1. KNR Constructions:
This Andhra-based construction firm has surged 58.2% in the past month. The stock got a boost after the Telugu Desam Party (TDP) won state elections with a single-party majority in Andhra Pradesh in June. TDP also won 16 seats in the Lok Sabha elections, becoming a significant part of the new NDA government at the centre. TDP leader and Chief Minister of Andhra, Chandrababu Naidu is seen as a pro-development politician, who believes in aggressive spending on new infrastructure.
In Q4FY24, the company posted operating revenue growth of 13.5% YoY to Rs 1,414 crore, beating Trendlyne’s Forecaster estimate by 15.6%. Its net profit rose 139.9% YoY to Rs 353.3 crore, surpassing estimates by 194%. Profits were on the higher side thanks to interest income received from subsidiaries.
Current order book of the company stands at Rs 6,505 crore (including two projects worth Rs 1,200 crore that the company won recently). Executive Director K. Jalandhar Reddy summarized the optimistic mood when he said, “After elections, there will be a lot of orders mainly from the highway segment”. He also highlighted that the company could receive orders worth Rs 2,000-3,000 crore in the next two months linked with the 100-day plan of the Ministry of Road, Transport and Highways post-elections. For FY25, the company is targeting an order inflow of Rs 5,000-6,000 crore.
IDBI Capital maintains a ‘Hold’ rating on the company as the brokerage expects revenue to be weak and mainly dependent on order inflows. With the main focus on highway projects, they believe that the company is looking to diversify into other segments such as metro, mining, railway and solar.
2. Raymond:
This textiles company has surged by 8.4% over the past week. This comes after its real estate arm, Raymond Realty, won two redevelopment projects in Mumbai on June 8 – residential projects in Bandra East with a revenue potential of over Rs 2,000 crore.
This is in addition to joint development agreements that it previously signed for three projects in the Mumbai suburbs, with an estimated development value of over Rs 5,000 crore. Raymond also owns a 100-acre plot in Thane, Mumbai, with a revenue potential of over Rs 25,000 crore expected over the next few years. Due to the rise in share price, the company features in a screener of stocks with strong momentum.
The real estate business has been a clear outperformer for Raymond. During Q4FY24, the company’s net profit increased by 17.9% YoY to Rs 229.2 crore. Revenue was up 21.3% YoY, beating Trendlyne’s Forecaster estimates by 12.8%. The real estate segment led the growth, which surged 2.4x YoY during the quarter. Meanwhile, the company’s branded apparel segment rose by 23.2% YoY during Q4, and improved domestic market conditions led to a 7% YoY growth in the engineering business. Raymond plans to expand its branded apparel stores, and expects to add over 500 new stores in the next three years.
According to Amit Agarwal, the Group CFO, “The real estate market maintains an upward momentum, driven by increasing residential demand that will persist in the forthcoming quarters”. Raymond hopes to derive a significant revenue contribution (40-45%) from its real estate and engineering divisions over the next 4-5 years. In FY24, revenue contribution from the real estate segment increased to 17%, up from 13% the previous year. Meanwhile, the lifestyle business accounted for 74% of the revenue.
The company has previously announced the demerger of its lifestyle business into a separate listed entity. The merger will result in two distinct net-debt-free companies - the existing listed company, Raymond, will deal in real estate business and engineering, while the lifestyle business will be listed as Raymond Consumer Care (RCCL). The company has already received approvals from SEBI, shareholders, and creditors. An update on the NCLT approval is awaited. RCCL is expected to be listed within the next 2-3 months, subject to this approval.
3. GAIL (India):
This non-electrical utilities company rose by 6.7% in the past week after announcing a capex plan worth Rs 60,000 crore. Part of this is for setting up a 1,500 KTA ethane cracker project, with a product slate of various ethylene derivatives, and a greenfield petrochemicals complex in Madhya Pradesh. Commercial production at the plant is likely to start only in FY31, according to reports.
Indian oil and gas companies are expanding their petrochemicals business to meet growing demand. GAIL spent 30% of its total capex of Rs 11,426 crore in FY24 on petrochemicals and plans to spend 40-45% of its FY25 capex (Rs 11,500 crore) on petrochemicals. Rakesh Kumar Jain, Director of Finance, said, “The production of the petrochemical segment will increase in FY25, due to maintenance undertaken this year. Production will increase from 7.7 lakh tons to 8.1 lakh tons in FY25.”
In Q4FY24, the company’s profit rose 289.3% YoY to Rs 2,468.7 crore despite a 2.3% YoY fall in revenue. Profit rose on the back of decreased inventory expenses. It also beat Trendlyne Forecaster’s net profit estimate by 5.9%. The company’s turnover dropped 10% YoY mainly due to the softening of natural gas prices. But this decrease was partly offset by an increase in the volume of the petrochemicals business.
Speaking about volume guidance, Jain said, “We expect that in the coming two years, our volumes are likely to increase by 10-12 million metric standard cubic meters per day (MMSCMD) per year, so, we are expecting an average volume of 130-132 MMSCMD in FY25 and 140-142 MMSCMD in FY26.”
However, Prabhudas Lilladher maintains a ‘Sell’ call on GAIL as the brokerage believes that existing consumers (except power) already consume an optimal amount of gas, and they expect only a few new consumer additions. The company appears in a screener for stocks with increasing shareholding by mutual funds in the past quarter.
4. Cummins India:
This industrial machinery company rose by 9.1% over the past week and announced its results on May 30. The firm beat Trendlyne Forecaster estimates for Q4FY24 for revenue by 9.1% and net profit estimate by 35.2%. In Q4FY24, the company’s net profit increased by 54% YoY to Rs 537.3 crore, while its revenue increased by 19.7% YoY on the back of improving Engines and Lubricant segment revenues. It shows up in a screener for stocks with consistent high returns over five years in Nifty500.
In Q4FY24, the company's domestic powergen, distribution, and industrial vertical revenue rose by 40%, 25% and 60%, respectively. However the exports business declined due to subdued demand in Europe & Latin America, and due to geopolitical tensions in the Middle East and African regions. Regarding the exports, Ashwath Ram, Managing Director, Cummins India, said, “ Exports dropped to 18% of sales this year, with major declines in Europe (nearly halving), and in the Middle East, Africa, and Asia Pacific. No export market grew for us last year.”
Concerns for FY25 include geopolitical crises and funding availability in African markets. The European markets are the most impacted as countries are trying to get out of internal combustion products as emission regulations grow stricter, and are preferring clean energy products.
Aswath Ram added, “For exports, our ambition is to get back to 30-35% of our sales being exports. So, we are not just giving up on it.” On FY25 growth he added: “We think the opportunities are there for us to continue to grow at the 2x GDP level for FY25.”
The company recently started the manufacturing of new gensets complying with the Central Pollution Control Board’s CPCB IV+ emission norms, which became mandatory from June 2024 for all genset manufacturers. These gensets constituted 33% of the revenue in this quarter and grew by 25% QoQ in the genset sales mix, thanks to replacement demand.
Sharekhan has given Cummins India a “Buy” rating, with a target price of Rs 4,200. The brokerage notes that the company is well-positioned for the transition to the new norms, with favorable long-term implications in terms of revenue and profitability. The brokerage sets a revenue/PAT CAGR of ~18%/21% over FY25-FY26E and notes that the valuations at 40x FY26E EPS might seem optically high, but they see growth tailwinds from government spending on infrastructure. Weaker exports however, remain a red flag and a number investors will need to closely track.
5. Indian Energy Exchange:
This exchange stock has risen by 10.5% over the past week, touching its 52-week high of Rs 182.6 per share today after its volumes grew 28.9% YoY to 10,633 million units (MU) in May. This was backed by a 21% YoY improvement in electricity volumes. The stock has also risen by 23.8% over the past month, helping the company to feature in a screener of stocks that outperformed their industries in the same period.
The company’s renewable energy certificates (REC) were at an all-time low price of Rs 165 each in May. This helped buyers like Distribution Companies (DISCOMS) and Captive Power Producers (CPPs) to meet their renewable purchase obligations, and voluntary customers to buy sustainable electricity at a lower rate. The company’s REC segment surged by 640.3% YoY to 1,055 MU.
IEX’s revenue grew by 15.2% YoY to Rs 149.3 crore in Q4FY24, beating Trendlyne’s Forecaster estimates by 17.8%. Its net profit increased by 9.5% YoY to Rs 96.7 crore, missing Forecaster estimates by 7.3%. The company’s revenue increased on the back of its day-ahead market (DAM) price, remaining flat at Rs 5.1 per unit which helped drive up trading on its platform.
Satyanarayan Goel, Chairman, and Managing Director of the company said, “For FY25, Indian power sector demand is expected to grow by 8%, and in the first 45 days of this year, that demand has grown by almost 12%. This jump will help our REC segment to grow by 25-30% YoY and the green segment to increase by 50% YoY.”
Post results, Keynote Capitals maintains its ‘Under Review’ rating on the stock. The brokerage believes that despite the company’s improving business prospects, there is uncertainty related to market coupling, which could significantly impact the business's fundamentals if it occurs. Market coupling is a model currently being tested, where the buy and sell bids on all the exchanges will be aggregated, which means that there will be one price for electricity traded on all the exchanges.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
