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The Baseline created a screener ROCE (Return on Capital …

23 Aug 2022

ROCE (Return on Capital Employed) is lower than Sector ROCE

Stocks whose ROCE is lower than Sector ROCE

The Baseline

23 Aug 2022

Five analyst picks in auto and chemicals, with high growth in Q1FY23

This week we look at analyst picks from the Auto and Chemicals and Petrochemicals sectors - two sectors where several companies posted high YoY revenue and profit growth in Q1FY23.

Balaji Amines: KRChoksey maintains a ‘Buy’ call on this specialty chemicals maker with a target price of Rs 4,313, indicating an upside of 23.3%. In Q1FY23, the company’s revenue grew 49.3% YoY to Rs 674.9 crore and profit by 63.8% YoY to Rs 148 crore. Analyst Kushal Shah thinks that robust performance was mainly driven by higher realisations from the amines and specialty chemical segment which grew 55% YoY.

Shah believes that the chemical maker’s “stronger product mix, ongoing healthy pricing realisations across the majority of its products, and rise in operational leverage due to a surge in volume offtake” drove the jump in operating margins.” Balaji plans to start the operation of its dimethyl carbonate plant by the end of August 2022. Its other capex plans include setting up of a new n-butylamine plant, acetonitrile plant, methylamine plant, and dimethylformamide plant. Shah concludes that “defined capex plans will add fuel to the growth story in the coming years.”

Hero MotoCorp: Prabhudas Lilladher maintains a ‘Buy’ call on this two-wheeler manufacturer with a target price of Rs 3,130. This indicates an upside of 12.5%. In Q1FY23, Hero’s revenue grew 50.4% YoY to Rs 8,503.1 crore and profit by 130.5% YoY to Rs 590.4 crore. EBITDA margin was 11.2% (below the brokerage’s estimate of 11.7%).

Analyst Mansi Lall says, “(the) festive season is expected to be healthy on the back of normal monsoons and increase in crop prices. The company is increasing its focus on premiumisation through its XTec models, which are 7-10% higher in price than the standard one.” Lall also remains positive on the two-wheeler manufacturer due to its successful investment in electric vehicles via Ather, an in-house mass product (Vida) and joint venture with Gogoro. These partnerships are expected to help Hero in building the entire electric vehicles ecosystem – from products to technology, to sales, service, customer care, operations, and innovation.

Maruti Suzuki India: Motilal Oswal maintains a ‘Buy’ call on this carmaker with a target price of Rs 11,300, indicating an upside of 30.5%. During Q1FY23, revenue increased 45.4% YoY to Rs 26,592.7 and profit by 118.2% YoY to Rs 1,036.2 crore.

According to analysts Jinesh Gandhi and Aniket Desai, Maruti Suzuki targets two million units in sales in FY23 and plans to regain 50% market share in the near future. They add that the introduction of hybrid technology in Grand Vitara, is the first step towards electrification.

Gandhi and Desai expect “a recovery in both market share and margin in H2FY23, led by an improvement in supplies and mix, a favorable product lifecycle, raw materials, forex benefits, and operating leverage”

Eicher Motors: ICICI Securities maintains a ‘Buy’ rating on this truck and two-wheeler maker with a target price of Rs 3,695. This indicates an upside of 9.6%. In Q1FY23, the company’s net profit rose 157.5% YoY to Rs 610.7 crore and revenue by 72.1% to Rs 3,397.5 crore.

Analysts Basudeb Banerjee and Pratit Vajani are positive on the company’s prospects as they believe that the business will reap benefits from falling raw material costs as demand recovers. They believe the firm’s arm Royal Enfield’s strategy to refocus at the lower end of the premium domestic motorcycle market will help boost profits. Banerjee and Vajani are also bullish on Royal Enfield’s plans to increase its exports, as it already has an 8% market share in developed markets. They believe its exports have the potential to grow given its bikes are high-quality while available at one-third the price of its global competitors. The analysts expect the company’s profit to grow at a CAGR of 52.8% over FY22-24.

Aarti Industries: HDFC Securities maintains its ‘Buy’ rating on this specialty chemical firm with a target price of Rs 1,085. This indicates an upside of 37.4%. In Q1FY23, the company’s net profit increased 14.7% YoY to Rs 189.1 crore and revenue by nearly 50% to Rs 1,972 crore.

Analysts Nilesh Ghuge, Harshad Katkar, Rutvi Choksi, and Akshay Mane believe the chemical maker’s profitability will improve in the coming quarters given its “constant focus on capex and R&D. (This) will enable it to remain competitive and expand its customer base”. They also expect that the company’s entry into the toluene segment will drive growth in the long term. The analysts see this specialty chemicals manufacturer’s revenue growing on the back of an increase in sales volumes from new capacities added recently. They estimate Aarti’s revenue to grow at a CAGR of 9.9% over FY22-24.

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

Trendlyne Marketwatch

23 Aug 2022

Market closes higher, Emkay Global recommends a ‘Buy’ on RBL Bank

Trendlyne Analysis

Nifty 50 recovered over 230 points from the day’s low and closed above the 17,550 mark on a volatile day of trade. European stocks traded mixed as investors remain uncertain about Central Banks’ monetary policy decisions to combat high inflation levels. Most major Asian indices closed in the red, tracking the US indices, which closed deep in the red on Monday. US stocks fell as the US Federal Reserve Chairman Jerome Powell is expected to reinforce the Fed’s commitment to tighten the monetary policy at the Jackson Hole symposium to be held later this week. The tech-heavy index NASDAQ 100 fell 2.7% while the S&P 500 lost 2.1% on Monday. Crude oil traded in the green after Saudi Arabia warned that OPEC could cut output to address the recent fall in crude oil prices.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, following the benchmark index. Nifty Metal and Nifty Bank closed higher than Monday’s levels. Nifty IT closed in the red, tracking the NASDAQ 100, which closed deep in the red on Monday.

Nifty 50closed at 17,623.35 (132.7, 0.8%), BSE Sensexclosed at 59,031.30 (257.4, 0.4%) while the broader Nifty 500closed at 15,127.05 (125.3, 0.8%)

Market breadth is in the green. Of the 1,903 stocks traded today, 1,184 were in the positive territory and 635 were negative.

Spicejet is rising in trade as it considers raising funds of around Rs 2,000 crore through equity and/or debt , according to reports.
SpiceJet airline is looking to raise funds to the tune of Rs 2000 cr. Recently the airline board passed the resolution to raise the funds for its sustainability and future expansion: @AjaySingh_SG, @flyspicejet @sameerdixit16 #airlines pic.twitter.com/3FlnezyMMX
— ET NOW (@ETNOWlive) August 23, 2022
Stocks like Hinduja Global Solutions, Grindwell Norton, Solar Industries India, and Affle (India)are in the overbought zone, according to the relative strength index or RSI.
Public sector banks like Bank of Baroda, Canara Bank, Punjab National Bank, Punjab & Sind Bank, and State Bank of Indiaare rising in trade. The broader Nifty PSU Bankindex is also trading in the green.
Dreamfolks Services, the airport service aggregator platform, opens for IPO subscription tomorrow. The price band for the issue is Rs 308-326 per share and is entirely an offer for sale for Rs 562.1 crore. The risk factors for this company include heavy dependence on relationships with airport lounge operators and the demand for air travel.
Emkay Global recommends a ‘Buy’ on RBL Bank with a target price of Rs 125, according to reports. It remains positive on the bank's focus on increasing its secured assets, and cards business. The brokerage believes that improving its retail and SME loan portfolio will help build assets for future growth.
Great Eastern Shipping Co and Bharat Electronics hit their all-time highs of Rs 545 and Rs 297.7, respectively. Great Eastern Shipping Co rises for two consecutive days, while Bharat Electronics trades higher for three sessions.
Axis Direct maintains its ‘Hold’ rating on Tata Consultancy Services with a target price of Rs 3,650. This indicates an upside of 8%. The brokerage believes supply-side constraints may persist, likely impacting margins despite robust deal wins. It expects the company’s net profit to grow at a CAGR of 14.4% over FY22-24.
Nifty 50was trading at 17,525.40 (34.7, 0.2%), BSE Sensexwas trading at 58,986.21 (212.3, 0.4%) while the broader Nifty 500was trading at 15,030.30 (28.6, 0.2%).
Market breadth is in the green. Of the 1,889 stocks traded today, 1,137 were in the positive territory and 685 were negative.
Unichem Laboratories rises as it receives abbreviated new drug application (ANDA) approval from the US FDA. The approval is to market a generic version of Tegretol (carbamazepine) tablets of Novartis Pharmaceuticals. The drug will be manufactured from the company's Goa plant.
ICICI Direct maintains its ‘Buy’ rating on Indian Bank with a target price of Rs 210, indicating an upside of 20%. The brokerage remains positive on the bank’s prospects on the back of improvement in asset quality and credit growth outlook. It expects the bank’s net profit to grow at a CAGR of 29% over FY22-24.
Ratings agency Fitch's arm CreditSights terms Adani Group as "deeply overleveraged" and finds no strong evidence of founders infusing capital. It is concerned about credit metrics and cash flows and the fact that Adani Group is entering unrelated businesses.
Gautam Adani’s port-to-power conglomerate is “deeply overleveraged” as it invests aggressively across existing as well as new unrelated businesses, predominantly funded with debt, a Fitch Group unit says https://t.co/AEKL9CTYIS
— Bloomberg (@business) August 23, 2022
Devyani International falls in trade after Temasek Holdings' arm Dunearn Investments plans to sell 2.6 crore shares (nearly 3% stake), according to reports. The total deal is worth approx $80-86 million.
Storage Media & Peripherals, Household Products, and Specialty Retail industries rise by more than 3% in trade today.
RBI Governor Shaktikanta Das says that inflation has moderated from its peak. He says the aim is to bring down the inflation rate below 6%.
#ETNOWExclusive | Here are the key takeaways from @nikunjdalmia's interview with the RBI Governor, @DasShaktikanta @RBI @FinMinIndia @nsitharaman #Inflation pic.twitter.com/XyZxUmNxsF
— ET NOW (@ETNOWlive) August 23, 2022
Sterling and Wilson Renewable Energy wins order worth Rs 2,200 crore for operations and maintenance of four blocks of the proposed solar photovoltaic plant of NTPC Renewable Energy at Khavda RE Power Park, Rann of Kutch, Gujarat.
IT stocks like Tata Consultancy Services, Infosys, HCL Technologies, Wipro and Tech Mahindra are falling in trade. All constituents of the broader Nifty IT index are also trading in the red.
Infosys is falling amid reports suggesting the company is scaling back the average variable payout of employees to 70% for Q1FY23. The scaling back is due to falling margins and rising employee costs.
IIFL Finance’s arm IIFL Home Finance approves allotting of 53.76 lakh shares worth Rs 2,200 crore to a wholly-owned subsidiary of Abu Dhabi Investment Authority. The investor will hold a 20% stake in IIFL Home Finance.
CEO of Cipla, Umang Vohra, expects Indian business worth Rs 10,000 crore to double in the next five years both organically and inorganically. He expects healthcare reach to improve further in rural India. He also expects the business in the US (worth $500 million) to double in the next five years.
#CNBCTV18Exclusive | Our ?10,000 crore India business has the potential to double in 5 years. New launches are a significant opportunity in the US, says Umang Vohra of Cipla pic.twitter.com/7dzENyLwTt
— CNBC-TV18 (@CNBCTV18Live) August 23, 2022
Godrej Agrovet signs three MoUs (memorandum of understanding) with the state governments of Assam, Manipur, and Tripura for the development and promotion of palm oil cultivation. The company is planning a cultivable area of 15,000 hectares in the next five years.
Future Retail’s financial creditors submit loan claims worth Rs 21,058 crore under the ongoing insolvency process, according to reports. Bank of New York Mellon submitted the largest claim worth Rs 4,670 crore.

Riding High:

Largecap and midcap gainers today include NMDC Ltd. (119.20, 5.77%), IDFC First Bank Ltd. (46.05, 5.50%) and Varun Beverages Ltd. (963.55, 4.76%).

Downers:

Largecap and midcap losers today include Adani Power Ltd. (410.90, -4.99%), Adani Green Energy Ltd. (2,412.90, -4.24%) and MphasiS Ltd. (2,264.95, -3.47%).

Movers and Shakers

18 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Kalyan Jewellers India Ltd. (77.35, 10.11%), Mas Financial Services Ltd. (708.50, 7.37%) and Great Eastern Shipping Company Ltd. (549.65, 5.66%).

Top high volume losers on BSE were Devyani International Ltd. (186.00, -5.22%), Procter & Gamble Health Ltd. (4,296.80, -0.80%) and Quess Corp Ltd. (569.95, -0.42%).

Bayer Cropscience Ltd. (5,298.55, 1.53%) was trading at 14.3 times of weekly average. 3M India Ltd. (2,2374.35, 0.06%) and Zydus Wellness Ltd. (1,616.95, 1.22%) were trading with volumes 8.1 and 7.5 times weekly average respectively on BSE at the time of posting this article.