1. Aster DM Healthcare:
This healthcare facilities company rose 18.9% and touched its all-time high of Rs 424.4 per share on Wednesday after its board of directors approved the sale of its Gulf business, Aster DM Healthcare FZC, to Alpha GCC Holdings for $1 billion (approximately Rs 8,330.1 crore).
Alpha GCC Holdings, a consortium of Fajr Capital and other members, will own a 65% stake, while the promoters will own the remaining 35% after the transaction. This deal means Aster DM will now focus solely on its operations in India. The firm also plans to distribute the proceeds from the deal as a dividend to its shareholders. The company shows up in a screener of stocks with prices above short, medium and long-term moving averages.
The divestment of the Gulf business aims to create a separate operational entity for India, enabling independent operations and a separate board structure. Despite contributing nearly 75% of consolidated revenue, the Gulf business’ lower margins and higher capital requirements had depressed the valuation. After the divestment, the company’s net profit growth jumped to 146% YoY compared to a 19% YoY fall seen pre-segregation in FY23. Its EBITDA margin also jumped by 200 bps to 15%.
Speaking on the divestment, the company’s founder, Azad Moopen, said, “Profitability of the Gulf business was lower because the GCC region is hyper-competitive for a smaller population, compared to the relatively underserved Indian market. The GCC sale will unlock the Indian entity’s potential for growth, which should see this business continue to grow at over 25-30%.”
2. Tata Power Company
This electric utilities company has risen around 5.8% in the past week and touched a new 52-week high today. This comes after it announced its plans to invest a capex of Rs 60,000 crore by FY27, during the analyst meet on Tuesday. Around 45% of this capex will be used for expanding its renewable energy segment. The company will invest around Rs 15,000 crore in FY24 and Rs 20,000 crore in FY25. In addition, the company’s arm, Tata Power Renewable Energy, has received a letter of award (LoA) to develop a 200 MW firm and dispatchable renewable energy (FDRE) project with SJVN.
Over the past month, the company’s share price has risen by 15.4%. In Q2FY24, Tata Power’s net profit rose 6.9% YoY to Rs 875.5 crore, due to lower fuel expenses. Its operating margins improved by 7.1 percentage points YoY on increased transmission and distribution (T&D) activities and lower costs for coal and solar cells. The electric utilities major plans to double its revenue and profits in the next four years, on the back of these new investments.
Sharekhan is optimistic about the company’s shift towards clean energy and believes that growth will be largely driven by the distribution and renewable energy segments. It expects PAT to see a CAGR of 11% over FY23-FY26E. The brokerage maintains its ‘Buy’ rating on Tata Power with a target price of Rs 285.
During the Q2 earnings call, Praveer Sinha, the Managing Director and CEO, highlighted the company’s focus on clean energy. He said, “We have set an ambitious target that by 2030, 70% of our installed capacity will be clean energy.” Currently, its clean energy portfolio stands at 5,500 MW which is nearly 38% of its installed capacity.
3. Bharat Heavy Electricals:
This heavy electrical equipment manufacturer hit its 52-week high of Rs 176.5 on Thursday. Over the past week, it rose by 19.4%, driven by a positive business outlook. It bagged a contract worth Rs 2,956 crore on Wednesday from the Ministry of Defense for supplying 16 advanced guns to the Indian Navy. Additionally, Bharat Heavy Electricals has signed a memorandum with a French state-owned company to explore opportunities in the Jaitapur nuclear power plant project in Maharashtra.
The company holds a 70% market share in power equipment manufacturing in India. It is now looking to diversify its revenue sources by foraying into new segments like railways (Vande Bharat train sets), pumped-hydro storage facilities, and other defence equipment. The stock also appears in a screener of companies efficiently managing their assets to generate profits. According to Trendlyne’s Forecaster, its annual net profit is expected to rise by 13.8% YoY to Rs 509.4 crore in FY24.
Over the past year, the stock has risen by 103.7%, particularly gaining momentum since mid-2022. The street is optimistic about the company’s prospects due to increasing demand for coal-based power and the Centre’s focus on infrastructure development. Given the firm’s presence across segments, its order book has seen robust growth.
The pick-up in new orders is likely to accelerate due to the increasing domestic demand for power. Given the firm's massive market share, it is expected to get a big share of the orders, from the ongoing capacity expansion plans in India. ICICI Securities maintains its ‘Buy’ call on the stock. According to analysts, a decrease in raw material prices and improved working capital management can boost the company’s margins.
4. Central Depository Services (India):
This investment companies firm rose 4.2% on November 23 following the announcement of it becoming the first listed depository to cross 10 crore active demat accounts. The number of active demat accounts grew by 31.8% YoY to 9.6 crore in Q2FY24. According to Trendlyne’s Technicals, the stock rose by 5.9% in the past week, mainly due to the IPO season, especially the Tata Technologies IPO.
In Q2FY24, the company’s revenue improved by 39.2% YoY. This increase was due to a significant rise in transaction revenue, IPOs/corporate actions, KYC processing, and strong seasonal earnings from e-voting. The company’s EBITDA margins marginally improved by 6 bps YoY to 62.4% due to lower finance expenses, which were offset by higher technology and employee expenses. The company appears in a screener of stocks with growing net profit and margins.
The depository’s demat accounts have grown by 8.3% in the current quarter, the highest in seven quarters. Central Depository Services maintains a dominant market share of 74%, with an incremental share of 89%. Additionally, it generates steady revenues from charges imposed on annuity issuers, which are not linked to market fluctuations. The income generated from the annuity division provides revenue visibility.
HDFC Securities says the mandatory demat requirement for non-small private limited companies presents significant growth prospects. The Ministry of Corporate Affairs has set a compliance deadline of September 2024 for about 1.4 million private limited companies. Despite increased technology investments and growing regulatory and labour expenses, the company’s EBITDA margins are expected to remain within the 60-62% range. The broker maintains a ‘Buy’ rating on the stock.
5. PCBL:
This chemicals manufacturer hit its all-time high of Rs 278 on Thursday and marked a 37% rise over the past month. The company acquired Aquapharm Chemicals for Rs 3,800 crore, allowing PCBL to foray into global specialty segments for water treatment chemicals and oil & gas chemicals. This is in line with the company’s vision to create a global specialty chemical business portfolio.
PCBL has also formed a battery application joint venture (JV) with Kinaltek, where it holds a 51% stake and will invest $16 million. This diversification of the portfolio aims to reduce the company's reliance on the tyre industry, where it supplies carbon black.
In Q2FY24, PCBL’s consolidated net profit grew by 5.4% YoY to Rs 122.6 crore, despite an 8.7% YoY fall in revenue. It beat Trendlyne Forecaster’s net profit estimate by 4.7%, while revenue was in line with estimates. Gross margin expanded by 6.8 percentage points YoY despite lower realisation and volumes. This was due to reduced raw material costs. The company also features in screener for stocks with improving ROCE over the past two years.
PCBL has also benefited from the commissioning of its carbon black facility in Chennai, which added 9 ktpa (kilo tonnes per annum) to sales and achieved 50% utilisation. Utilisation rates are expected to reach 80% in 3-4 quarters. The management expects to add 80-100 ktpa of carbon black capacity per annum to meet strong domestic and international demand. Due to its expansion efforts, PCBL stands to benefit from the European ban on Russian carbon black (752 ktpa), effective July 2024.
ICICI Securities maintains its ‘Buy’ call on PCBL on the back of its entry into the conductive carbon black business. The brokerage believes that it will be an added growth driver and boost margin expansion.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
