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1. Dixon Technologies (India):

This consumer electronics company has risen by 19.3% over the past month, reaching its all-time high of Rs 7,048 on Monday. The company has also recovered by 13% since the Directorate of Revenue Intelligence’s inspection concerning raw material imports on January 19. 

The past month has been eventful for Dixon. The company’s arm, Padget Electronics, inked a manufacturing agreement with Compal Smart Device India for mobile phone production. Padget has also finalised deals with Lenovo for manufacturing notebooks and tablets, and is in talks with ASUS. Another Dixon subsidiary, Dixon Electro, began refrigerator production.

In Q3FY24, Dixon Technologies reported an 85.8% YoY growth in net profit to Rs 96.4 crore, while revenue increased 2x YoY. This growth was driven by a 251% YoY rise in its mobile and electronic manufacturing division, which accounts for 67% of total revenue. But the EBITDA margin contracted 80 basis points YoY. The company missed Trendlyne Forecaster’s net profit estimate by 18.6% due to a 116.3% YoY rise in material costs to Rs 4,345.3 crore.

Dixon’s management is positive about its mobile business and expects to capture a market share of 35-40% in Indian smartphone manufacturing. Managing Director Atul Lall says, “We're ramping up investments to meet the increasing order book from Motorola, and demand for some large new brands in the pipeline.” The company has also partnered with Samsung for their Taizun operating system, which is expected to commence operations by the end of FY24.

Jefferies downgrades Dixon Technologies to ‘Underperform’ and warrants caution over valuations and softer discretionary demand. It suggests that the risk-reward appears to be stretched. The company appears in a screener for stocks with PE higher than their respective industry.

2. Delhivery:

This logistics startup rose 2.7% on Monday, following the extension of its partnership with wellness brand Plix for cross-border freight shipping services. Delhivery has an existing collaboration with the brand for domestic express parcel shipping. 

Over the past month, Delhivery has risen by 8.8%, placing it in a screener of companies with prices above their short, medium, and long-term moving averages. In Q3FY24, the company reported a net profit of Rs 11.7 crore, marking its first ever profit, against a net loss of Rs 195.7 crore in Q3FY23. This beat Trendlyne’s Forecaster expectations of a Rs 67.8 crore net loss for the quarter. Nuvama Research noted, “The shift to profitability is a milestone we had foreseen only in H1FY25E.” 

Sahil Barua, the MD and CEO, said, “We've achieved profitability for the first time in Q3,  from enhanced utilization across our key business segments and trucking networks.” 

Meanwhile, revenue was up 20.3% YoY to Rs 2,194.5 crore, fuelled by strong demand during the festive season. The Express Parcel business (which constitutes 66% of total revenue) saw a 21% YoY revenue increase, while the Part Truckload business (17% of revenue) rose by 37% YoY. Delhivery features in a screener of stocks with increasing revenue for the past four quarters.

Elara Securities upgrades Delhivery to ‘Buy‘ and raises the target price to Rs 570. The brokerage believes that the festive season push may normalize in the near term and the focus will be on market share gain.

3. Reliance Industries: 

The Ambani family is in the news for another partnership, but that's not the one stock markets are interested in. This refineries/petro products company has risen by 3% over the past month due to merger talks with Disney. These talks concluded successfully on Thursday as Reliance Industries entered into a joint venture (JV) agreement with Viacom18 Media and Walt Disney, merging Viacom18 into Star India through a court-approved arrangement. 

This landmark JV will be valued at Rs 70,352 crore, and marks the rise of a major new player in the entertainment industry. Post-merger, Reliance will own 16.3%, Viacom18 will have 46.8%, and Disney will hold a 36.8% stake in the JV. Additionally, Reliance will invest Rs 11,500 crore in the venture. 

According to analysts at Jefferies, the JV is set to dominate India's cricket broadcasting rights with a substantial 40% share of the advertising market. The brokerage also added that Disney's business valuation is substantially lower than perceived, potentially adding around Rs 40 per share to Reliance's value.

The company released its Q3FY24 results on January 19, with a 9.3% YoY growth in its net profit to Rs 19,641 crore, while its revenue increased by 3.9% YoY to Rs 2.3 lakh crore. The revenue growth was on the back of improvement in oil to chemicals (O2C), oil & gas, JioBharat, Reliance Jio Infocomm (led by Akash Ambani) and Reliance Retail (headed by Isha Ambani) segments. 

JioBharat and Reliance Jio Infocomm’s revenue increased by 11% YoY to Rs 32,500 crore, thanks to a sharp rise in net subscriber additions. Similarly, Reliance Retail’s revenue grew by 23.8% YoY to Rs 74,370 crore, owing to increased footfall in stores and improvement in the groceries, fashion and consumer electronics segments. The company appears in a screener of stocks with increasing return on equity (RoE) over the past two years. 

Post-results, BOB Capital Markets maintains its ‘Buy’ rating on the company with an improved target price of Rs 3,175. This indicates a potential upside of 6.4%. The brokerage believes that the company’s market share expansion and media business growth will contribute to its revenue. It expects the company’s revenue to grow at a CAGR of 7.5% over FY23-26.

4. Triveni Turbine:

This heavy electrical equipment manufacturer has risen by 7.9% over the past week, touching a 52-week high of Rs 504.9 today on the back of a strong order book and good quarterly results. Its Q3FY24 net profit grew by 29.7% YoY to Rs 68.2 crore and revenue increased by 32.9% YoY, thanks to a favourable demand-supply scenario. The firm beat Trendlyne Forecaster’s estimates for net profit and revenue by 3.3% and 4% respectively. The company appears in a screener of stocks with strong momentum.

In Q3FY24, the company’s order book grew by 28% YoY to Rs 1,575 crore, with export orders climbing 41% YoY to Rs 762 crore. Major order bookings were noted from the Middle East and North Africa, Turkey and the Americas. Its geographical expansion and product & aftermarket offerings have fueled order growth across various segments, including biomass industries, oil & gas, and both sub & beyond 30 MW. A new subsidiary was established in Texas, USA, to invest in local manufacturing, aligning with its strategy of being closer to customers and gaining from US energy incentives. The domestic order book saw a modest 18% YoY increase to Rs 814 crore, impacted by order delays and the festive season.

Dhruv Sawhney, Chairman & Managing Director of the firm, says, “We've set new records in revenue, profitability, and order booking. By the nine-month mark, product orders reached Rs 9.9 billion, a 19% YoY increase driven by exports, especially in the API segment, alongside robust domestic demand. With a 14% improvement in the overall enquiry book, we remain constructive on future orders for this segment in the medium term.” 

Sharekhan recommends a ‘Buy’ rating for Triveni Turbine, with a target price of Rs 550. They say, “ The stock trades at ~29x its FY2026E EPS, which we believe offers room for an upside, considering a strong growth prospectus and robust ROE/ROCE ratios.”

5. Havells India:

This consumer durables company has risen by 5.8% in the past week, hitting its 52-week high of Rs 1,550 on Wednesday. This uptick came after Goldman Sachs upgraded Havells India to ‘Buy’, expecting the company to resume double-digit growth starting Q1FY25. 

The company has struggled recently, posting single-digit returns in the past two quarters, mainly because of reduced demand in semi-urban and rural markets, driven by inflation. 

In Q3FY24, Havells India posted a slight net profit increase of 1.5% YoY to Rs 287.9 crore, missing Trendlyne’s Forecaster estimates by 10.1%. At the same time, its revenue rose by 7.3% YoY to Rs 4,469.8 crore, also missing estimates by 2.8%. The firm appears in a screener of stocks where mutual funds have increased their shareholdings in the past quarter. Based on Trendlyne’s Results dashboard, the company’s growth in revenue and net profit during Q3FY24 lagged behind its industry peers.

Havells India’s wholly owned subsidiary, Havells International, announced a joint venture with Salesmark Ventures, USA on February 14, 2024. This partnership will allow Salesmark to market and sell various portable air conditioning units and related accessories from Havells’ brand portfolio in the US market.

CEO Anil Rai Gupta says, “We expect the premiumisation trend to recover as inflation shows signs of abating.” He expects better margins as the company’s investments in brand building normalize over the next quarter.

BOB Capital Markets maintains a ‘Buy’ call on Havells India, given its strong presence in the consumer durables sector and improving consumer demand. The brokerage estimates the firm’s sales to grow at a 9% CAGR, with net profit improving at a 17.6% CAGR over FY24-26.

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.

Following the Q3 results season, we turn to Trendlyne’s results dashboard to assess the performance of various industries, and identify top performers as well as those that struggled. We also check drivers of positive or negative industry sentiment. This edition of Chart of the Week looks at the YoY growth in revenue and net profit for Q3FY24 across industries and their large-cap stocks. 

Leading the pack in terms of revenue and profit growth for the quarter are internet software and services, realty, and consumer electronics industries.

Zomato, PB Fintech drive growth in internet software and services

The internet software and services industry registered an average net profit growth of 292.6% YoY and revenue growth of 33.2% YoY in Q3FY24. 

This surge was helped by Zomato and PB Fintech, which saw net profit rise 139.8% and 143.6% YoY, respectively. Additionally, 21 of 31 stocks in the industry posted a profit increase  during the quarter.

Zomato’s profit boost was on the back of its quick-commerce arm Blinkit, which saw a 27% QoQ revenue growth. Its food delivery segment’s revenue also increased by 10% QoQ, helped by a higher take rate of 20.1% (up 70 bps QoQ) after introducing a platform fee.

PB Fintech’s revenue rose by 42.8% YoY, driven by its insurance and credit businesses, which grew by 44.3% and 35.5% YoY, respectively.

The realty industry posted an average net profit growth of 211% YoY in Q3FY24, with a 21.4 % YoY improvement in revenue amid strong customer demand. Key contributors included Macrotech Developers, Phoenix Mills, and Brigade Enterprises respectively, with their net profit up by 24.4%, 58.4%, and 29.2% YoY. The industry’s revenue boost was largely due to Macrotech Developers and Brigade Enterprises reporting record pre-sales of Rs 3,410 crore (up 12% YoY) and Rs 1,520 crore (up 51% YoY), in Q3FY24. Phoenix’s mall consumption went up by 25% YoY to Rs 3,300 crore with rising income levels and urbanisation, while its rental income was up 33% YoY to Rs 447 crore during the quarter.

The consumer electronics industry also saw its net profit and revenue improve by 172.5% YoY and 29.7% YoY during the quarter. Dixon Technologies (India), Voltas, and Blue Star contributed to this growth with their profits up by 85.8%, 72.5%, and 71.9% YoY, respectively. This growth was supported by major policy changes and production-linked incentive (PLI) schemes by the Indian government to attract large global players into this space. Dixon Technologies in particular, saw its revenue double on a YoY basis in Q3FY24, thanks to its mobile and electronic manufacturing segment, with a growth of 251% YoY to Rs 3,214 crore. Voltas and Blue Star also reported net profit growth on festive sales and rise in demand for air conditioners.

While these three industries celebrated robust Q3FY24 results, others like commodity chemicals, fertilizers, and agrochemicals faced declines in both revenue and net profit during the same period.

Weak demand and Chinese competition dampen chemical industry’s revenue

The chemical industry faced continued price pressures in Q3FY24, while inventory rationalisation by end-user agrochemical companies is coming to an end. Weak demand and ongoing Chinese dumping resulted in subdued revenues and margins.

The agrochemicals industry was impacted the most, recording a 125.8% YoY decline in average net profit and a 21.3% YoY fall in revenue. UPL, Bayer Cropscience, and Sumitomo Chemical India saw revenue declines of 27.7%, 8% and 28.1% YoY, respectively. This downturn was due to a sharp decrease in price realisation, pressured by higher supplies from China as Covid-related restrictions eased.

Meanwhile, the commodity chemicals industry saw a 53.4% YoY plunge in average net profit and a 7.6% YoY fall in revenue during the quarter. Tata Chemicals and Navin Fluorine International reported significant profit drops of 59.6% YoY and 26.8% YoY, respectively. The decline in net profit was mainly due to industry-wide channel destocking and inventory reduction.

The fertilizers industry also saw a 67.3% YoY decline in net profit, while its average revenue decreased by 32.9% YoY during Q3FY24. Coromandel International and The Fertilisers and Chemicals Travancore faced sharp decreases of 56.2% YoY and 81.7% YoY in net profit during the quarter.

The GDP numbers for major countries in the most recent quarter, were a big 'ouch', painting a grim picture of the global economy. The UK reported negative growth and entered a technical recession, hurting its already unpopular Prime Minister, Rishi Sunak. Germany and Japan are in the same boat.

So far, India is better placed. Although official GDP growth figures haven't been released yet for the December quarter early estimates suggest a strong growth rate of 6.5%-7%. Jefferies predicts that the Indian economy will become the third-largest by 2027.

India’s growth has been helped by muted inflation, the China +1 strategy, a stable currency, and higher government spending.

For Nifty 50 companies, revenue has grown on average by 6.2% YoY in the December quarter, slower than India's expected GDP growth. The difference suggests a slowdown in the formal sector, due to downturns in major industries like IT, agrochemicals, specialty chemicals, and packaged foods.

But if we look at profit, the Nifty 50 registered an impressive 17.3% YoY growth, thanks to lower input costs and product premiumization. Sectors like auto, metals and realty are outperforming the broader market in profit growth. Five Nifty companies — Tata Motors, HDFC Bank, Tata Steel, ICICI Bank, and JSW Steel — contributed 56% of the index's YoY profit growth.

The Nifty 50’s current PE stands at 22.8, which is below its five-year average of 25.9. The lower valuation is due to a slowdown in the overall topline, and concerns over debt-fueled consumption. 

• Nifty 50 results review: IT and chemicals underperform, while auto and metals shine
• Screener: Nifty 50 stocks surging over the past month with rising operating profit and operating profit margin

Let’s get into it.

Concerns rise with revenue slowdown

The Nifty 50 reported subdued revenue growth in the latest quarter, due to multiple factors - a weaker-than-expected monsoon from the El Nino effect, soft rural demand, and reduced global IT spending.

The IT sector, a heavyweight in the Nifty 50, saw only a 3.2% increase in the top line, and marked its first net profit decline of 1.4% in the past 26 quarters. 

Revenue trends: Auto, metals, realty, and banks excel amid slowdown in chemical, IT, and OMC sectors

Packaged food and agrochemical sectors were especially hit by lower rural consumption. "Urban growth has continued to outpace rural growth across many industries, and an uneven monsoon hit kharif crop output," Rohit Jawa, the CEO of HUL noted. Although a good monsoon in FY25 is expected to drive a recovery in rural spending, many companies in consumption-driven sectors still see muted demand in the first half of FY25.   

The refineries and petroleum sector suffered from lower consumption and crude prices, though the demand for petroleum products is expected to grow by 3% in FY25. Specialty chemicals faced challenges from higher Chinese imports, which has pressured domestic sales volumes and margins.

On the other hand, industries like banks, auto parts & equipment and iron & steel products have led revenue growth for the Nifty 50. Banks benefitted from higher loan growth, while the auto sector’s revenue was boosted by price increases and festive season sales. 

Margin growth helps the bottom line

The Nifty 50 saw its profit margins grow because of lower input costs, festive demand, higher price realization, increased exports, and a stronger USD.

Nifty 50 sees margin expansion in four consecutive quarters

Margins in the auto parts and equipment industry got a boost from lower commodity prices and higher price realization, with an uptick in volumes during the festive season.

Oil marketing companies have benefited from buying crude at lower prices from Russia and exporting more refined oil to European nations, improving refining margins. However, this may change as nations buying from Russia face a higher risk of sanctions.

The iron & steel industry saw better margins from domestic consumption and lower costs. However, rising Chinese imports have put pressure on margins lately. Meanwhile, the pharma sector has benefited from stable prices in the US, and better domestic sales.

Banks and IT sector to drive earnings in FY25

The banking sector has seen margin contraction this quarter due to the rising cost of funds and lower yields on advances. But with interest rates expected to drop in FY25, banks should see margins recover, supported by high loan growth. Credit growth in banks is projected at  14% for FY25, with profits expected to grow by around 22% YoY. 

India's IT sector, which had surged during the Covid years, has been impacted by spending cuts by BFSI clients, leading to lower revenue and margin contraction. As interest rates surged globally, customers have also postponed IT infrastructure spends.  

With its cash cow failing to deliver, tech CEOs are looking for other ways to grow. New verticals are all the rage - utilities, telecom, automobile, retail and manufacturing. Tech companies are also tapping into newer markets in Asia, Africa and the Middle East. Wipro for example, is bullish on digital solutions and AI in FY25, while HCL Tech is betting on non-BFSI verticals. TCS is expecting a surge in order inflows from India.

With global interest rates expected to drop post-June 2024, the IT sector may see a revival in client spending, especially in Q3FY25. 

Banks set to boost topline, IT eyes margin expansion in FY25 

Nifty 50 valuations appear reasonable

The Nifty 50 has gained 12.2% in the past month, sparking debate on whether it's valued too high compared to its global peers. Given India's status as the fastest-growing major economy and Nifty 50’s impressive 17.2% earnings growth in Q3FY24, a premium valuation seems justified.

The Nifty 50’s current PE of 22.8 is also below its 5-year and 10-year averages.

Nifty 50 PE trades below long-term averages

The lower valuation compared to historical averages is on account of a slowdown in its topline and an expected margin moderation in FY25. The index's long-term averages were also marginally skewed by the high valuations in the Covid period.

However, the Nifty 50’s one-year forward PE of 19.4 suggests that the valuation is within a reasonable range, and FY25 will give it more room to grow.

Screener: Nifty 50 stocks surging over the past month with rising operating profit and operating profit margin

BPCL leads in month change, while Adani Ent leads in operating profit margin growth

Continuing our analysis of the Nifty 50's performance, we look into which stocks in the index have the highest YoY growth in operating profit and operating profit margin in the latest quarter. 

This screener focuses on Nifty 50stocks that have surged over the past month, and saw a rise in operating profit and operating profit margin.

Leading the pack is the automobile & auto components sector, with five out of 11 stocks coming from this sector. Major stocks that appear in the screener are Bharat Petroleum Corp, Mahindra & Mahindra, Power Grid Corp of India, Tata Motors, Maruti Suzuki India, Adani Ports & SEZ, Sun Pharmaceutical Industries and Adani Enterprises.

Mahindra & Mahindra has risen by 19.3% over the past month, owing to its operating profit growing by 18.5% YoY to Rs 6,224 crore in Q3FY24. Its operating profit margin also expanded by 48 bps YoY to 17.6%, helped by increased sales of premium vehicles (XUV 700, Thar & Scorpio-N) and improved price realization. 

Power Grid Corp of India’s share price has surged by 19.1% in the last 30 days, while its operating profit grew by 3.2% YoY in Q3FY24. This utilities company’s operating profit margin increased by 57 bps YoY to 88.4% on the back of reduced finance costs and lower provisions for depreciation and interest payments. 

You can find more screenershere.