1. Torrent Power:
This electric utilities company rose by 7.4% to touch its all-time high of Rs 1,071.9 per share on Thursday after signing four memorandums of understanding (MoUs) worth Rs 47,350 crore with the Gujarat Energy Development Agency (GEDA).
The company is set to receive Rs 47,350 crore under the Gujarat government’s investment promotion initiative. The stock has also risen by 12.9% over the past week, helping it appear in a screener of affordable stocks with high momentum and return on equity (RoE). The largest MoU of the four, worth Rs 30,650 crore, is for setting up 3,450 MW of solar power and 1,045 MW of hybrid power projects in Banaskantha, Jamnagar, Patan and Surendranagar.
Torrent Power also expects to commission a 300 MW solar power project by the end of FY24. Along with this, the acquisition of Air Power Wind Farm will expand its wind power capacity. The management also plans to enter the hybrid energy segment due to the low return profiles from solar and wind power projects. The higher capacity utilization factor (CUF) of hybrid projects is likely to facilitate increased power generation and ensure a consistent supply.
The stock ranks high in Trendlyne’s checklist with a score of 73.9%. It also has good Trendlyne Durability and Momentum scores. According to Trendlyne’s Forecaster, Torrent Power has a consensus recommendation of ‘Sell’ from 10 analysts tracking the stock with an average target price of Rs 776.9 per share. This indicates a potential downside of 25.2%.
2. Sobha:
This realty firm rose 15.7% on Thursday after being chosen as one of the top picks for 2024 by Motilal Oswal, with a target price of Rs 1,400. According to Trendlyne’s Technicals, the stock has risen by 31.1% in the past month, outperforming the Nifty Realty Index by 16.7%. This surge can be attributed to the company maintaining a pre-sales revenue of Rs 2,500 crore for 9MFY24.
Sobha has long been seen as primarily a Bengaluru company, with the tech city accounting for 70% of its sales until FY20. However, with the introduction of projects in Kerala, Delhi NCR, and Hyderabad, Bengaluru's sales share dropped to 54% (from 65%) in H1FY24. Despite Bengaluru remaining a crucial geo, the company aims to expand in NCR, Pune, and Hyderabad. It's working on a 15 million square feet (msf) project pipeline, with 8 msf outside Bengaluru. Higher price realisations across major cities have also helped in margin expansion.
Sobha plans to launch 12 msf of projects in the next 15 months. With over 200 msf of land holdings, there is potential to increase its launches to 9-10 msf by FY26.
The firm, in its Q3FY24 update this week, reported a 37% YoY increase in total sales value to Rs 1,952 crore, with revenue realisation growing by 21.5% YoY. After declining for two consecutive quarters, Trendlyne’s Forecaster projects that the company’s net income will rebound to match Q3FY23 levels. Based on these estimates, Sobha is currently trading at a PE of 43.9 for FY24E and at 24.2 of FY25E.
Motilal Oswal says that initiating projects on significant land parcels in Bengaluru and Tamil Nadu is a key driver for higher land valuations. Sobha's land, valued at Rs 3,800 crore (CMP), is assessed by Motilal Oswal at Rs 6,000 crore. The broker upgrades the firm to a ‘Buy’ rating.
3. NMDC:
This mining company has risen by 7.5% in the past week and touched a 52-week high of Rs 227.3 per share today after announcing price hikes for its products. The company has raised the prices of lump and fine ores by Rs 200 and Rs 250 per tonne, respectively. Since September 2023, the prices of both lump and fine ores have cumulatively increased by Rs 750 per tonne.
Global iron ore prices have been rising recently due to expectations of economic growth in China, the world’s largest iron ore importer. This increase comes after China implemented major economic stimulus measures. Even after the latest price hikes, NMDC’s prices are still 60% lower than international rates, which crossed $135 per tonne in January from $105 per tonne in August last year. This gives the firm room to increase prices further.
Domestic steel demand is expected to increase at a CAGR of 8% till FY25, as both government and private capex in infrastructure is set to rise. Additionally, all domestic tier-1 steel manufacturers are expanding their capacities to meet domestic demand. According to NMDC’s management, capex for FY24 will exceed the initial target of Rs 1,600 crore and reach Rs 2,000 crore.
Motilal Oswal says, “The firm is set to produce 46 million tonnes of iron ore in FY24, and likely to produce more than 50 million tonnes by FY25 on the back of improved capacity and strong domestic demand”. However, only 36 of 110 iron blocks auctioned since FY16 are operational, which could result in intense competition if the remaining mines become operational.
4. Tata Motors:
This automobiles & auto components company touched a new 52-week high of Rs 805.9 today. This comes after it reported that its total domestic wholesales rose by 4% YoY to 76,138 units in December. In Q3FY24, Tata Motors’ passenger vehicle (PV) wholesales grew by 5% YoY, while that of commercial vehicles (CV) improved marginally by 1% YoY. Girish Wagh, the Executive Director, said, “The rise in CV sales is due to demand from government infrastructure initiatives, expansion in core industries, and sustained growth in e-commerce.”
According to N Chandrasekaran, Chairman of Tata Motors, it is focused on increasing the profitability of JLR (Jaguar Land Rover) rather than boosting volumes. The firm is improving earnings per vehicle while reducing its debt levels. Domestic PV sales are seeing traction in its electric vehicle and SUV segments. The company expects improved demand in Q4FY24 across most CV segments, from a pick-up in infrastructure and mining activities, and the harvesting season.
The automobile major has risen by 4.9% over the past week till Thursday. As a result, it features in a screener of companies with strong momentum.
The EV segment is gaining ground in JLR and Tata Motors India. JLR plans to invest £15 billion in electric vehicle development in the next 5 years. Tata Motors India sold 69,173 EVs in 2023, which is a 59% YoY increase. This is expected to further grow by 35% in 2024.
Post Tata Motors’ business update announcement, JP Morgan has upgraded its rating to ‘Overweight’ and revised the target price to Rs 925. This upgrade is driven by better-than-expected margins and cash flow for JLR. The brokerage also highlighted that the company has maintained its market share in the PV space, despite new launches by competitors.
5. Zomato:
This food delivery company’s stock price hit its 52-week high of Rs 134.4 on Friday and rose by 8.2% in the past week after increasing its platform fee from Rs 3 to Rs 4 per order in its key markets. This marks a 33.3% hike, effective from January 1. This is expected to improve the firm’s EBITDA by 5%.
During the month, Zomato received a show cause notice (SCN) from the Directorate General of GST Intelligence for an alleged tax liability of Rs 401.7 crore. This includes interest and a penalty for the period from October 2019 to March 2022. The demand relates to GST not levied on delivery charges collected from customers, on behalf of delivery partners.
The company said it will be filing an appropriate response to the SCN. Zomato has denied the correctness of the tax claim, stating that delivery services were provided by partners directly to customers, not by the company and do not require GST. However, service aggregators like Uber charge 5% GST on driver charges and 18% on comfort charges.
Zomato reported profits for the first time in Q1FY24, followed by a second consecutive time in Q2. However, the tax liability may affect the company’s profitability in Q3FY24. Trendlyne Forecaster estimates Zomato to report a net profit of Rs 97.5 crore in Q3FY24, as against a loss of Rs 346.6 crore in Q3FY23. The company also appears in a screener for stocks with increasing quarterly net profit and profit margin.
CLSA maintains its ‘Buy’ call on Zomato, despite the SCN. The brokerage believes the increase in platform fee could partially offset (about 25%) the impact of GST on its delivery charge, in case the company is liable.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
