1. Hindustan Petroleum Corporation:
This refineries/petro-products firm rose 6.3% on November 7 after reporting a net profit of Rs 5,827 crore in Q2FY24, against a net loss of Rs 2,475.7 crore in Q2FY23. This turnaround was due to higher refining margins and volumes. According to Trendlyne’s Technicals, the company rose 17.4% in the past week, outperforming the Nifty Oil & Gas index by 14.1%. The company also beat Trendlyne Forecaster's profit estimates by 55.7%.
The stock was recently in the news after rising 7.5% on November 8, aided by a 10% decline in Brent crude oil prices the previous week. This surge in stock price has placed the company in a screener of stocks with strong momentum.
The management plans to upgrade its Vizag refinery, to increase production by 67% to 15 metric tonnes. This upgrade will be completed by Q4FY24, and is expected to increase the firm’s refining margins by 25% per barrel. Additionally, HPCL’s Rs 37,000 crore investment in the Barmer refinery project in Rajasthan will help the company enter the oil to chemical segment.
In Q2, HPCL's gross debt was Rs 51,800 crore, a decrease of 24% YoY. However, debt levels are still relatively high due to an ambitious capex plan of Rs 75,000 crore over the next five years, and an annual spending rate of approximately Rs 14,000-15,000 crore.
ICICI Securities, for the rest of FY24, expects lower gross refining margins (GRMs) but stronger retail margins compared to Q2 averages. It projects increased volumes in both the refining and marketing segments, driven by the expansion of Vizag facility and the construction of the Barmer Refinery. It also foresees a recovery in fuel consumption by H2FY24. The broker maintains a ‘Buy’ rating on the stock.
2. Ratnamani Metals & Tubes:
This iron & steel company has risen 18.6% over the past week to touch its all-time high of Rs 3,465 per share. The rise came after it announced a 65.9% YoY growth in its Q2FY24 net profit to Rs 163.4 crore on November 2. Revenue increased by 25.7% YoY due to growth in the steel tubes & pipes and bearing rings segments. Its net profit beat Trendlyne's Forecaster estimates by 40.6%, but revenue missed by 1.9%.
The company’s net profit has improved on the back of its EBITDA margin expanding by 554 bps YoY to 22% in Q2FY24 due to a better product mix. The stock appears in a screenerfor companies with quarterly growth in net profit and profit margin. However, its order book fell by 8% YoY to Rs 2,975 crore, which includes Rs 607 crore worth of export orders. The order book fell due to weak demand in the carbon steel segment.
Manoj Sanghvi, the business head, said, “In the future, we expect to see good traction in the core energy segment, and other critical applications across various industrial segments. This will help us deepen our customer base by expanding the product basket.”
Post results, Keynote Capitals downgraded the stock to a ‘Neutral’ rating from ‘Buy’, with a target price of Rs 3,113 per share. This indicates a potential downside of 6.9%. The brokerage believes that it is difficult for the company to maintain its high growth levels in net profit and revenue. It expects the company’s sales to grow at a CAGR of 17.3% over FY22-26.
3. Prince Pipes & Fittings:
This pipes manufacturer rose 15.3% in intraday trade on Wednesday, after it announced its Q2FY24 results. The street cheered as the company was back in the black on a YoY basis, with a net profit of Rs 70.6 crore in Q2FY24, against a loss of Rs 24.1 crore in Q2FY23. Its profitability has improved on the back of normalising Poly Vinyl Chloride (PVC) prices, improved product mix, and better pricing. Its EBITDA margin shot up to 14.3% from -1.8% in Q2FY23. The company also beat Trendlyne Forecaster’s profit estimates by 55.9%. It shows up in a screener for companies with improving cash flows and high durability scores.
The management has guided for an improvement in sales volumes, which will be on par with its peers. Over the past few quarters, the firm’s volume growth had lagged behind the industry’s due to its limited presence in key segments such as high-density Polyethylene (HDPE) pipes (used in government infrastructure projects). Prince Pipes has expanded its production capacity for HDPE pipes, which helped improve volumes in Q2. Its volume growth had been impacted by unfavourable pricing, which the firm rectified with its recent price adjustments.
The management expects PVC prices to remain stable and has guided for an EBITDA margin of 12-14% over the medium term. ICICI Securities believes that the company will see healthy revenue growth, led by improved demand from the plumbing, infrastructure and agriculture sectors.
4. Jyothy Labs:
This FMCG company hit its all-time high of Rs 424.7 on Thursday, marking a 14.9% rise over the past week. The spike came after the company reported 61.1% YoY growth in its Q2FY24 net profit to Rs 104.2 crore, with revenue increasing by 12.2% YoY to Rs 745.6 crore. It beat Trendlye Forecaster’s net profit estimates by 14%, while revenue met the forecast. The company features in a screener for durable stocks with improving cash flow.
Jyothy Labs’ expansion into new geographies, market share gain and strength across segments have been key factors behind its growth. The EBITDA margin expanded by 628 basis points YoY to 18.5% due to a reduction in raw material costs. The expansion was primarily in the fabric care segment (43% of total sales), where margins grew by 1,100 basis points to 26.1%. All segments, except for household insecticides, reported double-digit growth. The fabric care and dishwashing segments saw revenues rise by 11% YoY and 10% YoY respectively, while personal care reported a 22% YoY increase. The company has managed to sustain demand despite constant inflationary pressures affecting FMCG products.
However, the management has noted a rise in competitive pressures and is focused on boosting volumes and maintaining growth rates. Managing Director M R Jyothy stated, “Jyothy Labs will handle increasing competition with promotional spending and wider distribution.” For FY24, the management expects sales to continue their growth trajectory, driven by volume.
ICICI Securities maintains its ‘Buy’ call on Jyothy Labs, projecting an EBITDA and net profit CAGR of 31% and 39%, respectively, over FY24-25. This outlook is based on the management’s focus on market share gains and volume growth.
5. Trent
This retailing company has risen around 11.2% in the past four days, and touched its all-time high today, after strong Q2 earnings. Trent’s net profit surged by 152.3% YoY to Rs 234.7 crore, beating Trendlyne’s Forecaster estimates by 69.8%. This was driven by lower finance expenses. Its revenue also improved by 52.7% YoY, aided by growth in its garments and emerging categories (which include beauty and personal care, innerwear, and footwear).
With a 19.7% increase in the past month, Trent has outperformed its sector by 15.6%. The rise in share price places it in a screener of companies with strong momentum.
Its strong performance in Q2 is led by its like-for-like (LFL) growth of 10% and retail expansion. According to ICICI Securities, Trent’s LFL growth is the highest in the apparel space. During the quarter, the company opened six Westside stores and 27 Zudio stores, taking the total store count to 222 and 411, respectively. Noel N Tata, the Chairman, said, “We will expand and deepen our store presence with the aim of being closer to customers.”
The company’s Star business (hypermarket and supermarket store chain) has also reported a 30% YoY increase in revenue, led by strong LFL and volume growth. Axis Securities remains positive about Trent’s performance despite the muted consumer demand environment. It maintains its ‘Buy’ rating with an upgraded target price of Rs 2,750. The brokerage expects the company to deliver strong sales growth in the coming quarters, driven by rapid store expansion.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
