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.
