Five Interesting Stocks Today
1. ABB India:
This heavy electrical equipment company has risen 10.9% over the past week, reaching its all-time high of Rs 6,472 today. This comes after UBS upgraded the company’s target price to Rs 7,550, implying an upside of 18.7%. The brokerage has retained its 'Buy' rating. UBS cited high double-digit growth across domestic and export orders from the motion and electrification segments. This is the highest target in the consensus – the average target from analysts on ABB India according to Trendlyne’s Forecaster is Rs. 5,148.
ABB India has also risen 16.7% over the past month, outperforming the industry by 3.5%. As a result, it features in a screener of companies with strong momentum.
In Q3FY24, the heavy equipment manufacturer’s order inflows stood at Rs 3,147 crore, up 35% YoY, taking its order backlog to Rs 8,404 crore. ABB's orders have mostly been short-cycle ones. However, its large orders (longer gestation orders - to be executed in 18-24 months) are gaining momentum. The company is also seeing an improvement in large orders and now represents 15% of the total order book. UBS expects ABB India’s order inflow to grow by 23% during 2023–26E. With a strong order pipeline in place, the focus now falls on the execution of projects.
According to Trendlyne’s Forecaster, the company’s revenue is expected to grow by 21.8% YoY in FY24. In Q3, it's revenue growth was led by new-tech segments, including electrification, robotics, and industrial automation.
Sanjeev Sharma, the Managing Director of ABB India says, “We expect growth to remain healthy given the ongoing capex upturn in India.” He cites potential drivers such as data centres, railways, metros, renewable energy and electronics.
2. Amber Enterprises India:
This consumer electronics company rose by 5.7% on March 21 after it announced a 50% joint venture (JV) with Resojet, part of the Hyderabad-based Radiant Group of companies. The JV serves as an entry for Amber Enterprises into the manufacturing of fully automatic top-loading and front-loading washing machines and components. The washing machine industry in India has a market size of $2.4 billion (approximately Rs 20,002 crore) as of CY23. Amber Enterprises will also invest Rs 35 crore in the JV to acquire the 50% stake.
The stock has risen by 13.5% over the past week, helping it appear in a screener of stocks outperforming their industries over the past quarter.
The company also previously expanded its electronics manufacturing services portfolio after its subsidiary, ILJIN Electronics, acquired a 60% stake in Ascent Circuits on January 3. Ascent is an Indian manufacturer of various types of printed circuit boards (PCBs) which are widely used across industries, including in aerospace, defence and consumer electronics.
After the JV announcement, CLSA has maintained its ‘Buy’ rating on the stock with a target price of Rs 4,300 per share. This indicates a potential upside of 17.6%. The brokerage believes that the stock has an attractive entry point due to its 2% decline over the past month on the back of an overall decline in the market. It also states that the company’s attempts to diversify will help its non-RAC (non refrigeration and air conditioning) segment to contribute to 50% of its revenue in the next five years.
3. PNC Infratech:
This road and highway construction company rose by 5.8% in the past week. The price rise comes after the firm received ‘Buy’ calls from analysts. ICICI Direct is optimistic and believes that the company has shown healthy execution and a stable margin trajectory. With asset monetisation done, the brokerage expects that resultant cash will free up capital and drive 10% revenue growth in FY24 and FY25, and 15% in FY26.
Under the Vivad se Vishwas scheme, PNC Infratech hopes to receive Rs 766 crore from the authorities for three projects accepted. It recently inked a settlement agreement with the National Highways Authority of India (NHAI) to receive Rs 255.4 crore under the scheme. The company has also inked an agreement to sell twelve road projects at approx Rs 9,000 crore. This along with the inflow of cash under the Vivad se Vishwas scheme, will help the company have a cash balance which it can utilize for its growth, going forward.
In the past month, PNC Infratech won an order worth Rs 1,174 crore to construct a bypass in Madhya Pradesh. Its current order book stands at Rs 17,380 crore. The company is also targeting order inflows of Rs 12,000 crore in FY25.
According to Trendlyne Forecaster, PNC Infratech will report profit growth of 10% YoY in Q4FY24 while revenue will increase by 12% YoY. The company appears in a screener for stocks with consistently highest returns over five years.
4. Crompton Greaves Consumer Electricals:
This household appliances player has fans in the analyst community, with an estimated upside of 23% on its share price and a consensus of ‘buy’. This is despite the stock seeing a decline in March, falling by over 8%.
No one likes a long, hot summer. But it’s good news for a company that sells fans and air coolers. Crompton management has mentioned this weather trend as a positive, and key to demand being strong in the upcoming quarter. It expects the core fan segment to grow in double digits as a result. Another major growth driver is premiumization – Crompton’s premium mix is at just 25%, compared to the industry average of 40%.
Crompton has faced higher costs due to new changes in energy efficiency rules. It hiked prices by 4-5% in fans over the last few months, which has helped it recover most of the cost increase. And over the long-term, these efficiency rules may work out in its favour – rules are being updated every two years, and the market as a result is increasingly shifting to the organized sector.
A major drag on Crompton Greaves is Butterfly Gandhimathi Appliances. The 2022 acquisition of the kitchen appliances company has not yet been a successful union. Crompton expected BGAL to be EPS accretive by FY24, but the business has underperformed. Revenue was down 6% YoY in Q3FY24, compared to 2% growth for its competitor Sunflame. On the upside, the kitchen industry is growing by double-digits, and Crompton Greaves is restructuring channel sales for BGAL to boost growth.
5. KEC International:
This heavy electrical equipment manufacturer rose by 6.1% over the past week. The company recently won orders worth Rs 2,257 crore across its various businesses which included new international and domestic orders for its transmission & distribution, oil & gas pipelines, cable verticals, and domestic orders for its civil business.
Trendlyne’s Forecaster estimates the company's net profit to grow by 6.9X to Rs 203.9 crore in Q4FY24 due to its strong order book and favorable government policies, while revenue is expected to improve by 20.7% YoY. The firm beat the Trendlyne Forecaster’s estimates for Q3FY24 for revenue by 1.2%. However, it missed the net profit estimate by 5% due to challenges in the supply chain and issues around the Red Sea.
KEC’s year to date (YTD) orders stand at Rs 13,000 crore, in which its transmission & distribution segment contributed to 61% of the total. Its total order book stands at approx Rs 38,000 crore, of which 69% are domestic and the rest 31% are international orders. The company is planning to participate in at least 30-35 renewable transmission tenders, adding another vertical to its business. The management expects execution to pick up going ahead for FY25, with a scale-up in execution in international T&D orders, civil, and oil & gas.
Vimal Kejriwal, Sr. Vice President of the firm, said, “For Q4, I think that margin guidance looks difficult to achieve today. I don’t say that 7% will become 5%, but there could be some downside depending upon the supply chain part, and whether we are able to get some more supplies or more profitable orders. There will definitely be significant improvement QoQ as interest cost will come down so on the profit before tax (PBT) side, you will see improvement happening.”
Sharekhan recommends a ‘Buy’ for KEC International with a target price of Rs 850. They say “We expect around 15% revenue growth for FY2024-26E with a sequential improvement in its margins. KEC is trading at a P/E of ~17x its FY2026E EPS, which provides room for upside, given its healthy order backlog and order pipeline and the possibility of margin revival. Hence, we maintain our Buy rating on the stock with a revised price target (PT) of Rs 850”
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
