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1. Bharti Airtel: This telecom company’s stock surged over 5.5% after it held its analyst day on March 25, 2022. Brokerages across the spectrum are bullish on the company’s future prospects and see an average target price upside of over 20% to Rs 892 levels. The company is mulling 2-3 hikes in its tariff plans over the next few years to boost its average revenue per user (ARPU) to sustainable levels. However, it will be successful in this endeavour only if Reliance Jio follows suit.

Bharti is looking to grow its ARPU to Rs 300 in the medium-term from Q3FY22 levels of Rs 163. At the current levels, the company clocks RoCE of just 6% which is lower than its cost of capital. Even if Bharti is able to make average revenues of Rs 250 per user, it can see an RoCE of 20%+. Hence, any future tariff hikes should be a key monitorable for investors.

The next leg of growth will come from its digital products and services, according to the company. The cumulative market opportunity for cloud communication, data centres, security, IoT and network as a service (NaaS) is around Rs 36,000 crore as of FY22. This market will grow at 25% CAGR to reach almost Rs 70,000 crore by FY25. The company's key products for its enterprise segment (B2B) such as Airtel IQ (CPaas), Nxtra (data centres), Airtel Secure and Airtel Ads could see stellar growth in the next 3-4 years. Another potential growth driver for the company will be the Airtel Payments Bank. This business already broke even in July 2021, and clocks a gross merchandise value of Rs 37,000 crore per quarter.

2. Aurobindo Pharma: This pharmaceutical company acquired Veritaz Healthcare for Rs 171 crore on March 28 to foray into the domestic formulations business. Aurobindo Pharma derives about 90% of its total revenue from international markets. Given the intense pricing pressure in the US and with export costs increasing, Aurobindo Pharma has turned towards domestic markets (India) to diversify its revenue mix. Veritaz Healthcare is an Indian pharma company specializing in branded generic formulations with a turnover of Rs 133 crore in 9MFY22. This 10-year-old company has around 40 brands across acute and critical care segments. The addressable market for its current product portfolio is Rs 26,775 crore.

Brokerages like Geojit BNP Paribas and Axis Securities have a long-term positive outlook on the company. However, a flash report by BOB Capital Markets released on Wednesday isn’t too optimistic on the acquisition. The brokerage says the strategy behind the acquisition is unclear and it is also sceptical on the financial planning post the acquisition. Hence, BOB Caps did not include the Veritaz acquisition while modelling its target price and stance. The brokerage believes that the low-value products of Veritaz in highly competitive segments aren’t compelling for Aurobindo Pharma. The investors reflected the same sentiment as the stock price has fallen over 5% since the announcement of the acquisition.

Like other pharma companies, Aurobindo Pharma witnessed significant price erosion in the US markets in Q3FY22. The operating profit margin decreased by over 450 basis points in Q3FY22 to 16.93%. The operating profit margin is on a downtrend since the start of FY22 owing to the intense competition globally. The company struggled to post YoY revenue growth for the past four quarters. Given these weak cues, the company has turned towards Indian markets to drive revenue growth.

3. G R Infraprojects: This infrastructure company’s stock rose 7.4% in five consecutive sessions till March 31, 2022 after it announced that it received Letter of Award (LoA) for five projects worth Rs 5,774 crore from the National Highways Authority of India (NHAI). All the projects to be constructed are under hybrid annuity mode (HAM). As of Q3FY22, the company’s order book stood robust at Rs 14,599 crore, which is twice its FY21 revenue. Its order book comprises road projects and metro projects and its order book mix is as follows - 67% HAM projects, 28% EPC (engineering, procurement, and construction) projects, and 5% railway and metro projects. According toICICI Securities, the focus on HAM projects bodes well for the company as HAM projects have a 20%+ operating margin, whereas EPC projects have a 14-15% operating margin. The company has also diversified into the power transmission segment to widen its opportunity landscape.

According to reports, NHAI has undertaken measures aimed at preventing excessive and aggressive bidding. It has reinstated the earnest money deposits (EMD) requirements and raised the net worth requirements for HAM projects to ensure that the successful bidder does not falter on achieving financial closure and leaving the project incomplete. These measures are expected to lead to a reduction in competitive intensity in FY23 and benefit financially sound players. G R Infraprojects will benefit from these measures due to its strong balance sheet and access to growth capital. According to Axis Securities, the company is well placed to capitalise on opportunities in the construction segment by leveraging its healthy financial position, healthy order inflows, and timely execution prowess.

4. Hindalco: This aluminium miner’s stock touched an all-time high of Rs 634.95 this week, as LME (London Metal Exchange) prices of aluminium are soaring due to a supply crunch caused by the Russia-Ukraine conflict. With the aluminium supply deficit and strong demand for aluminium from major segments like beverage cans, automotive body sheets, specialities, and aerospace, the management expects higher LME prices to prevail through FY23 and FY24.

The management announced a growth capex of nearly $8 billion over 5 years. Of the total capex, $4.5-4.8 billion would be incurred at Novelis while $3.37 billion would be spent on the India business.The company expects $2 billion of free cash flow (FCF) post sustaining capex and has created a roadmap to allocate 75% of FCF toward growth projects. The company plans to increase the capacity of Novelis by 1.3 million tonnes per annum (mtpa) to 5.8 mtpa, to meet the growing demand for auto parts and beverage cans in North America. The management sees a growing demand-supply gap for beverage cans in the next 7-8 years in North America as an opportunity to expand. As for its India operations, the company plans to expand its upstream and downstream further to raise its aluminium capacity to meet growing demand in the Indian market. Better realisations can be expected in the Indian operations as Hindalco obtains a majority of its coal requirements from Coal India and its captive mines. The company plans to increase production in captive mining to enhance its coal security and reduce energy expenses. So far, the business environment is favourable for Hindalco, the only headwinds being supply-chain disruptions which may impact its margins.

5. Axis Bank: This private banker’s stock rose 2% on Thursday after it announced the acquisition of Citibank India’s consumer business for Rs 12,235 crore. Citibank’s Indian businesses include credit cards, retail banking, wealth management, and consumer loans.

Citibank is the seventh-largest player in the outstanding credit card segment with a customer base of 26 lakh and a market share of 3.6% in February 2022. Analysts at Motilal Oswal expect that Axis Bank’s acquisition of Citibank’s consumer business will help it increase its credit cards market share to 15.6% from 12% giving tough competition to ICICI Bank which has a market share of 17.8%. The acquisition will also boost Axis Bank’s loan book by 4.1% to Rs 6.9 lakh crore with the retail loan mix increasing 177 bps to 57%. The retail loan mix for Q3FY22 stands at 55% in Q3FY22.

The acquisition seems like a welcome change. However, some analysts are sceptical about the move. HDFC Securities didn’t revise its target price after this deal was announced. Motilal Oswal reduced its target price as it expects the benefits of the acquisition to show up only after two years. A Jefferies report suggests that Citibank’s standalone business growth is modest and this might not add up to Axis Bank’s earnings until FY26.

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

It has been a turbulent couple of years for the Indian aviation sector. And despite revenge travel, the recovery hasn't been a quick one. Airlines are yet to hit pre-pandemic levels on the number of passengers ferried, with the load still lower than FY21.

Pre-Covid, average daily fliers were 4 lakh passengers. The latest data suggests that daily traffic reached 3.6 lakh fliers as of March 26, 2022. Although the average number of travellers surged to 137 from 126 in March 2022, the third wave dampened this trend, the Director General of Civil Aviation’s monthly data shows.

In February 2022,Interglobe Aviation (IndiGo), Air India, Go First (formerly GoAir), Spicejet, and Vistara saw a substantial rise in passengers carried. However, IndiGo’s market share fell by 411 bps MoM, to 51% as competitors Air India, SpiceJet and Vistara ate into its market share. Vistara in particular has seen an increase in market share by 226 bps MoM to 9.73%.

However, an increase in the price of aviation turbine fuel (ATF) might pose a problem for all airlines. Unlike other sectors, where price hikes are taken to offset the rise in input costs, aviation companies cannot increase fares indiscriminately. According to a report by ICICI Securities, revenue per available seat-kilometre (RASK) in Q3FY22 was Rs 3.51, which is already higher than Rs 2.70 in FY11, when fuel prices were $100-$110 per barrel. So the option of increasing fares is very limited.

With the government re-starting international flights from March 27, 2022, demand is set to go up, causing a surge in the number of passengers carried.Reports suggest that since daily traffic increased in March 2022, DGCA approved 25,309 departures every week starting the last week of March. If the demand continues to jump, airlines might be able to mitigate the rise in ATF cost and come out of the red in FY23. 

1. Ajanta Pharma(AJP): Motilal Oswal maintains a ‘Buy’ rating on this pharmaceutical company but cuts its target price to Rs 2,500 from Rs 2,780, indicating an upside of 32%. The brokerage reduced the target price due to the lower pace of ANDA (abbreviated new drug application) filings and approvals in the US market, which may hinder growth in the medium term. However, its compliance track record remains sound and ongoing product development implies a promising outlook for the US generics segment.

The brokerage remains bullish on Ajanta’s branded generic segment and believes the company is on track to outperform the industry. “AJP has remained a focused player in the branded generics business in Asia and Africa, with 40 product registrations over the past 12 months”, say analysts at Motilal Oswal. The company delivered 53% and 2% YoY sales growth in Africa and Asia respectively over 9MFY22 on the back of 20-22 product launches and market share gain in existing products. It already has a portfolio of 200 products in the Asia and Africa markets. The brokerage expects Ajanta Pharma to deliver a 16% profit CAGR over FY22-24.

2. Bharat Petroleum Corporation(BPCL): HDFC Securities upgrades its rating to ‘Buy’ for this oil marketing company with a target price of Rs 420. This indicates an upside of 16.6%. The brokerage upgraded the call as “the stock has corrected 30% from its peak over the last six months, owing to pressure on auto-fuel marketing margins and an increase in LPG under-recoveries,” say analysts Katkar, Ghuge, Chokshi and Akshay Mane. A combination of a sharp surge in crude oil price and pausing of revision in retail auto fuel and LPG prices resulted in the contraction of auto fuel marketing margins and an increase in LPG under-recoveries for the OMCs. Additionally, the government announced an LPG subsidy of only Rs 4,000 crore in the recent budget which the brokerage expects to be revised. The brokerage is positive on the stock on improvement in refining margins and resumption of daily auto fuel price changes. Retail prices may be raised given the increased crude oil prices, which will further lighten the LPG recovery burden.

3. Reliance Industries (RIL): Prabhudas Lilladher reiterates its ‘Buy’ call on this oil and gas to retail conglomerate and raises its target price to Rs 3,045, indicating an upside of 17.3%. “Low product inventory and strong demand have pushed oil product spreads, which will benefit complex refiners like RIL,” says analyst Avishek Datta. Additionally, domestic gas prices are set for a sharp upward move in the backdrop of a multi-fold increase in international prices. Spot LNG prices are also on an upswing led by higher demand in Europe. Amid geopolitical tensions, gas prices are likely to remain at elevated levels. Datta adds, “We expect RIL’s telecom and retail segment performance to remain strong on the back of flow through of tariff hikes and opening of stores.” The brokerage remains positive on the company as it exhibits strengths across its business verticals. 

4. Can Fin Homes: CD Equisearch maintains a ‘Buy’ on this housing finance company and increases its target price to Rs 754 from Rs 665, indicating an upside of 25.4%. The loan book of the company saw robust growth of 19.5% YoY in Q3FY22 to Rs 25,091 crore. In terms of asset quality, Gross NPA and Net NPA ratios stood at 0.71% and 0.39%, respectively, showing sequential improvement over Q2FY22 ratios of 0.78% and 0.47% respectively. The brokerage states, “Established focus on catering to affordable segments and small ticket size in its stronghold southern market, has enabled the company to penetrate deeper in tier-2 and tier-3 cities.” Accordingly, the brokerage expects the company’s loan book to grow by 20% in the current fiscal year. The brokerage adds, “With a capital adequacy ratio of 24.2% Can Fin’s balance sheet remains well capitalized to support this growth.” CD Equisearch believes penetration in remote areas of the country would act as a catalyst for business growth.

5. G R Infraprojects (GRIL): Axis Securities initiates coverage on this EPC infrastructure company with a ‘Buy’ rating and a target price of Rs 1,775, indicating an upside of 22.9%. As the construction sector is witnessing long-term structural changes on account of the government’s push towards infrastructure development, many opportunities are emerging in the construction space such as the development of airports, metros, and railways, among others. The brokerage believes that the company is well placed to capitalize on opportunities due to its diversified order book, healthy bidding pipeline, established track record, and healthy financial position. As of December 2021, the company’s order book stood at Rs 14,599 crore (2x of FY21 revenue), comprising road projects as well as metro projects. “GRIL is one of the leading EPC (engineering, procurement, and construction) contractors in India having a demonstrated project execution experience of more than two decades,” say analysts at Axis Direct. Furthermore, the brokerage expects the company’s healthy capital structure will enable it to efficiently capture emerging opportunities moving forward.

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

• Cipla: This pharmaceutical company’s stock rose over 10% in the past two weeks after it received approval from Central Drugs Standard Control Organization (CDSCO) to conduct local trials on the anti-Covid-19 pill Paxlovid. Cipla is the third company that got such approval by CDSCO to allow generic companies to make a version of Paxlovid. Paxlovid is Pfizer's new antiviral treatment for COVID-19 that reduces the risk of hospitalization and death by 89% for high-risk groups when taken early in the course of the infection.

Pfizer expects to generate US$20 billion in revenue this year from Paxlovid which is currently priced at $530 for a five-day course. Pfizer entered into a voluntary licensing agreement with the Medicines Patent Pool, enabling generic companies to make cheaper copies to supply 95 low and middle-income countries. However, with the Covid -19 pandemic receding, Cipla might not be able to get substantial revenues from this drug.

Cipla has a strong product pipeline in the US to combat the prevailing pricing pressures it’s facing. In Q3FY22, Cipla received USFDA approval for the usage of lanreotide injection, which has a US market size of $867 million. The company also plans to launch the generic version of Revlimid (lenalidomide) in the US. This is the second Indian company to do this - Natco Pharma on March 7 launched the first generic version of Revlimid, which has a global market size of over $12 billion. Brokerages like Axis Securities and HDFC Securities are positive on this company on the back of its market-beating growth in generic franchises of India and South Africa.

• CreditAccess Grameen: This microfinance company’s stock rose over 17% in the past two weeks after RBI removed the interest rate ceiling on loans offered by non-banking financial company microfinance institutions (NBFC-MFIs). The RBI also raised the annual household income to Rs 3 lakhs for a collateral-free loan to be classified as microloan. These changes will allow the lender to undertake risk-based pricing rather than offering fixed-rate loans, and expand further into new markets. The company offers one of the lowest lending rates among peers, enabling it to pass on the incremental cost of funds (CoF) to its customers and maintain loan spreads.

In Q3FY22, the company’s revenue rose 27% YoY to Rs 689.7 crore. It reported a profit of Rs 119.8 crore in Q3FY22 compared to a loss of Rs 77.3 crore in Q3FY21. Net interest income (NII) grew by 44% YoY to Rs 415 crore, as its interest income grew by 27% YoY to Rs 654 crore. The improvement in margins was due to increasing disbursements and improving collection efficiency, during Q3FY22 the collection efficiency of the lender stood at 94.5%.

According to analysts from Axis Direct, the company is well-positioned to benefit from the new regulations due to its deep rural presence, expanding branch network, and improving customer traction. The company’s rural penetration and improving collection efficiency are expected to drive further growth of its gross loan portfolio.

• Indian Hotels Company: This hospitality chain said that its hotel bookings for the March-May period this year surpassed the levels for the same period in 2019. The recovery in hotel bookings was led by strong domestic demand for leisure travel.

In Q3FY22, the company’s revenue grew 84.5% YoY to Rs 1,133.9 crore and reported a profit of Rs 76 crore, its first in six quarters. The recovery was led by demand and higher pricing as the average room rate (ARR) for leisure travel grew by 46.6% QoQ to Rs 16,446 and for non-leisure travel grew by 32.5% QoQ to Rs 7,547. The occupancy rate in its domestic hotels, such as Taj, Vivanta, The Gateway, among others, in Q3FY22 was 94% of Q3FY20. The company’s revenue per available room (RevPAR) reached 89% (Rs 6,429) of the pre-covid RevPAR of Rs 7,224, only Goa’s and Chennai’s RevPAR were higher than pre-covid levels during the same period.

The company is all set to launch its qualified institutional placement (QIP) issue of Rs 2,000 crore. Earlier in October 2021, the company announced plans to raise up to Rs 4,000 crore equity funds, through rights issues and QIP. The capital raised from these issues will be used to reduce debt and fund the company’s expansion plans to increase market share as the economy recovers from the effects of Covid-19. The company plans to expand rapidly by opening more than one hotel a month in CY2022, having signed on 17 new hotels for the year and with an order pipeline of over 60 hotels. It has a portfolio of 232 hotels in 11 countries and over 100 locations.

• Jindal Steel & Power (JSPL): This metal stock is rising for the last three consecutive sessions after it  prepaid a $357 million loan of its Mauritius subsidiary. This prepayment clears off almost the entire debt of its subsidiary. Post this payment, JSPL’s net debt now stands at $130 million compared to $1.8 billion in FY19.

Brokerage Motilal Oswal upgraded the stock’s target price by 18% to Rs 605 as it bags exports orders, especially from Europe. Reports suggest that the management also plans on increasing exports by capturing the supply gap in European markets to meet the rising cost of raw materials. For now, JSPL is secured in its coking coal supply. At its 6 million tonnes furnace capacity, it requires 4 million tonnes of coking coal which can be sourced from Mozambique and Australia. The brokerage also expects a steady demand flow for the company, even at current price levels. However, demand may slightly waiver due to record high steel prices.

Analysts at Motilal Oswal believe that strong volume growth, saving up on raw material costs, and an increase in capex plans will drive EBITDA growth by 7-35% for FY 23-24. Trendlyne’s Forecaster expects revenue to go up by 22% in FY22 and EPS to rise by 31.4% in FY22. The company recently declared an interim dividend on March 11, 2022.

• Nestle: This FMCG stock fell 1.3% on Wednesday on the Indian bourses. As Russia continues to wage war with Ukraine and Nestle’s global business is feeling the heat, Nestle India has its own problems to face.

Brokerages Motilal Oswal, Nirmal Bang, and Dolat Capital are not very positive on the stock. Although they have upgraded their target price for the stock by nearly 5.6% on average, they maintain a ‘Neutral’ stance. Motilal Oswal thinks that since Nestle’s ad-to-spends ratio is declining it will affect its EBITDA margins. As a percentage of net sales, it fell 60 bps YoY to 5.5%. With pressures rising on gross margins because of the rise in raw material costs, EBITDA margins are likely to take a hit. Nirmal Bang and Dolat Capital are of the same opinion. According to a report from IDBI Capital, Nestle’s price hikes were only 1-2% compared to 15% taken by Britannia. Analysts believe that inflationary pressures might hit Nestle sooner, if not later.

Even with the downsides, analysts expect with an increase in the number of product launches and lockdown restrictions easing, revenues are likely to go up by 11% in FY23.

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