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1. Ashok Leyland: Axis Direct retains its ‘Buy’ rating on this truck maker’s stock but reduces its target price to Rs 160. This indicates an upside of 28.5%. The company reported subdued performance that was below Axis Direct’s estimates. “This was primarily on account of a steep rise in raw material costs, a lower-than-expected increase in average selling price, and higher expenses,” says analyst Darshan Gangar. The net profit for Q3FY22  stood at Rs 5.8 crore against Axis’s estimates of Rs 37 crore and net revenue stood at Rs 5,535 crore as against Axis Direct’s estimate of Rs 5,697 crore. Yet the brokerage remains positive on the automobile company due to a rise in replacement demand, and the government’s thrust on infrastructure and scrappage policy for older vehicles and trucks. Additionally, the analyst at Axis Direct believes that bus demand will increase as travel restrictions ease off from Q4FY22 onwards and hence retains the ‘Buy’ rating.

2. Eicher Motors: Motilal Oswal maintains ‘Buy’ on the owner of the Royal Enfield brand with a target price of Rs 3,050, indicating an upside of 12.84%. The company’s Q3FY22 net profit fell 14% YoY to Rs 420 crore while revenue grew 2% YoY to Rs 2,880 crore. For 9MFY22, net profit grew 30% to Rs 1,060.1 crore and revenues 23% YoY to Rs 7,104.6 crore, respectively, in 9MFY22. The fall in net profit was due to lower realisations but that’s not a long-term problem. “Focus on exports and revenue from accessories is helping Royal Enfield improve its realisation,” say analysts Jinesh Gandhi, Vipul Agrawal, and Aniket Desai. The company added two more suppliers of semiconductors to deal with the shortage, which will help increase the supply. Additionally, “the demand remains good, with a healthy order book,” they dd. Royal Enfield (RE) exports rose by 57%. The brokerage believes with the recently launched classic 350, and upcoming products will expand markets and drive the next phase of growth for RE.

3. Greenply Industries: Bob Capital gives a ‘Buy’ rating to this plywood maker’s stock, with a target price of Rs 260 (indicating an upside of 39%). The company’s Q3FY22 revenues grew 24% to Rs 420 crore. The company hiked prices by 8% in Q3 to mitigate the rise in input cost and also plans to foray into medium density fibreboard (MDF) manufacturing, setting up an 800 cubic metres per day capacity at a cost of Rs 550 crore. This has an estimated revenue potential of Rs 650 crore at peak utilisation. “This will be the first MDF facility in Western India, giving the company a freight advantage over peers when catering to demand in the region,” says analyst Ruchitaa Maheshwari. “With this foray, Greenply will be able to broaden its wood panel portfolio and deepen its presence in a growing market.” She “expect(s) strong plywood recovery” due to considerable balance sheet strengthening post-Covid and strong recovery in the secondary real estate market and hence stays positive on the stock.

4. Hero MotoCorp: Prabhudas Lilladher gives this two-wheeler maker’s stock a ‘Buy’ rating with a target price of Rs 3,221, an upside of 17.9%. “Hero’s Q3FY22 EBITDA margin at 12.2% surprised positively and came ahead of our estimates (of 11.8%),” say analysts Varun Baxi and Mansi Lall. This was due to multiple price hikes over the year, a focus on a cost savings program, and higher spares revenue (up 15% YoY). The average realisations stood at Rs 61,000, improved 15% YoY. The analysts believe that in FY23, the company will have a strong rebound in volumes on the back of Covid-19 third wave in India phasing out, the opening of colleges, etc., and commodity prices now peaking out. Additionally, exports during January stood at 2,39,000 units (up 80%). The brokerage stays positive on the company due to increased savings that the company achieved through cost savings program, and success in electric vehicles.

5. KNR Constructions: ICICI Securities maintains a ‘Buy’ rating on this infrastructure development company with a target price of Rs 360 (an upside of 12.9%). According to analysts Bhupendra Tiwary and Lokesh Kashikar, KNR Constructions reported a decent set of numbers during Q3FY22. The company’s net profit stood at  100.8 crore, up 29.9% YoY and standalone revenue improved 11.7% YoY to Rs 766.3 crore, led by a strong order book position and pick-up in execution. This, the analysts believe, will further translate into a 17.7% CAGR over FY21-24. The company is aiming to bag Rs 2,000-3,000 crore worth of orders in the rest of FY22. ICICI Securities believes that the company will surpass current revenue levels in FY23 and operating margins will remain elevated at 18-19%. According to the analysts, KNR Constructions is likely to be one of the prime beneficiaries of the roads and water segment. 

• Tata Chemicals: This chemicals company posted stellar Q3FY22results as its net profit rose 69% YoY to Rs 340 crore due a rise in product prices and lower taxes. Revenues grew 21% YoY to Rs 3,141.6 crore led by growth across all geographies driven by both volumes and realisation growth due to revival in demand and re-opening of businesses across all sectors. The demand momentum looks set to continue. However, the input supply-side environment, especially energy costs remain high compared to historical levels. Supply chain challenges continue to be seen in the market. Globally, demand for soda ash (basic chemical segment) picked up significantly which helped in the revenue growth during the quarter. Basic chemicals contribute 75% to the company’s revenue, and special chemicals the rest. The basic chemical segment grew 23.2% YoY to Rs 2,447.80 crore, whereas the revenue from special chemical segment grew 9.7% YoY to Rs 678.55 crore. The rise in demand for soda ash resulted ina tight demand-supply situation, leading to higher spot prices which helped Tata Chemicals’ quarterly performance. Analysts atNirmal Bang maintain a ‘Buy’ rating on Tata Chemicals, having a positive outlook for the company. According to Nirmal Bang’s industry scenario analysis, soda ash will enjoy a cyclical upswing in margins for at least 2 years leading to higher pricing. On the other hand,  Motilal Oswal maintains a ‘hold’ rating as even though the company did well in Q3FY22, the brokerage believes that rising input costs are likely to negatively affect the margins.

• Metropolis Healthcare: This diagnostics company’s stock slumped 17.4% till Thursday after the company posted weak Q3FY22 results, missing the Trendlyne Forecaster’s net profit  and revenue estimates. Profit fell 29.7% YoY to Rs 41.2 crore despite a 6.2% increase in revenue to Rs 295.6 crore. EBITDA margin dipped 550 bps YoY to 26.5% mainly because of a fall in margin across its testing both Covid and non-Covid segments. While the company’s peers registered robust non-Covid revenue growth in the range of 20-25% YoY, Metropolis Healthcare’s non-Covid revenue rose marginally by 7% to Rs 243.7 crore. This is because of a sharp drop in volumes from its government contract. Lower EBITDA margins of testing services of Hitech Diagnostics labs, which Metropolis Healthcare acquired last year, pulled down the overall profit margins. The revenues can come under additional pressure with large healthcare service providers expanding aggressively into Integrated digitized healthcare services. Edelweiss continues to remain positive on the company despite its lacklustre performance. The brokerage expects the non-Covid revenue to increase supported by the government contracts and the EBITDA margins to get back to pre-covid levels with the consolidation of Hitech labs.

• Mahindra & Mahindra: Amid a weak quarter for the auto sector, this car and farm equipment maker saw its Q3 net profits jump 57% YoY to Rs 1,987 crore. Part of the rise in profit was because the company accounted for an exceptional income of Rs 205.1 crore on selling stake in its logistics joint venture Porter. So, what was brewing in its core segments?Although M&M’s auto and farm divisions’ Q3 revenue grew 10% YoY to Rs 16,928 crore, operating profit fell 29% YoY to Rs 1,287 crore. Higher commodity price inflation and semiconductor shortage affected M&M as well. The core topline growth was driven by the auto segment which saw revenues rise 16% to Rs 9,958 crore led by strong demand for XUVs, Thar and Bolero. However, the farm segment witnessed dismal sales growth as its tractor volumes fell 9% YoY to 91,769 units. Another trend highlighted in M&M’s earnings call was the spike in farm input costs by 25% while final output prices witnessed a rise of only 10% YoY. This led to lower purchasing power amongst the farmers as they were hardly left with any money in their hands. M&M has subsequently reduced its FY22 growth guidance for the farm equipment segment. While chip shortages are easing out in Q4, it will be interesting to see if this helps the auto segment give a boost to the company’s overall profitability.

• Berger Paints: This paint maker’s stock is on an upswing over the past week, despite the larger paint industry being marred by fears of a rise in input costs due to the increase in crude oil prices. While Berger Paints’ Q3FY22 revenues rose 20.4% YoY to Rs 2,550 crore, its net profit fell 8% YoY to Rs 250 crore due to raw material price inflation of 28-29%. However, the decorative segment saw relatively lower raw material price inflation.. The decorative segment led the growth in revenue with a growth of 12% YoY, and as the company was able to pass on price hikes to its customers. Metros and tier-1 cities were key growth drivers, with increasing demand in this segment. Industrials continue to suffer due to falling demand and high input costs, especially in auto. This is probably why Chola Wealth Direct has a positive outlook on the company, despite its cost troubles in Q3FY22. To meet this growing demand, the company is setting up a new plant in Lucknow. The capex for the plant is Rs 800 crore and is expected to be operational by mid-2022, well before the official deadline of January 2023.

• Oil And Natural Gas Company: This oil and gas explorer’s stock rallied 5% on Monday as oil prices hit a seven-year high. The stock also hit a 52-week high of Rs 176.35 as crude was on the boil due to geopolitical tensions between Russia and Ukraine. The company’s Q3FY22 performance also helped. Its net profit zoomed 7X YoY to Rs 8,763 crore in Q3FY22 and revenues surged 1.6X YoY to Rs 28,742.9 crore. The rise in revenue comes in because of the realisation of crude oil at USD 75.4 per barrel and gas sales at 4.3 billion cubic metres. The thing to note here is that revenues and profit rose despite a fall in production. In this context, the management is infusing capex of Rs 30,000 crore to increase production of crude oil and gas to 60 metric million tonnes for FY 23-24. Total oil production is at 5.5 million metric tons down 3.2% YoY, while total gas production at 5.5 billion cubic metres, down by 4.2% YoY in Q3FY22. Motilal Oswal’s report suggests that ONGC’s gas production is likely to clock 7% CAGR growth over FY22-24. Meanwhile, HDFC Securities is positive on the company’s overall performance and believes that the capex guidance of the company will ramp up production. Both these brokerages have a ‘Buy’ rating on the stock.However, ICICI Securities remains concerned over lower production levels. Right now, the brokerage believes that if high crude oil prices sustain, the company may have higher earnings, but the sustainability of high crude prices is suspect. For now, the brokerage has downgraded its rating to ‘Hold’ from ‘Buy’.

At the end of FY21,Life Insurance Corporation of India or LIC held a 66.2% market share. Although it still dominates the life insurance market, its market share at the end of January 2022 is down to  61.2%. The company is losing market share to private players likeSBI Life Insurance,HDFC Life Insurance,ICICI Prudential Life Insurance, among others.

LIC sells individual insurance products and group insurance products. The Insurance Regulatory Development Authority of India, or IRDAI data shows LIC is ceding new business premium (NBP) market share to private players. This is especially true for individual single premium and group non-single premium products (NBP is the premiums on new insurance policies sold by an insurer, while gross written premium is the total premium including renewals on policies).

LIC’s total NBP for individual single premium products for the ten months ended January 31, 2022 (10MFY22) was Rs 18,598 crore compared to Rs 28,822 crore in FY21. For group non-single premium, total NBP for 10MFY22 was Rs 2,116 crore compared to Rs 5,116 crore in FY21.

LIC needs to earn more than 3X NBP in February and the coming two months just to match up to FY21 numbers. The slowness in NBP growth is reflected in the loss of market share. The market share for the individual single premium segment fell to 58.6% in January 2022 from 67.9% in March 2021. For group non-single premium, the market share was down to 87.9% from 93.3% in March 2021.

Private life insurance peerICICI Prudential Life Insurance gained market share in the individual single premium segment reaching 8.4% in January 2022 compared to 6.3% in FY21.SBI Life has a 10% market share at the end of January 2022. 

It will be interesting to see how investors welcome this company’s IPO considering that it is rapidly losing market share.

1. Balaji Amines: Edelweiss maintains a ‘Buy’ rating on this chemicals company and increases its target price to Rs 4,150. This indicates an upside of 42.9%. The company posted strong revenue growth of 44.1% YoY to Rs 565 crore and net profit growth of 19% YoY to Rs 90 crore in Q3FY22. The company’s performance is driven by higher realizations and robust performance by the subsidiary Balaji Specialty Chemicals. According to analyst Anshul Verdia, “Bottlenecks in the availability of key raw material ethylene oxide are easing off and may result in volume growth in the upcoming quarters.” Edelweiss remains positive about the chemicals company due to an increase in contribution from higher-margin products following removal of bottlenecks in its plants, commercialisation of dimethyl carbonate, and propylene glycol capacity by Q1FY23, and strong demand for products leading to improvement in utilization and realizations. Verdia also anticipates more capex announcements in the upcoming quarters.  

2. TVS Motors: Axis Direct maintains a ‘Buy’ rating on this automobile company and increases its target price to Rs 720 with an upside of 9.8%. “TVS Motors posted a robust set of numbers in Q3FY22 with the performance ahead of our expectations, driven by improved product mix leading to strong ASP growth and margin beat”, says analyst Darshan Gangar.  The company’s Q3FY22 net profit grew 8.5% YoY to Rs 288 crore (25% higher than Axis Direct’s profit estimates) and net sales increased 5.8% YoY to Rs 5,760 crore (5% higher than Axis Direct’s estimates). The company is also witnessing strong sequential recovery across its portfolio in domestic as well as international markets. Considering the better business visibility, new product launches, and healthy demand and exports, Gangar expects the company's volumes to grow by 9.5% CAGR over FY 21-24 and expect robust revenue and earnings CAGR of 16% and 36% over FY 21-24.

3. Aditya Birla Capital: HDFC Securities gives this financial services company a ‘Buy’ rating with a target price of Rs 157, indicating an upside of 38.3%. According to analysts Krishnan ASV, Deepak Shinde, and Sahej Mittal, the company is steadily repositioning its lending business mix towards retail, small and mid-size enterprise loans and this is reflected in improved franchise earnings. The insurance businesses are steadily building their profitability trajectory. The life insurance business, despite soft growth, witnessed a better net value of new business margins at 11.2% while the health insurance business remains on track to break even over the next couple of quarters. Along with Aditya Birla Capital, HDFC Securities is also bullish on the company’s asset management armAditya Birla Sun Life AMC with a target price of Rs 720.

4. Affle (India): ICICI Securities gives this advertisement technology company a ‘Buy’ rating with a target price of Rs 1,500, indicating an upside of 27.3%. The company posted strong results for Q3FY22. The net profits increased 86.35% YoY and fell 20.9% QoQ to Rs 12.5 crore and revenue increased  125.5% YoY and 23.6% QoQ to Rs 339 crore. The EBITDA margin grew by 100 bps QoQ to 19.9%. The analyst Sameer Pardikar expects the company to add 600 croreconnected consumer devices globally by FY25. There is also a significant expectation of an increase in India’s digital user base from 52.5 crore in FY20 to 90.2 crore by FY25, at 11.4% CAGR. In the same period, mobile ad spending is expected to rise by 32.4% CAGR. “We expect 48% revenue growth in FY 21-24 (organic & inorganic combined),” says analyst Sameer Pardikar. 

5. Union Bank of India: Motilal Oswal gives this bank a ‘Buy’ call with a target price of Rs 65 and an upside of 46.9%. Analysts Nitin Aggarwal and Yash Agarwal say “reported healthy earnings, supported by a pickup in loan growth and controlled provisions, as fresh slippage / special mention accounts moderated further.” The bank reported 49% YoY growth in profit to Rs 1,090 crore, supported by 10% YoY growth in core revenues. On the business front, loan books grew 6% QoQ to Rs 6.2 lakh crore. On the asset quality front, fresh slippage stood at Rs 3,410 crore due to slippage in the corporate portfolio. The total stressed book declined to 6% in December 2021 v/s 16% at the start of Covid-19. The analysts expect loans and deposits to grow in the 6–8% range. The company’s management expects loan growth to be likely at 11–12% for FY23. The analysts expect the improving asset quality will reduce net non-performing assets by 2.2% in FY23. The brokerage expects the bank’s return on assets and return of equity to be at 0.8% and 14%, respectively by FY24.