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The Baseline
17 Jan 2022
Five analyst stock picks this week
  1. Steel Authority of India (SAIL): Axis Securities initiates coverage on SAIL with a ‘Buy’ recommendation and a target price of Rs 150, implying an upside of 38.95%. SAIL’s modernisation and expansion plan is near completion and the company’s total saleable steel capacity will increase to 20.2 million tonnes per annum post-expansion, according to analyst Aditya Welekar. “We expect steel margins to come under pressure in H2FY22 as lower steel prices will coincide with higher coal price,” Welekar writes. But margins may recover post that as coal prices ease out and steel prices find support with lower demand in China getting balanced by lower production in CY22. Driven by higher profits, Axis Securities expects SAIL to maintain its dividend payout ratio of 28% from FY22 to FY24, which translates into a high dividend yield of 6-8% at current market price. Axis Securities values the company at 4.0x FY24 EBITDA.
  1. Infosys: HDFC Securities maintains a ‘Buy’ rating on Infosys but increased its target price to Rs 2,220 from Rs 1,995 with an upside of 14.10%. Infosys reported robust revenue growth of 7% QoQ and 21.5% YoY in Q3FY22.  Amit Chandra writes, “Its (TCS’) growth trajectory will remain robust supported by a strong deal pipeline and wins, broad-based momentum across verticals, and operational pivots of offshoring and utilization.” These factors will mitigate the near-term impact of higher subcontracting. Chandra remains positive on Infosys and expects 17% EPS CAGR over FY21 to FY24. Chandra is factoring in a YoY dollar revenue growth of 20.1% in FY22, 15.4% in FY23, and 10.5% in FY24. For Q4FY22, the analyst expects 4.1% QoQ growth in dollar revenues.
  1. Tata Consultancy Services (TCS): Motilal Oswal’s analysts Mukul Garg and Raj Bhanushali have a ‘Buy’ rating on TCS with a target price of Rs 4,250, implying an upside of 6.65%. TCS topline grew 16.3% YoY to Rs 48,885 crore in Q3FY22 in a seasonally weaker quarter. The analysts expect this performance to alleviate concerns about its growth potential and the likely drag from the growing share of smaller deals in the market. They also feel IT Services has entered into a technology upcycle, with cloud migration and digital transformation-led deals coming into the market. “Given TCS’ size, capabilities, and portfolio stretch, it is rightly positioned to leverage the anticipated industry growth,” Garg and Bhanushali write. The duo stay positive on TCS factoring in revenue growth of 15% YoY in  FY23.
  1. Gujarat Gas: Prabhudas Lilladhar’s analyst Avishek Datta has a ‘Buy’ rating on Gujarat Gas with a target price of Rs 764,  indicating an upside of nearly 9.42%. “We expect Gujarat Gas’s margins to bottom in Q3 at Rs 2.5 per standard cubic metre and improve in Q4, due to pricing intervention,” Datta writes. Domestic ceramic demand in the residential segment picked up post-pandemic led by home improvements and work-from-home trends. Indian ceramic capacity expanded to 1,320 million square metres in CY20, up 8%YoY, and will likely expand more. Further, a gas price increase of 10-15% is also expected shortly, due to continued high spot prices and any improvement in the geopolitical environment in Ukraine will improve Gujarat Gas profitability. Datta expects a 15.8% CAGR volume growth over FY 23-24.
  1. CRISIL: Monarch Networth Capital gives CRISIL a ‘Buy’ rating with a target price of Rs 3,700,  indicating an upside of 24.92%. “Buoyancy in the capital market will aid strong traction in the domestic research revenues for CRISIL,” Monarch Networth says.  “This, in addition to a seasonally strong quarter for the global benchmarking business, will aid superior earnings growth in the research division.” The brokerage sees traction across segments for the company. CRISIL’s strong parentage, superior margin profile, healthy return ratios - Return on Equity (ROE) at 30% and dividend payout ratio provides comfort. Monarch Networth factors in 15% CAGR growth in CRISIL’s research revenue and a CAGR of 8.5% in its revenue estimate. Monarch Networth also estimates 13% CAGR growth in revenue and 15% growth in earnings over CY 20-23 while expecting ROE to be at 30-31%.
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The Baseline
17 Jan 2022
Analysts predict winners and losers of Q3, cement sector sees slowing government spends

The Q3 earnings season is in full swing, and obviously that is all everyone can talk about (or at least that’s what we want to talk about!) This week’s newsletter looks at analyst consensus estimates to see what could happen in Q3 results. Our Trendlyne Forecaster is here to help.

In this week’s Analyticks:

  • The cement sector’s foggy winter
  • Upcoming Q3 gainers and losers according to Forecaster’s consensus estimates
  • Screener: Stocks gaining ahead of earnings

Let’s get into it.


Cement sector’s near-term outlook softens as government spending slows

Although top cement companies gave a positive growth outlook for H2FY22, analyst estimates for Q3 earnings results suggest a different story altogether. Interestingly, the average stock returns from the top seven listed cement companies are a meagre 0.1% for the last three months. Brokerages are positive on the cement sector from a medium-term perspective, but investor  interest seems to be waning.

After posting dismal results in Q2FY22, cement companies like Dalmia Bharat and JK Cement anticipated higher demand in the next two quarters. This expectation was on the back of higher infrastructure spending by the central government. However, the actual capital expenditure numbers published by the Controller General of Accounts are quite lacklustre. 

The Centre’s capex fell 24% YoY to Rs 23,919 crore in October 2021 and 54% YoY to Rs 20,360 crore in November 2021. If we talk about the year-to-date numbers (April-November 2021), the government managed to spend only 49% of its budgeted capex estimate of Rs 5.54 lakh crore. Accordingly, top brokerages such as ICICI Securities and Axis Securities expect sales volumes of top cement players to fall by an average of 2.4% in Q3FY22. 

Notably, analysts are not anticipating a major fall in Q3 sales volumes. According to their respective channel checks, volumes did recover in December 2021 as the monsoon season finally receded from India. 

Another factor is that the price hikes by cement players on cement bags in October 2021 got completely reversed in the following months. According to channel checks by ICICI Securities, the eastern and southern regions of India witnessed the highest price corrections in Q3 due to a fall in demand on delayed withdrawal of the south-west monsoon and a transporters strike. However, the saving grace here is that the pan-India prices are still up by close to 5% YoY at the end of Q3FY22. 

With a marginal fall in quarterly sales volumes and a sub-par rise in realisations, revenues of cement players are likely to stay flat in Q3FY22 on a YoY basis. 

The flat trend in quarterly revenues does not bode well for cement players especially when input costs are likely to see a spike on an YoY basis. Analysts expect the cost/tonne metric to rise 14% YoY for the top 13 cement companies led by a jump in fuel prices. As a result, EBITDA/tonne for companies is set to fall nearly 15% YoY on an average. Ramco Cements EBITDA/tonne is likely to fall  30% YoY to Rs 1,067 as the company derives roughly 75% of its sales from the southern region. 

Prabhudas Lilladher sees a 520 bps fall in EBITDA margins of market leader UltraTech Cement. A possible reason could be a large exposure (36% share in sales) to the eastern and southern regions. Although Dalmia Bharat derives 60% of its topline from the eastern region, brokerages have a divergent view on its likely operating performance. Axis Securities expects a 130 bps erosion in its EBITDA margins while HDFC Securities sees a 440 bps fall in its margins. 

As a consequence of flat revenues and lower margins led by high input costs, net profit of the top players is set to decline in double digits for Q3FY22. Interestingly, ACC is set to report a 17% YoY rise in its Q3 net profits based on the bullish view of HDFC Securities.

While investors are in for yet another disappointing quarter, power and fuel costs for cement players are likely to normalize in Q4FY22. International coal and pet coke prices fell from their all-time highs in November first week. This provides some breather to companies. According to IIFL Securities, cement dealers are hopeful of a demand revival in January 2022 as the peak construction season kicks in. However, the rapid spread of omicron may put brakes on the Centre’s capex plans and may snap the chances of a meaningful recovery in cement demand. All in all, the outlook for the cement sector in H2FY22 looks quite blurry this winter.


Forecaster Consensus: Slowing sales may dent Maruti’s Q3FY22 profit, Dr Reddy’s may shine

The big boys—Tata Consultancy Services,Infosys, and Wipro—were the first ones among the Nifty 50 to announce their Q3FY22 earnings on Wednesday. Wipro’s earnings per share for Q3FY22 was largely flat at Rs 5.43 per share, but missed Trendlyne’s Forecaster’s average consensus estimate (Rs 5.40 per share). Wage hikes and high attrition dented the company’s margins which came in at 17.6%.

Although TCS’ Q3FY22 EPS of Rs 26.4 per share was marginally below the average consensus estimate (Rs 26.9 per share), the company’s stellar growth in revenues helped IT bellwether cross $25 billion in revenues in 2021.

The standout performer till now is Infosys which posted stellar earnings with an EPS of Rs 13.9 per share, which is above the consensus estimate of Rs 13.4 per share. The company’s Q3 performance led the management to upgrade its revenue guidance to 19.5%-20% in FY22, up from 16.5%-17.5%.

Now that the earnings season is in full flow, we decided to look at Trendlyne Forecaster’s average of consensus estimates to find out the top five companies that analysts expect to post good and bad earnings in Q3FY22.

Dr Reddy’s Q3FY22 profits may get a base effect boost

In Q3FY21, Dr Reddy’s Laboratories suffered an impairment loss on inventory and other intangible assets to the tune of nearly Rs 600 crore led to a fall in its net profit. This resulted in its standalone EPS coming in at around Rs 1.70 per share. This low base, in case there is no recurring impairment charge, may see the company post a rise in its earnings in Q3FY22.

The average consensus estimate expects Bajaj Finance to post stellar earnings in Q3FY22. According to Trendlyne Forecaster’s estimate, the company’s EPS may more than double during the quarter. This may happen on the back of a 26.3% rise in the company’s assets under management to Rs 1,81,300 crore in Q3.

Maruti’s slowing wholesale dispatches and retail sales expected to bite in Q3FY22

The auto industry is reeling under supply-chain issues, and high fuel costs aren’t helping the sector’s cause either. Market leader in the Indian passenger vehicle market—Maruti Suzuki had to resort to multiple production cuts as it curbed dispatches to dealers during Q3FY22. The company’s wholesale dispatches to dealers and exports fell 13.2% YoY to 4,30,668 units during the quarter. This is despite the company’s retail sales picking up in Q3 from October onwards after falling for three consecutive months. This is bound to dent the company’s EPS in Q3.

Similarly, Hero MotoCorp and Bajaj Auto may also see a dent in their Q3 earnings. It’s not surprising that the top five companies that may see the highest fall in EPS (according to Trendlyne Forecaster’s estimates) are from the automotive industry. The one-two punch of poor rural demand and supply chain issues is bearing heavily on the sector’s prospects.


Screener: Stocks swinging ahead of their Q3FY22 results

With another earnings season underway, investors will be hoping the hype priced into stocks pays off. The third wave has not yet played spoilsport, with the benchmark Nifty 50 hovering above 18,000 levels. The earnings announcements will be the next trigger for many companies, but some stocks are trading higher ahead of results being announced.

This screener shows there are 53 companies among the Nifty 500 as of Wednesday that saw a weekly rise in their share price ahead of their results being announced. Some companies like Asian Paints and Tanla Platforms touched their 52-week high ahead of their Q3FY22 results. This suggests that investors hoping for a bite of the cherry before the stock potentially surges post results. This screener also shows the 1-year high price along with its current market price.

Financial services companies like ICICI Bank, HDFC Bank, Bajaj Finance, Cholamandalam Investment & Finance Company, Housing Development Finance Corporation, and Axis Bank are gaining momentum. HDFC Bank and Bajaj Finance recently announced their operational update for Q3FY22 which showed decent growth in business.

Other companies’ shares that are rising are from the paints, specialty chemicals, IT services, and pharmaceuticals industries, including Kansai Nerolac, HCL Technologies, GlaxoSmithKline Pharmaceuticals, Atul and BASF India. IT stocks have been on a high since the second week of December 2021. A news report suggests that IT companies generally have a slow season in Q3FY22, but this financial year could be an exception as Covid related lockdowns and restrictions have led to a rise in demand for digital transformation spending for even mid-cap companies.

You can find more expert screeners here.

Market closes higher, Nazara Technologies' arm acquires complete stake in Planet Superheroes

Trendlyne Analysis

Nifty 50 closed at 18,255.75 (-2.1, -0.0%) , BSE Sensex closed at 61,223.03 (-12.3, -0.0%) while the broader Nifty 500 closed at 15,730.40 (9.4, 0.1%)

Market breadth is in the green. Of the 1,840 stocks traded today, 1,078 showed gains, and 733 showed losses.

  • Trident, Supreme Industries, Zydus Wellness, and Endurance Technologies are trading with higher volumes as compared to Thursday.

  • GTPL Hathway's Q3FY22 net profit rises 21% YoY to Rs 54.65 crore whereas revenues fall by 7.42% YoY to Rs 613 crore. The profit growth is led by 35% YoY rise in internet service segment's revenues and 30% YoY growth in active broadband subscribers

  • Nazara Technologies rises as its arm NODWIN Gaming acquires 100% stake in licensed merchandising D2C company Planet Superheroes at a reported Rs 4.9 crore

  • HDFC Securities maintains a 'BUY' on Infosys and sees a target price upside of 19%. The company beat the brokerage's QoQ earnings growth expectation by 260 bps backed by robust deal wins. Infosys gave a strong growth outlook and upgraded its FY22 revenue growth guidance to 19.5-20% from 16.5-17.5% earlier.

  • Rossari Biotech is trading with more than eight times its weekly average trading volume. Tata Consumer Products, Lakshmi Machine Works, Sterling and Wilson Renewable Energy, and Kaveri Seed Company are trading at more than three times their weekly average trading volumes.

  • Aditya Birla Fashion and Retail acquires 51% in "Masaba", a brand by Masaba Gupta, for Rs 90 crore. The company will use the Masaba brand to strengthen its foray into fashion for young and digital native consumers. This acquisition will also help Aditya Birla Fashion to enter the branded beauty and personal care segment.

  • Aurobindo Pharma falls after its bulk drug manufacturing plant in Hyderabad receives a warning letter from the US FDA owing to violation of certain manufacturing practices. The company will not be able to market this plant’s products in the US until it resolves the concerns of the regulator.

  • Sanofi India’s Managing Director Rajaram Narayan resigns from the company on January 13, 2022 to pursue an opportunity outside of Sanofi. His resignation is effective from April 10, 2022.

  • Tata Metaliks' Q3FY22 net profit falls 52.5% YoY to Rs 35.66 crore and revenues rise by 31.2% YoY to Rs 693.12 crore. The profits fall on poor performance of the pig iron segment and a sharp spike in raw material costs.

  • Mindtree’s Q3FY22 net profit rises 9.7% QoQ to Rs 437.5 crore and revenues by 6.3% to Rs 2,750 crore. The management attributes the revenue momentum to rising demand, extensive customer mining and providing end-to-end digital transformation services to its clients.

Riding High:

Largecap and midcap gainers today include Bharat Electronics Ltd. (220.10, 5.03%), Tata Consumer Products Ltd. (762.50, 4.42%) and Indian Railway Catering & Tourism Corporation Ltd. (902.70, 3.98%).

Downers:

Largecap and midcap losers today include Motherson Sumi Systems Ltd. (185.55, -20.98%), MindTree Ltd. (4,547.95, -4.13%) and Au Small Finance Bank Ltd. (1,262.40, -3.52%).

Volume Shockers

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

Top high volume gainers on BSE included Triveni Turbine Ltd. (202.00, 13.01%), Jamna Auto Industries Ltd. (120.85, 7.85%) and HFCL Ltd. (91.85, 7.62%).

Top high volume losers on BSE were Motherson Sumi Systems Ltd. (185.55, -20.98%), MindTree Ltd. (4,547.95, -4.13%) and Aurobindo Pharma Ltd. (695.15, -3.13%).

Rossari Biotech Ltd. (1,343.20, 6.17%) was trading at 10.1 times of weekly average. Timken India Ltd. (2,073.65, -0.42%) and Aegis Logistics Ltd. (227.25, 5.80%) were trading with volumes 7.2 and 5.7 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

22 stocks hit their 52-week highs, while 2 stocks hit their 52-week lows.

Stocks touching their year highs included - Chambal Fertilisers & Chemicals Ltd. (468.90, 3.85%), Deepak Fertilisers & Petrochemicals Corporation Ltd. (542.25, 6.52%) and IDFC Ltd. (64.15, -0.31%).

Stocks making new 52 weeks lows included - Gillette India Ltd. (5,207.60, -0.45%) and Dilip Buildcon Ltd. (389.65, -3.89%).

15 stocks climbed above their 200 day SMA including Rossari Biotech Ltd. (1,343.20, 6.17%) and Tata Consumer Products Ltd. (762.50, 4.42%). 8 stocks slipped below their 200 SMA including Motherson Sumi Systems Ltd. (185.55, -20.98%) and Axis Bank Ltd. (721.70, -2.57%).

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The Baseline
14 Jan 2022
Five Interesting Stocks Today
  • Tata Steel: This steel company’s stock yielded negative returns in the past three months, along with most other steel stocks This correction in steel stocks comes after a 11% fall in domestic hard-rolled coil prices ever since November, 2021. Although ICICI Securities maintains a ‘Buy’ rating on Tata Steel, it reduced its target price by 15% in December 2021.

On Tuesday, Jefferies India downgraded the steel sector, and hence Tata Steel, to ‘Sell’. Jefferies believes muted real estate demand from the Chinese market and softening steel prices will likely impact Tata Steel’s margins from H2FY22 onwards. It expects EBITDA margins to contract in FY23 as spot steel prices may fall further by 9-10%. This may lead to a 44% fall in earnings. Interestingly, Indian brokerages like Axis Direct and Prabhudas Lilladher still hold a positive view on the steel sector. They anticipate that steel prices will not fall materially in FY23 as lower demand in China might be balanced out by lower production. Only time will tell whether the commodity cycle actually turns for the worse in FY23.

  • Hinduja Global Solutions: The journey of this stock in 2022 is nothing short of a theatrical drama. It hit a 52-week high on January 4, 2022 in anticipation of a dividend declaration and bonus issue. However, on January 7, the stock plunged nearly 20% after the company announced a special dividend of Rs 150 per share and a bonus issue of 1:1. An anticlimax you would think? Well, not exactly.

The company had earlier faced investors’ ire when it extended short-term loans of Rs 340 crore to its group entities in Q4FY20. HGS’ management informed them of this development only in August 2020 when the loan was already paid off. The company got embroiled in yet another corporate governance issue as it concluded the sale of its flagship healthcare services division. The cash inflow for the company in this deal is around Rs 8,082 crore while dividend outgo is a meagre Rs 315 crore. However, investors have a much bigger concern here. They suspect that a major part of this inflow will go to the related parties. This belief is backed by the company's history and the fact that the board raised the limit for corporate loans to Rs 3,500 crore from just Rs 500 crore. Also, as the company hives off the healthcare division, its earnings could fall by nearly 30-40% taking down the stock price as well. This story is far from over as the company recently announced that it will consider a buyback proposal on January 14. Only time will tell whether this move is a pure gimmick to support stock prices or real value lies on the table for the investors.

  • Avenue Supermarts (DMart): This stock slumped during intraday trade on Wednesday because of the company’s Q3FY22 earnings being a mixed bag. The company’s consolidated net profit rose 23.4% YoY to Rs 5,526 on a  22.2% YoY rise  in revenues to Rs 9,220 crore. However, gross margins remained flat at 15.4% YoY because of lower sales of general merchandise and apparel. Brokerage Prabhudas Lilladher suggests that a deterioration in sales mix and an expected rise in expenses by 15.2% YoY might hamper margins going forward. The brokerage has a  ‘Hold’ rating on the stock as it expects store expansions and increasing share of essentials in the sales mix to drive profit growth at a 31% CAGR from  FY20-24.

On the other hand, ICICI Securities downgraded its target price for Avenue Supermarts expecting footfalls to decrease and demand for general merchandise and apparel to stall in H2FY22. ICICI Securities feels  the trend of tepid demand is likely to continue due high inflation and reduced mobility because of restrictions on movement of people due to the pandemic’s third wave in many cities the company operates in.

  • Abbott India: This stock rallied for five continuous sessions in the last week of December 2021 and ended up 5.8%, but since January 1, the stock is on a downward trajectory losing nearly 8.5% . A recent report from Axis Securities says that the company’s Q2FY22 performance has been robust and its average growth rate of 11% in October 2021 and November 2021 outpaces the Indian Pharma Market’s growth of 5.8% by 520 bps. Axisreduced its target price by 2.7% to Rs 20,000 as it believes that the stock has limited upside. However, the brokerage maintains a positive outlook on the company and has a ‘Buy’ rating on the stock. According to Axis Securities’ report, the company retains its leading position in segments like women’s health, gastroenterology, metabolic, pain management, CNS, and vaccines. Axis Securities believes that its branded business will improve the company’s profitability in H2FY22. The distinct factor for this company’s growth prospects is its strategy of going digital and providing services beyond just medicinal pills and venturing into diagnostics, medical devices, and nutrition.

Market closes flat, Equitas Small Finance Bank's advances rise 13% YoY

Trendlyne Analysis

Nifty 50 closed at 18,257.80 (45.5, 0.3%) , BSE Sensex closed at 61,235.30 (85.3, 0.1%) while the broader Nifty 500 closed at 15,721.05 (53.2, 0.3%)

Market breadth is neutral. Of the 1,848 stocks traded today, 941 were on the uptrend, and 871 went down.

  • Honeywell Automation India, AIA Engineering, Gillette India, and Nazara Technologies are trading with higher volumes as compared to Wednesday.

  • Equitas Small Finance Bank’s gross advances rise 13% YoY to Rs 19,642 crore at the end of December 2021, as demand for loans from the informal sector increase. Total deposits grew by 13% YoY to Rs 17,884 crore with retail term deposits rising 27% YoY to Rs 7,000 crore

  • Axis Direct initiates coverage on SAIL with a 'BUY' call and sees a target price upside of 44%. The rating is backed by expectation of EBITDA growth of 13.5% between FY21-24 owing to recovery in steel prices by FY23 and attractive valuations

  • Ramkrishna Forgings wins an export order from North America worth Rs 57.5 crore to supply spindles. This order will be implemented over a period of three years.

  • Metal stocks are trading in green with stocks like JSW Steel, Vedanta, Tata Steel, and Coal India rising. The broader sectoral index BSE Metal is also trading higher today.

  • TCNS Clothing Co. is trading with more than 40 times its weekly average trading volume. PNB Housing Finance, Jindal Stainless, ICICI Securities, and Karur Vysya Bank are trading at more than three times their weekly average trading volumes.

  • Wipro’s Q3FY22 net profit grows 1.3% QoQ to Rs 2,969 crore. Revenue from operations rises 3.2% QoQ to Rs 20,313.6 crore. In dollar terms, revenues from IT segment rise 2.3% QoQ to $2.64 billion. Operating margins fell 20 bps QoQ to 17.6% because of salary hikes and ESOPs given to senior management

  • Indraprastha Gas increases the prices of piped natural gas by Rs 0.50 per standard cubic metre for Delhi with effect from Wednesday. This is the second price hike after the company hiked gas prices back in October 2021

  • TCS’ Q3FY22 net profit rises 1.5% QoQ to Rs 9,769 crore while revenues increase 4.3% to Rs 48,885 crore. Cloud, cyber security, IoT and digital engineering-based services drive growth in Q3. The company announces a buyback of Rs 18,000 crore and an interim dividend of Rs 7 per share.

  • Tata Motors' arm Jaguar Land Rover's retail sales for Q3 FY22 drops 13.6% QoQ and 37.6% YoY to 80,126 units comprising of 14,407 units of Jaguar and 65,719 units of Land Rover.

  • Infosys’ Q3FY22 net profit rises 7% QoQ to Rs 5,809 crore on the back of a 7.7% increase in revenues to Rs 33,379 crore. The company’s large deal wins move up to $2.53 billion. The management believes large deal wins and rapid digital transformation have contributed to revenue growth in Q3FY22 and the trend is likely to continue.

Riding High:

Largecap and midcap gainers today include Polycab India Ltd. (2,685.15, 8.24%), Tata Steel Ltd. (1,221.15, 6.45%) and Jindal Steel & Power Ltd. (413.20, 5.84%).

Downers:

Largecap and midcap losers today include Wipro Ltd. (649.75, -6.02%), Motherson Sumi Systems Ltd. (234.80, -3.55%) and Oberoi Realty Ltd. (945.65, -2.81%).

Volume Shockers

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

Top high volume gainers on BSE included Polycab India Ltd. (2,685.15, 8.24%), TCNS Clothing Co. Ltd. (815.45, 7.54%), and Jindal Stainless Ltd. (206.15, 7.43%).

Top high volume losers on BSE were Wipro Ltd. (649.75, -6.02%), HDFC Bank Ltd. (1,528.00, -1.84%) and Supreme Industries Ltd. (2,248.20, -0.85%).

PNB Housing Finance Ltd. (508.50, 2.00%) was trading at 10.2 times of weekly average. FDC Ltd. (314.15, 5.01%) and Prince Pipes & Fittings Ltd. (700.40, 0.62%) were trading with volumes 8.5 and 7.7 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

19 stocks made 52-week highs,

Stocks touching their year highs included - Astral Ltd. (2,483.45, -0.09%), Blue Dart Express Ltd. (7,255.30, -2.10%) and Chambal Fertilisers & Chemicals Ltd. (451.50, -0.46%).

16 stocks climbed above their 200 day SMA including Tata Steel Ltd. (1,221.15, 6.45%) and Jindal Steel & Power Ltd. (413.20, 5.84%). 5 stocks slipped below their 200 SMA including Berger Paints (India) Ltd. (781.95, -0.88%) and MOIL Ltd. (171.35, -0.81%).

Market closes higher, L&T's subsidiary wins EPC contracts worth more than Rs 7,000 crore

Trendlyne Analysis

Markets closed up today. Nifty 50 closed at 18,212.35 (156.6, 0.9%) , BSE Sensex closed at 61,150.04 (533.2, 0.9%) while the broader Nifty 500 closed at 15,667.90 (137.4, 0.9%)

Market breadth is holding steady. Of the 1,848 stocks traded today, 947 showed gains, and 881 showed losses.

  • Cholamandalam Financial Holdings, Teamlease services, ABB India, and Galaxy Surfactants are trading with higher volumes as compared to Tuesday

  • HDFC Securities increases Multi Commodity Exchange of India's target price by 26% to Rs 2,150, while also upgrading its rating to ‘Buy’. The brokerages says the fall in futures average daily trading volumes (ADTV) by 6.6% QoQ in Q3FY22 will be offset by higher index and options volumes. Revenues may increase by 4% QoQ and margins may expand 51bps QoQ to 41.1% in Q3FY22

  • Larsen & Toubro's subsidiary L&T Hydrocarbon Engineering wins two offshore contracts worth more than Rs 7,000 crore on engineering, procurement and construction mode to build new facilities and their intergration with existing ones

  • Bharat Forge is falling as CLSA India downgrades the stock to ‘Sell’ from ‘Buy’ and cuts the target price by 23.3% to Rs 690. The brokerage anticipates a slowdown in export growth. The company depends on exports of its components to Class 8 trucks to the US and semiconductor shortages are impacting orders of Class 8 trucks.

  • HDFC Securities maintains a 'BUY' rating on BSE and its subsidiary CDSL. It expects BSE's profit to grow by 116% YoY led by strong traction in its cash and mutual funds segment. It further expects CDSL's profits to grow by 71% YoY led by its transaction and corporate actions segment.

  • Easy Trip Planners's board of directors approves the issue of bonus shares in the ratio of 1:1, subject to the approval from shareholders.

  • Mahindra Holidays & Resorts India is trading with more than 10 times its weekly average trading volume. Gujarat Alkalies & Chemicals, Sharda Cropchem, Prestige Estates Projects, and Varroc Engineering India are trading at more than five times their weekly average trading volumes.

  • DLF rises on the bourses as its West Delhi based luxury residential project ONE Midtown generates sales worth Rs 1,500 crore within a few days of its launch.

  • RattanIndia Enterprises' board approves Rs 350 crore investment in its wholly-owned subsidiary Cocoblu Retail to enter the e-commerce business. The company will tie-up with several big and small brands to bring them to digital channels

  • Sunil Singhania buys 46.12 lakh shares or 5.8% stake in Rupa and Company at an average price of Rs 465.5 in multiple bulk deals on Tuesday.

  • Hindustan Unilever hikes prices of soaps and detergents by 3-20% across brands like Wheel, Rin, Surf Excel, and Lifebuoy. This is the second hike in prices after November 2021 due to high input cost inflation.

  • HDFC Securities maintains a 'BUY' rating on Larsen & Toubro and Cummins as it expects high government capex to drive the order books of these capital goods companies. It further expects their revenues and earnings to rise 8.7% and 24% QoQ respectively.

  • Tata Teleservices Maharashtra's board opts for DoT’s telecom relief package of conversion of interest on adjusted gross revenue dues into equity. The net present value of the interest due amounts to Rs 850 crore. After conversion, the Indian government will hold a 9.5% stake in the company. This is subject to a mutual agreement on terms and conditions.

Riding High:

Largecap and midcap gainers today include Adani Power Ltd. (119.40, 10.00%), Vodafone Idea Ltd. (12.80, 8.47%) and Ruchi Soya Industries Ltd. (908.00, 6.35%).

Downers:

Largecap and midcap losers today include Avenue Supermarts Ltd. (4,276.10, -5.08%), Motherson Sumi Systems Ltd. (243.45, -3.18%) and Abbott India Ltd. (17,888.20, -1.55%).

Movers and Shakers

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

Top high volume gainers on BSE included Sheela Foam Ltd. (3,765.45, 14.12%), Sequent Scientific Ltd. (184.05, 12.84%) and GHCL Ltd. (425.45, 11.00%).

Top high volume losers on BSE were Avenue Supermarts Ltd. (4276.10, -5.08%), Brightcom Group Ltd. (180.55, -3.86%) and Solar Industries India Ltd. (2226.00, -2.35%).

Venky's (India) Ltd. (2,858.25, 9.55%) was trading at 15.0 times of weekly average. Gujarat Alkalies & Chemicals Ltd. (721.25, 8.43%) and Mahindra Holidays & Resorts India Ltd. (203.10, 8.12%) were trading with volumes 14.6 and 12.2 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

18 stocks hit their 52-week highs,

Stocks touching their year highs included - Blue Dart Express Ltd. (7,411.05, 5.70%), Chambal Fertilisers & Chemicals Ltd. (453.60, 6.50%) and Deepak Fertilisers & Petrochemicals Corporation Ltd. (486.45, 7.24%).

10 stocks climbed above their 200 day SMA including Venky's (India) Ltd. (2,858.25, 9.55%) and Mahindra Holidays & Resorts India Ltd. (203.10, 8.12%). 5 stocks slipped below their 200 SMA including Mahindra CIE Automotive Ltd. (225.80, -2.17%) and Abbott India Ltd. (17,888.20, -1.55%).

Market closes higher, Aurobindo Pharma plans to sell 30-35% stake in its injectables business

Trendlyne Analysis

Nifty 50 closed at 18,055.75 (52.5, 0.3%) , BSE Sensex closed at 60,616.89 (221.3, 0.4%) while the broader Nifty 500 closed at 15,530.55 (35, 0.2%)

Market breadth is in the red. Of the 1,858 stocks traded today, 849 showed gains, and 986 showed losses.

  • Cholamandalam Financial Holdings, Teamlease services, ABB India, and Galaxy Surfactants are trading with higher volumes as compared to Monday.

  • Adani Green Energy’s total operational capacity increases by 84% YoY to 5,410 mega watt (MW) in Q3FY22. Solar energy portfolio’s capacity rises 96% YoY to 4,763 MW, while wind portfolio's by 102% YoY to 497 MW. The sale of energy rises 97% YoY at 2,504 million units in Q3FY22.

  • Aurobindo Pharma is falling as reports suggest the company is planning to sell around 30-35% stake in its injectable business for Rs 4,500-5,250 crore to unlock value in its core business.

  • HDFC Life Insurance’s new business premium for December 2021 rises 55.6% YoY to Rs 2,973.74 crore.

  • Madras High Court dismisses SpiceJet's appeal against admission of its winding up on Credit Suisse AG's petition. A petition was filed by Credit Suisse AG alleging inability by the airline to pay its debt owed to Credit Suisse.

  • Fortis Healthcare is falling as US-based Emqore Envesecure Private Capital Trust files a suit against the company and various others for alleged "copyright infringement and tortious interference with contracts". Emqore is seeking damages from Fortis of over $6.5 billion.

  • Nilkamal is trading with more than 12 times its weekly average trading volume. BASF India, RHI Magnesita India, Just Dial, and NLC India are trading at more than four times their weekly average trading volumes.

  • Steel stocks like Tata Steel and JSW Steel fall on the bourses as Jefferies downgrades the steel sector due to a correction in steel prices and weak demand from China. The brokerage further expects Tata Steel and JSW Steel's earnings for to fall 44% and 23%, respectively, in FY23.

  • One97 Communications’ (Paytm) gross merchandise value rises 123% YoY to Rs 2.5 lakh crore (up 27.8% QoQ) in Q3FY22. Monthly transacting users rises 37% YoY to 6.4 crore users. The numbers of loans disbursed rise 401% to 44 lakh at the end of the quarter, with the total value of loans disbursed rising more than 4.5X to Rs 2,180 crore.

  • JSW Steel's consolidated steel output for Q3FY22 rises 28% YoY rise to 5.35 million tonnes. Domestic Production rises 24% YoY to 5.19 million tonnes. Combined volumes for nine months ended December 31, 2021 stands at 15.5 million tonnes, up 39% YoY

  • KBC Asset Management sells 32.55 lakh shares or 0.53% stake of NCC at a price of Rs 73.52 in a bulk deal on Monday. This deal effectively reduces its stake in the company to 2.47% from 3%.

  • Vodafone Idea’s board avails the option of telecom relief package by DoT and approves conversion of the full amount of interest, related to spectrum auction installments, and Adjusted Gross Revenue (AGR) dues into equity. The Net Present Value (NPV) of the interest on spectrum auction and AGR is expected to be about Rs 16,000 crore. After conversion the Indian government will hold a 35.8% stake, the promoter shareholders of Vodafone Group will hold around 25.8%, and Aditya Birla Group around 17.8%.

Riding High:

Largecap and midcap gainers today include Adani Green Energy Ltd. (1567.95, 8.97%), Au Small Finance Bank Ltd. (1298.80, 5.22%) and Adani Enterprises Ltd. (1843.90, 5.21%).

Downers:

Largecap and midcap losers today include Vodafone Idea Ltd. (11.80, -20.54%), GMR Infrastructure Ltd. (44.85, -7.43%) and Jindal Steel & Power Ltd. (383.95, -5.03%).

Volume Shockers

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

Top high volume gainers on BSE included Greaves Cotton Ltd. (238.05, 13.68%), Prism Johnson Ltd. (150.70, 10.93%) and Adani Green Energy Ltd. (1567.95, 8.97%).

Top high volume loser on BSE was Vodafone Idea Ltd. (11.80, -20.54%).

Nilkamal Ltd. (2582.30, 3.86%) was trading at 15.5 times of weekly average. Just Dial Ltd. (862.45, 6.36%) and BASF India Ltd. (3178.70, 7.36%) were trading with volumes 11.9 and 11.4 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

19 stocks made 52-week highs,

Stocks touching their year highs included - Astral Ltd. (2452.65, -0.05%), Greaves Cotton Ltd. (238.05, 13.68%) and KPR Mill Ltd. (732.85, 0.49%).

17 stocks climbed above their 200 day SMA including PVR Ltd. (1482.80, 3.43%) and Route Mobile Ltd. (1864.25, 2.81%). 8 stocks slipped below their 200 SMA including Jindal Steel & Power Ltd. (383.95, -5.03%) and Quess Corp Ltd. (792.55, -3.09%).

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The Baseline
11 Jan 2022
Omicron restrictions may hit car sales more than chip shortages

Passenger vehicle makers have been reeling under the impact of semiconductor shortages in FY22. Lockdown restrictions imposed by state governments in April-June 2021 hit retail sales, but there was a recovery from July 2021 as pent-up demand from customers drove sales at dealers. Demand also recovered with new launches. 

Another major concern however was the long wait times for new vehicles due to supply-side constraints for carmakers. Still, Q2FY22 saw retail sales of passenger vehicle sales reach pre-Covid levels.Mahindra & Mahindra’s retail sales were helped by the launch of its XUV700 with its aggressive new design. It became the vehicle with the longest waiting period, and received more than 1.6 lakh bookings in Q2FY22. With one more launch lined up in FY22, the company is hoping for more of the same.

Maruti Suzuki’s strong brand presence and distribution network led to an increase in retail sales in Q3FY22. Except for a brief period in September 2021 and October 2021, sales were on a rising trend.Tata Motors retail sales are rising after a lull in Q2FY22. This is despite its wholesales rising 56.3% YoY to 1.7 lakh units in Q2FY22.

Mahindra & Mahindra’s wholesales dipped to 17,722 units in December 2021 from 19,458 units a year ago, which dovetails with a marginal rise in retail sales over the month. It will be interesting to see if wholesale dispatches to dealers continue to translate into retail sales at a fair clip as the third wave might lead to curbs on discretionary expenditure. The elevated fuel prices and supply-side issues may also impact demand for cars in Q4FY22.

Markets close in green, Macquarie cuts Paytm's target price further by 25% to Rs 900

Trendlyne Analysis

Upbeat trading today.Nifty 50 closed at 18,003.30 (190.6, 1.1%) , BSE Sensex closed at 60,395.63 (651.0, 1.1%) while the broader Nifty 500 closed at 15,495.55 (147, 1.0%)

Market breadth is surging up. Of the 1,898 stocks traded today, 1,352 were in the positive territory and 512 were negative

  • Procter & Gamble Hygiene & Healthcare, CG Power and Industrial Solutions, Suven Pharmaceuticals, and Bayer Cropscience are trading with higher volumes as compared to Friday

  • Macquarie Research cuts One97 Communications’ (Paytm) target price by almost 25% to Rs 900 giving it a ‘underperformer’ rating as it does not see a high potential in its scaling up of merchant loans business. The brokerage sees RBI’s digital payment regulations on capping charges impacting revenues, hence, reducing revenue estimates for the company to 23% from 26% for FY21-26. It has also cut down EPS estimates by 16-27% because of high employee and software expenses

  • CreditAccess Grameen’s consolidated gross loan portfolio rises 18.4% YoY to Rs 14,587 crore at the end of December 2021 with Madura Micro Finance’s gross loans contributing Rs 2,407 crore, up by 13.6% YoY. Consolidated disbursements rise 22.5% MoM to Rs 1,845 crore with the total number of borrowers rising to 90,505, up by 51% MoM from 59,930 in November 2021.

  • Mahanagar Gas increases the prices of compressed natural gas by Rs 2.50 per kg and piped natural gas by Rs 1.50 per standard cubic metre for the Mumbai Metropolitan Region with effect from January 8, 2022 midnight. This is the second price hike after the on company also hiked gas prices back in December 2021.

  • Avenue Supermarts (D-Mart) ' Q3FY22 net profits rise 22.6% YoY to Rs 552.5 crore, led by a 22% YoY increase in revenues to Rs 9,065 crore. Weak recovery in fashion and general merchandise segments weigh on its sales growth as well as gross margins

  • Railtel Corporation of India approves interim dividend at the rate of 17.5% of paid-up share capital and Rs 1.75 per share for FY22. The record date is January 21, 2022.

  • RHI Magnesita India is trading with more than six times its weekly average trading volume. KEC International, Hinduja Global Solutions, Asahi India Glass, and SJVN are trading at more than three times their weekly average trading volumes.

  • Sobha’s sales volumes rise to 1.32 million square feet up by 17% YoY to Rs 1,048 crore. Bengaluru market’s contribution was the highest with sales volumes increasing to 0.96 million square feet up by 22% YoY. The company’s total sales volume, sale value, and Sobha share of sale value are up by 33%, 34%, 46% respectively at the end of December 2021.

  • KEC International rises as the company wins new orders worth Rs. 1,025 crore. The orders include transmission and distribution projects in Middle East, infrastructure works in the metals and mining segment, and laying of a slurry pipeline in India among others.

  • Oberoi Realty rises after its sales bookings jump 2X to Rs 1,965 crore for Q3FY22, backed by higher festive demand. Its total sale of units more than doubled to 610 units for the nine months ended December 31, 2021

  • Tata Consultancy Services surges in trade as its board will mull a buyback of equity shares in its meeting to be held on Wednesday. The board will also take up for approval the company's Q3FY22 results in the same meeting

  • Tata Steel's consolidated steel output for Q3FY22 rises 2% YoY rise to 7.68 million tonnes. Domestic Production rises 4% YoY to 4.80 million tonnes. However, the sales volume for the quarter fell by 3% YoY to 6.88 million tonnes

Riding High:

Largecap and midcap gainers today include Adani Power Ltd. (108.70, 8.48%), GMR Infrastructure Ltd. (48.45, 5.79%) and Bharat Heavy Electricals Ltd. (62.65, 5.29%).

Downers:

Largecap and midcap losers today include Ipca Laboratories Ltd. (1061.00, -3.54%), L&T Technology Services Ltd. (5597.90, -3.10%) and Godrej Consumer Products Ltd. (931.05, -2.77%).

Crowd Puller Stocks

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

Top high volume gainers on BSE included Greaves Cotton Ltd. (209.40, 19.69%), Alok Industries Ltd. (29.80, 12.24%) and Sunteck Realty Ltd. (569.75, 11.54%).

Top high volume losers on BSE were SBI Cards and Payment Services Ltd. (904.55, -2.42%) and Avenue Supermarts Ltd. (4633.55, -2.07%).

Indostar Capital Finance Ltd. (250.90, 5.44%) was trading at 21.7 times of weekly average. RHI Magnesita India Ltd. (385.80, 4.27%) and Adani Power Ltd. (108.70, 8.48%) were trading with volumes 7.4 and 7.0 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

16 stocks hit their 52 week highs, while 1 stock tanked below their 52 week lows.

Stocks touching their year highs included - Asian Paints Ltd. (3553.50, -0.64%), Astral Ltd. (2453.90, 0.71%) and Greaves Cotton Ltd. (209.40, 19.69%).

Stock making new 52 weeks lows included - Mas Financial Services Ltd. (596.75, -0.91%).

21 stocks climbed above their 200 day SMA including Adani Power Ltd. (108.70, 8.48%) and Jubilant Ingrevia Ltd. (613.85, 7.83%). 6 stocks slipped below their 200 SMA including Ipca Laboratories Ltd. (1061.00, -3.54%) and PI Industries Ltd. (2887.35, -2.09%).

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The Baseline
10 Jan 2022
Five analyst stock picks this week
  1. Aptus Value Housing Finance India: LKP Securities gives a ‘Buy’ rating to Aptus Value Housing Finance India (Aptus) with a target price of Rs 477 - a potential upside of 33.58%. LKP Securities says Aptus consistently delivered a return on assets (ROA) of more than 6% since FY16. It also has a high capital base and lower leverage, which keeps the return on equity (ROE) above 12%. LKP Securities estimates an ROA and ROE of 7% and 15%, respectively, for FY22. The company’s collection efficiency improved to pre-Covid levels and stood at 99.7% in the quarter ended September 2021 compared to 95% for the quarter ended  June 2021. The collection efficiency remained robust despite the pandemic, and asset quality was steady. “A lower stress is likely to keep the credit cost in check, which may translate into better profitability in coming years,” says LKP Securities. LKP Securities expects strong growth in assets under management, stable net interest margin of 10.6%, and operating expense ratio or opex of 2.2% to help to deliver strong profit growth of 27% CAGR over FY21-FY24.

  1. Coforge: Based on record deals won by this company, Axis Securities maintained its ‘Buy’ rating on Coforge with a target price of Rs 6,870 and an upside of 21.22%. Coforge bagged deals worth $781 million in FY21, a growth of 11% YoY. Revenue growth in FY21 stood at 11.4% with operating margins at 18%, an expansion of 80 basis points over the previous year. Margin expansion was aided by higher offshoring, higher utilization, lower attrition, and a favorable currency mix during FY21. Due to the pandemic, Coforge witnessed a robust digital demand wave, and this is expected to continue. Coforge also continues to invest in human capital to build strong capabilities to fulfill client requirements. Axis Securities believes the company is likely to have better revenue growth and operating margin expansion prospects in the near future as the management has guided for double-digit growth in FY22 by factoring in robust deal wins in the recent past.

  1. Coal IndiaICICI Securities gives a ‘Buy’ rating to Coal India (CIL) with a target price of Rs 234 and an upside of 47.36%. CIL recorded an all-time high production during the nine months ended FY22 at 413.6 million tonnes. Key factors behind the surge in production volumes are higher power demand, low coal stocks at most power plants, unprecedented power prices on exchanges in October 2021, and global elevated coal prices. Coal prices are expected to rise again as Indonesia bans exports amid increasing demand for coal. Further, demand for coal is higher in most major coal importing countries. “This is likely to make CIL a preferred coal supplier for domestic consumers in the medium term as it remains at a 50% discount to international prices,” says ICICI Securities, which expects a good dividend payout from CIL in FY22. 

  1. KPR Mill: Analysts at Edelweiss Wealth Research are enthused at  KRP Mill’s prospects based on two themes – fashion and its ethanol business. It has a ‘Buy’ rating on the stock with a target price of Rs 860, with an upside of 18.78%. The garment segment has provided a steady balance to the company’s growth, as this grew at a CAGR of 16% over the past nine years. Due to government policies that boosted demand for ethanol, the company increased its ethanol capacity to 130 kilo litres per day (KLPD), which will be enhanced to 360 KLPD by Q4FY22. Edelweiss Wealth Research forecasts that the sugar/ethanol segment will generate revenue of Rs 1,400 crore by FY24. It also expects KPR Mill’s EBITDA  to grow at a 24% CAGR translating into a margin expansion of 340bps. This could translate into a net profit growth of  29% CAGR with healthy return on capital employed (ROCE) of 28%and RoE of 25% by FY24.

  1. SBI Cards and Payment Services: HDFC Securities initiates coverage on SBI Cards and Payment Services with a ‘Buy’ rating and a target price of Rs 1,100 with an upside of 21.4%. SBI Cards and Payment has emerged as a formidable, high-quality, high-growth franchise that is poised for sustained earnings growth of 45% EPS CAGR and high profitability of RoA of 5.2% over FY21-FY24, says the analysts. SBI Cards’ strategy of maintaining a balanced mix of Open Market and Banca customers “bodes well for superior profitability and credit risk management”. HDFC Securities expects SBI Cards to deliver 6.2%  RoE and 28% RoA by FY24 led by strong growth in CIF/spends and steady unit economics.