains its ‘Buy’ rating with a target price of Rs 1,650 as it expects volatility ahead of lock-in expiry. 

5. Triveni Turbines: Despite a fallout with its joint venture partners, the stock has managed to sail well, even as  markets turned volatile with rising inflation and recession fears. The stock has given decent returns as it shows up on a screener of stocks with consistently high returns over the last five years. The stock rose 20% in the last 30 days and nearly 46% in the past 90 days.

Triveni’s rise in share price comes as reports suggest that the company will cater to the entire 3-100 MW markets globally. The stock rose 5% in trade on October 21, after the news came to light. Currently, the company has a market share of more than 50% and the order book of the company stands at Rs 3,610 crore. With rising demand from international markets like Southeast Asia, Europe, West Asia and North America and the ongoing global energy crisis, energy transition through renewable sources and methods will be sped up which is an opportunity to grab.

The growth story does not stop here. The stock rose 2% on Wednesday after declaring its Q2FY23 results. It reports an increase in net profit by 21% QoQ to Rs 46.2 crore. On a YoY basis, this fell 73.4% because of an exceptional item gain in Q2FY22 (settlement amount from litigation between the company and its joint venture). Reports suggest that the management guides a 35% revenue growth for the next few years and aims to maintain the PBT above 20% to maintain high margins. Centrum Broking initiates coverage on the stock with a ‘Buy’ rating and expects a 14% CAGR growth on order inflows over FY22-25E. Triveni Turbines also shows up on a screener of stocks with improving book value per share for the last two years.

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

India is all set to go 5G as major telecom companies, including Jio and Bharti Airtel, have started the rollout. India's 5G entry was made official at the Indian Mobile Congress (IMC) event held in New Delhi on October 1. 

Reliance Jio picked Diwali to launch 5G, hinting that beta testing had launched on October 5. Bharti Airtel launched the service in eight Tier 1 cities on October 8. Vodafone Idea however, has not yet announced the date of its 5G launch or the cities where the service would be available.

5G will be the next big battle for domination among India's telecom companies. In the meantime, we take a look at their monthly subscription numbers over the past six months in this edition of chart of the week.

Reliance Jio’s active subscriptions took a hit in July but bounced back in August as it rose almost 1% to 38.5 crore. The data indicates that 91.8% of its total subscribers are active. The company had posted an average revenue per unit (ARPU) of Rs 176 in Q1FY23. 

Bharti Airtel’s active subscribers in August rose 0.5% to 35.8 crore. It has the highest proportion of active subscribers to total subscribers, 98.3%. The company’s average revenue per unit (ARPU) has also been the highest, at Rs 183.

Vodafone Idea on the other hand, has seen its active subscribers decline in the past six consecutive months and fell 1.4% to 21.4 crore in August. Only 84.8% of the company’s total subscribers are currently active. The company had posted an average revenue per unit of Rs 128 in Q1FY23.

According to ICICI Direct, the telecom sector is due to see a rise in ARPU in H2FY23. This rise will come on the back of a higher number of days and residual benefits of the tariff hike. 

Investors and traders are always on the hunt for alpha –  gaining excess returns on an investment relative to the benchmark index. But managing a portfolio that delivers this magic consistently, and over a period of time is something very few investors/traders are capable of. 

Why is this so difficult? A lot of factors come in the way of consistent alpha. A rising dollar may force foreign investors to temporarily exit the market, and cause indices to fall. Stocks in entire industries may fall as the sector struggles. Trading volumes may decline with changes in government regulations, or with a sharp economic downturn.

Investors also differ from traders, in seeking returns over a longer period, while investing in fewer stocks.  These investors don’t like bear market periods as a result, as even sound investments can see share price declines. Traders on the other hand, take advantage of both rising and falling markets to enter and exit positions over a shorter period, and take smaller and more frequent profits. 

Using DVM scores to deliver alpha on investments

Trendlyne’s durability (D), valuation (V), and momentum (M) scores allow investors to evaluate all aspects of a stock. By choosing from curated screeners or by creating your own, users can make use of these stock scores to devise a high-return trading or investing strategy. One can also backtest these screeners on Trendlyne to see how a particular strategy performed in the past. The backtests also have various filters that let you change the frequency of portfolio review, control for the number of stocks invested in each period, etc. 

There is no one-size-fits-all strategy in investing or trading. A Momentum Score strategy, which looks for stocks with bullish technicals, is more suitable for traders with an appetite for higher risk, who are very active in the stock market. While the Valuation Score strategy is suitable for value investors who are always looking for stocks that are undervalued, a Durability Score strategy which selects financially healthy companies, is for those looking for lower risk and in it for the long game.

Finally, combinations of these scores help investors identify high-quality stocks that may favor one approach over another. 

Let’s look at strategies that use these three DVM metrics individually, evaluate the results and then move on to combining these parameters in search of a better strategy. 

A Momentum Score strategy favours traders, but comes with caveats

This Momentum Score screener helps select high-momentum (technically bullish) stocks with sufficient volumes, so that it is easy for investors to enter and exit. This strategy outperformed all others as it delivered the highest CAGR over a shorter time frame (one to three years). This is optimal for short-term traders who are active in the stock market. Surprisingly, it also performed the best even in volatile markets, as it focuses only on stocks with the highest momentum score. With weekly portfolio reviews, this strategy delivered a stellar three-year CAGR of 301% against Nifty 50’s CAGR of 16%. 

The period analysis, which shows the returns every week, is also mostly in green. However, the maximum drawdown over longer investing time periods. 

Maximum drawdown is the biggest observed loss from a peak to a trough of a portfolio before a new peak is attained. This did not have a stop loss, so the drawdowns show the maximum possible with this strategy. 

Things to watch out for while employing this strategy: 

1. A weekly portfolio review is essential since the momentum score is sensitive to share price changes, and can cause higher stock entries and exits. A stop loss can also reduce negative return periods. 
2. Some stocks hit the upper/lower circuit as soon as the markets open–sometimes even before the market opens–in pre-market trading itself. Hence, in some cases, it can become difficult to enter/exit the stock when required. 
3. For longer term investors, other strategies are more optimal as weekly portfolio reviews may not be feasible for everyone. In those cases, valuation and other strategies perform better. 

A Valuation Score strategy delivers stellar long term returns, but has the highest drawdown

The Valuation Score trading strategy performs best in a longer time frame (10 years). This could be due to markets taking time to discover the stock’s true value and price it accordingly. The screener includes high valuation score stocks with sufficient volumes so that it is easy for investors to enter and exit.

Since the stock's Valuation Score changes with share price movement, it is necessary to review the portfolio every quarter. In fact, a quarterly review (as opposed to a yearly review) allows investors to select optimal stocks based on the screener and get maximum returns. In addition, limiting the number of stocks selected during each period keeps this number manageable (stocks can be limited under the ‘Advanced’ option in the screener - see image below)

Under these conditions, the strategy delivered a staggering 93.7% CAGR over 10 years. 

However, investors will have to endure a high drawdown when following this strategy. Another important thing to note is that a single stock could be responsible for a significant portion of the returns. 

In the top valuation score strategy for instance, Sunil HiTech Engineers (now delisted) delivered over 5,400% returns. So, missing a key stock could lead to lower-than-expected returns. In addition, not all low-valuation score stocks are undervalued stocks. There could be several reasons for low share price relative to earnings–litigations, distorted earnings due to one-time gains, etc. So, there is a chance that affordable stocks can plunge further in share price. In this strategy for example, Gitanjali Gems lost big as long-hidden fraud came into view –95% of its value. 

Good for low risk investors: With lower drawdowns, the Durability Score strategy delivers results when combined with other metrics

The Durability Score strategy is most effective in relatively short terms (three years) for investors, as it delivers higher returns during this period, compared to others. Like the other two strategies, a quarterly review of stocks and controlling the number of stocks to five shows high returns for investors.

Compared to other strategies which are heavily dependent on the share price, this has a relatively lower drawdown. This could be due to the presence of fundamentally strong companies in this screener. However, it becomes more effective when combined with other metrics like valuation score. 

One such strategy can be devised, by using a screener that lists high DVM-score stocks with tradable volume. Another option is to use one of Trendlyne’s expert screeners–DVM - High Return, Highly Durable Companies. This includes companies with high DVM scores with rising stock prices and strong fundamental growth. When this expert screener is used, returns increase significantly, compared to the high DVM strategy that only uses stock scores. 

This is particularly effective for a long term (10 years), with quarterly portfolio review, and controlled for five stocks. The top strategy in this category delivered 85.4% CAGR with a maximum drawdown of 53%. In addition, filtering for Nifty 500 stocks made marginal changes in the returns, but reduced drawdown. But filtering for Nifty 50 stocks led to underperformance, mainly because of the low number of stocks selected due to stringent parameters. 

Not surprisingly, period analysis is mostly in the green as the stocks selected here are fundamentally strong. 

The DVM expert screener performs the best, when accounting for drawdowns

When mid to long-term strategies across different categories are considered, high-valuation stocks deliver the highest returns. But when we consider the maximum drawdown along with the CAGR, the expert screener comes out ahead as it has a lower drawdown. 

The expert screener (DVM - High Return, Highly Durable Companies), delivered returns at a whopping 85% CAGR–meaning an investment of Rs 10,000 10 years ago is now worth over Rs 38.2 lakh. All an investor needed to do was to review the portfolio quarterly and shuffle it according to the entry and exit of stocks in the expert screener and stay invested. 

This is just the tip of the possibilities available to investors. Investors can use several different parameters such as PE ratio and ROE  to create screeners and backtest it to calculate the returns that particular strategy has delivered over a selected period. Combining these with Trendlyne’s stock scores can, as we saw above, substantially increase your alpha.

Investors can also choose several expert screeners encompassing different parameters and investment philosophies and backtest them to come up with a trading strategy that works for them. 

This week we look at analyst picks from the Pharmaceutical and Chemicals & Petrochemicals sectors.

1. Granules India: ICICI Direct maintains its ‘Buy’ rating on this pharmaceutical company with a target price of Rs 410, implying an upside of 10.0%. In Q2FY23, the firm’s net profit rose 79.8% YoY and revenue, 29.5% YoY. Analysts Siddhant Khandekar and Utkarsh Jain say Granules’ revenue growth in this quarter has beaten their estimates, mainly driven by higher paracetamol sales in the US, increased market share and new launches. They added that the company’s EBITDA margins also beat their estimates. It grew by 409 bps YoY to 21.1%. 

Khandekar and Jain believe that the company’s margin will improve in the coming quarters on the back of a focus on economies of scale and gradual expansion of complex products. Overall, they are positive about the company’s prospects, given its focus on product portfolio diversification, improving backward integration, and cost management. The analysts expect the firm’s net profit to grow at a CAGR of 27.8% over FY22-24.

2. Glenmark Life Sciences: BoB Capital Markets keeps its ‘Buy’ rating on this active pharmaceutical ingredient (API) manufacturer but reduces the target price to Rs 535 from Rs 560. This implies an upside of 25.9%. Analyst Saad Shaikh reduces the target price on the expectation of higher costs to commission the new plant in Dahej and a fall in the firm’s Q2FY23 revenue. GLS’ revenue fell on the back of a 33% YoY reduction in API business from its  parent company Glenmark Pharmaceuticals, the analyst noted.

However, Shaikh remains positive about the company’s growth prospects for its “strong market position in key APIs and focus on product value over volumes, which translates to a superior margin profile”. He also believes that an increase in production capacity will benefit the company in the medium to long term. The analyst expects the company’s net profit to grow at a CAGR of 9.8% over FY22-25.

3. Torrent Pharmaceuticals: ICICI Securities maintains its ‘Buy’ rating on this pharmaceutical company and increases its target price to Rs 1,853 from Rs 1,769. This indicates a 12.3% upside. Analysts Vinay Bafna and Rohan John say that the firm’s Q2FY23 revenue and EBITDA margin growth was broadly in line with their estimates. But then, its profit growth came in below estimates. They attribute this to higher other expenses and lower other income. Despite its profit growth missing their estimates, the analysts remain positive on Torrent Pharma, considering “its strong branded franchise supported by a dominant chronic segment in India and Brazil”.

Bafna and John believe that the company’s recent acquisition of Curatio will augur well for it, despite the acquisition diluting the earnings per share in the near term. They also expect the firm’s operational leverage, cost optimisation, and resolution of its plants will drive margin growth in the coming quarters. The analysts estimate Torrent Pharma’s net profit to grow at a CAGR of 35.5% over FY22-25.

4. UPL: Prabhudas Lilladher maintains a ‘Buy’ call on this agrochemical manufacturer with a target price of Rs 1,020. This indicates an upside of 39.7%. UPL has announced a strategic realignment of its businesses into four distinct business verticals. Himanshu Binani remains optimistic about the company on the back of this business restructuring strategy. 

Marquee investors like ADIA, TPG, Brookfield, and KKR are investing a total of $500 million in UPL. But ADIA and TPG will receive $241 million for their exit from non-crop protection in UPL Corp business resulting in net proceeds of $259 million. Binani believes that these net proceeds are likely to be utilized towards debt reduction and working capital requirement and would not meaningfully impact the earnings profile in the near term. “In terms of unlocking the fair value of each of the business segments, It will be a positive move in the long term,” he added.

5. Navin Fluorine International: Edelweiss maintains a ‘Buy’ call on this commodity chemicals company with a target price of Rs 5,500, indicating an upside of 20.8%. In Q2FY23, the company’s profit decreased 8.6% YoY to Rs 57.8 crore, despite a 23.1% YoY increase in revenue to Rs 430.1 crore. Analysts T Ranvir Singh, Nikhil Shetty, and Prasad Hase said, “Navin Fluorine International’s Q2FY23 performance was below our estimates and street expectations on the revenue and bottom-line front.” 

Despite the lower-than-expected results, the analysts remain positive on the chemicals manufacturer on the back of strong hydrofluoroolefin demand, commercialization of phase one multi-product plant, robust demand outlook, ability to pass on price hikes, and healthy realizations across specialty chemical products. “The company’s long-term story is intact and we expect new capacity additions to drive top-line growth while gaining leverage after achieving optimum capacity utilization to improve profitability,” they concluded.

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

(You can find all analyst picks here)