My Newsfeed

China has been a naval power longer than some countries have existed - the Song Dynasty, dating back to the 12th century, had a permanent standing navy, with squadrons and fighting vessels. For China, aggression via sea is an old tactic, and its growing maritime presence around India in recent years has raised eyebrows.

China's naval strategy around India involves an expanding network of ports across the Indian Ocean, essentially encircling India and forming what experts have called the "String of Pearls". 

This not only positions China as a key regional player in the Indian Ocean but has also made any potential response from India more complicated.

The strategic significance of these Chinese or China-funded ports cannot be overstated, as they serve as crucial hubs for international trade, connectivity, and regional influence. It's important to note that the civilian ports China has invested in, must provide logistical support to the Chinese navy if required. The Chinese investments thus come with military commitments to China. 

This edition of Chart of the Week explores the key Chinese-operated ports in the Indian Ocean region, examining their growth, investments, and the broader implications for India and its neighbours. 

China encircles India, by investing in eight ports in the Indian Ocean

India’s neighbours are, Pakistan, Sri Lanka and Bangladesh. All three countries have received port investments from China. 

Under the China-Pakistan Economic Corridor (CPEC), China has invested in two Pakistani ports: the Gwadar port ($248 million investment) and the Karachi deep-water terminal ($550 million investment). 

China's engagement with the Gwadar Port has unfolded in two phases. The first phase took place from 2002 to 2006, involving a financial infusion of $248 million through foreign aid grants from the Chinese government and loans from the Export-Import (Exim) Bank of China. The second phase, initiated in 2013, remains undisclosed in terms of the invested amount. Under this agreement, China will be providing financial investment in exchange for a concession agreement to conduct operations at the port. 

The second port, the Karachi Deep Water Container Terminal, commenced its operations at Karachi Port in December 2016. The port was established through a public-private collaboration between Karachi Port Trust (KPT) and Hong Kong's Hutchison Ports. Its significance lies in providing optimal access to ships entering Karachi, which is strategically positioned in the CPEC under China's Belt and Road Initiative (BRI).

In addition, there is a direct investment pledge of $3.5 billion from the Chinese government in the Karachi Coastal Comprehensive Development Zone (KCCDZ) from 2021, according to reports. Unlike a conventional loan, this investment aims to transform the underutilised land of the Karachi Port Trust into a multi-purpose residential, commercial, and seaport infrastructure. 

Debt-ridden Sri Lanka has, thanks to its highly strategic location, two ports under Chinese influence: Hambantota Port and CICT Terminal Colombo. China has invested around $1.3 billion in the former and $500 million in the latter. State-owned China Merchants Port Holding (CMPH) is the contractor for both these ports. Hambantota Port received funding from China’s Exim Bank in two phases: an initial $508 million from 2007 to 2014, and a subsequent $808 million from 2014 onwards. Under the agreement, CMPH will get a 99-year concession agreement of $1.12 billion and 85% ownership of the port.  

Bangladesh also has two ports with major Chinese investments. The Chittagong Port and the Payra Port have investments of $400 million and $600 million respectively. Mongla Port is contracted out to China National Complete Engineering, another state-owned entity. It is one of the main seaports of Bangladesh, handling about 80% of the nation's export-import trade. 

As for the Payra Port, the construction and development of its core infrastructure started in 2016. The project was executed by two Chinese companies, China Harbour Engineering Company (CHEC) and China State Construction Engineering Corporation (CSCEC). CHEC was responsible for building the core infrastructure, which amounted to $150 million, while CSCEC undertook tasks such as fortifying riparian areas, reducing flood risks, and establishing housing, education, and health facilities, involving an investment of $60 million. 

Much like Pakistan, Myanmar is also involved in China's BRI through the China-Myanmar Economic Corridor (CMEC). China earmarked an investment  of $1.3 billion for the Kyaukphyu Port, starting from 2020. The total project cost was $7 billion. However, Myanmar’s National League of Democracy (NLD) regime reduced the project's scope in 2020,  due to fears of falling into a debt trap. The China International Trust and Investment Corporation Group (CITIC) leads the project, which also involves creating an industrial zone. Situated on the western coast of Rakhine state, , the Kyaukphyu Port occupies a strategic location on the Bay of Bengal. This geographical positioning follows the trajectory of the 21st-century Maritime Silk Road, a modern-day maritime route that interlinks Asia, Europe, and Africa.

China looks to expand far east with ports in Cambodia and Malacca

China has increased its presence in Cambodia through a $1.5 billion investment in the Ream Naval base. This initiative, led by state-owned Shanghai Construction Company and China Bridge and Road Company, is set to be operational by 2025. The initial project phase has a $200 million investment to establish container operation zones, commencing with a yearly capacity of 300,000 TEU (twenty-foot equivalent unit). Plans include highway connections, including one to the nearby capital, Phnom Penh. Recent reports indicate swift progress, with the pier development underway in the first half of 2023.

Adjacent to the Cambodian naval base is Malaysia's Malacca Port, a crucial link between the Indian Ocean and the South China Sea. The project was awarded in 2016 to Malaysian developer KAJ Development. Collaborating with Chinese companies like PowerChina International Group, a subsidiary of China's State Power Investment, along with Shenzhen Yantian Port Group and Rizhao Port Group, KAJ envisioned a 246-hectare project featuring economic zones, upscale housing, hotels, and diverse tourist attractions. However, the project was left incomplete after the Malacca government cancelled the agreement with KAJ Development owing to three years of inactivity in November 2020.In December 2022,  the countries made new plans for the redevelopment of the port into a new deep sea port with an investment of $7.2 billion from China. The redevelopment deal also includes a commitment of imports of $2 trillion from Malaysia over the next five years.

China continues to make new investments in African nations

We now shift our focus to the African continent, where China stands as one of the top four investors with investments reaching $3.4 billion in 2022 and another $1.3 billion by April 2023. 

Among African countries, Sudan represents one of China's earliest engagements with the continent. Sudan’s Haidob port received a Chinese investment of $141 million, and was inaugurated in December 2020. This facility is dedicated to the transportation of livestock such as cattle, camels and sheep to Asian markets. In the vicinity,  Eritrea and Djibouti have two ports with major Chinese investment - the Massawa Port and the Doraleh Multipurpose Port, respectively. Massawa Port’s project was contracted to state-owned China Harbor Engineering Company for $400 million. Doraleh, on the other hand, was financed for $405 million by China’s Exim Bank and was contracted to state-owned China Civil Engineering Construction Corp and Channel Engineering Bureau Group.

Coming to the Southern part of Africa, we  encounter Tanzania, home to the Dar Es Salaam and Bagamoyo ports. For the Dar es Salaam Port, a $154 million contract was awarded to China Harbour Engineering Company in 2017. The project involves the expansion of the primary port in the commercial hub, the construction of a roll-on, roll-off terminal, and the enhancement of the depth and resilience of seven berths within the port. On a different note, the Bagamoyo Port is a stalled $10 billion project, which is being renegotiated between the Tanzanian Government and China Merchant Port.

Mirroring Tanzania, Kenya also hosts two ports with Chinese funding - Lamu and Mombasa. The Lamu Port plays a crucial role in the expansive transportation corridor linking Lamu, South Sudan, and Ethiopia. This corridor, known as the Lamu Port South Sudan-Ethiopia Transport (LAPSSET) corridor, is valued at $23 billion. The initial phase of this project, which involves constructing 32 berths, was undertaken by the state-run China Communications Construction Company at $367 million in 2021, focusing on the first three berths. The Mombasa-Nairobi standard gauge railway received a $3.2 billion loan from China’s Exim bank. The initial auditor’s report suggested that the Mombasa port served as collateral, and any default on yearly payment of $705 million could result in a Chinese takeover, akin to the events in Sri Lanka. 

China eyes global trade with two ports in the Suez Canal

From eastern and southern Africa, we move to the ports along the Suez Canal, which is a vital route for India’s trade  with Europe. Among these, Port Said is situated in the northern part of the canal and Ain Sokhna Port occupies the southern part. China’s COSCO Shipping Ports (CSPL) has purchased a 25% stake in a new container terminal at the Ain Sokhna Port for $375 million. The company already had a 20% stake in the non-controlling container terminal at Port Said. 

In Australia, the Darwin Port was leased to China’s Landbridge group for $390 million for a period of 99 years. As Australia’s relations with China deteriorated in recent years, the Australian government decided to build a new port in Darwin for $1.5 billion. 

In conclusion, China's "String of Pearls" strategy involves strategic investments in maritime ports along the Indian Ocean, thereby reshaping regional geopolitics. Ports like Gwadar, Hambantota, and Chittagong enhance China's influence through initiatives like BRI and CPEC. The situation in Hambantota, Sri Lanka, is a warning about the risks of falling into debt traps. The impact extends to trade routes like the Suez Canal, reflecting China's global maritime ambitions. These nations are striving to strike a balance between reaping economic benefits and addressing security concerns, thereby reshaping policies in response to China's ever-expanding maritime network.

  1. Mazagon Dock Shipbuilders: 

Thisshipbuilding firm is making headlines due to the government’s plans to tender six Air Independent Propulsion (AIP)-capable diesel submarines worth around Rs 43,000 crore. It's the only Indian firm capable of building destroyers and conventional submarines. According toTrendlyne Technicals, the stock has risen by 8.8% in the past month. The firm’s order book at the end of June 2023 was pegged at Rs 39,117 crore, which is executable till FY27. However, the peak revenue recognition is expected in FY25 if no new major orders are bagged.

Mazagon Dock Shipbuilders’ Q1FY24 revenue increased marginally by 1.6% YoY, but net profits surged by 39.5% YoY. The bottom-line growth was driven by the faster commissioning of the P15-B destroyer ship. The management has given a revenue guidance of 10-12% for FY24, with margins at FY23 levels. Mazagon Dock has planned a capex of Rs 500 crore towards a floating dry dock.

The firm has tied up with ThyssenKrupp Marine System (TKMS) to participate in the bidding for P75I submarines (6 numbers), with an expected order value of around Rs 43,000 crore. Mazagon Dock Shipbuilders and L&T (along with Spain-based firm Navantha) have been shortlisted for the bidding process. The firm is also expecting an extension of the P75 submarine (3 numbers) valued at around Rs 22,000 crore. Apart from this, periodic refit and life certification projects are in the pipeline.

ICICI Securities says that despite Mazagon Dock’s strong execution capability, uncertainties around ordering timelines for P75I and P75 and its depleting order book pose a risk to revenue growth. The brokerage maintains its ‘Sell’ rating.

2. Kalyan Jewellers India: 

This gems and jewellery retailer has risen by 18.2% in the past week, reaching a 52-week high of Rs 228.4 on Thursday. The increase comes after the company announced a 33.3% YoY improvement in its Q1FY24 net profit to Rs 143.9 crore, beating Trendlyne Forecaster’s estimate by 16.9%. Its revenue also grew by 31.3% YoY to Rs 4,387.4 crore, beating the estimate by 3.7%. This revenue surge was driven by robust store expansion and high momentum in footfall.

For FY24, Kalyan Jewellers has plans to open 52 new stores in India under the FOCO model (franchise owned while the company operates). This approach will reduce capex costs and contribute to margin expansion. The management also aims to convert its digital platform Candere into an omnichannel model by launching 25 new stores in FY24. This rapid expansion may lead to further top-line growth. In Q1FY24, Kalyan Jewellers’ operating profit margin stood at 7.8%, while its peer Titan’s was 11.2%.

But the jewellery maker needs to absorb and train employees much before the store openings, leading to increased employee cost expenses. It already added nearly 600 employees in Q1. The company also features in a screener for stocks with growing YoY costs for long-term projects. 

Along with the expansion push, Kalyan Jewellers may also benefit from the rising share of organised jewellery retailers. These organised retailers are expected to claim over 40% of the market share by FY25 from 32% in 2020.

ICICI Securities maintains a ‘Buy’ call on Kalyan Jewellers and foresees  revenue and profit CAGR of 21% and 28% respectively by FY25. It retains its stance based on the company’s execution performance capabilities, which it expects to sustain in the future. According to Trendlyne Forecaster, the company has a consensus recommendation of ‘Strong Buy’ from 6 analysts.

3. Jindal Steel & Power: 

This metals & mining stock has been on the decline since Monday following its announcement of a 15% decrease in net profit to Rs 1,691.8 crore in Q1FY24 on August 11 post-market hours. Its revenue also fell by 3.3% YoY to Rs 12,588.3 crore due to a fall in pellet production and delays in the commissioning of key steel manufacturing facilities. These caused the company to appear in a screener of stocks with declining quarterly revenue and net profit (YoY). While its revenue was in line with Trendlyne’s Forecaster estimates, net profit beat estimates by 111.1%.

Despite the dip in net profit, Jindal Steel & Power's EBITDA margin expanded by 560 bps YoY to 21.6%, owing to a reduction in the cost of raw materials due to lower iron ore and thermal coal prices. It has managed to conclude the mining lease of Utkal C and Gare Palma IV/6, along with the commissioning of a 6 MTPA pellet plant at Angul, despite a delay in the commissioning of steel plants. This will bring down the cost of thermal coal. The delay in the commissioning of the steel plants was due to the hold-up in environmental approvals. Bimlendra Jha, Managing Director of the company, said, “The mining lease for the two thermal coal mines will lead to consistent availability of coal for our thermal coal requirements in DRI Kilns, Coal Gasification and Power Plants at lower costs.”

Following the results, ICICI Securities has maintained its ‘Buy’ rating on the stock with an upgraded target price of Rs 810 per share. This indicates a potential upside of 26.4%. The brokerage believes that the delay in the steel mining activities in Angul will affect revenue growth in the near term. However, it expects the company’s EBITDA margin to improve on the back of the captive coal mining and pellet plants. The brokerage expects its revenue to grow at a CAGR of 3.6% over FY22-25.

4. Tejas Networks:

This telecom services company rose nearly 7% in intraday trade on Wednesday after  winning a contract worth Rs 7,492 crore from TCS. The contract involves supplying radio access network (RAN) equipment for BSNL's 4G/5G network project. As per the deal, the firm will supply RAN equipment across 1 lakh sites and the project is expected to be executed during 2023 and 2024. 

This deal seems to have accelerated the recovery of Tejas Networks' share price. The stock had declined by nearly 10% after the announcement of its Q1FY24 results on July 21. Its net loss widened nearly 4X YoY to Rs 26.3 crore due to sharp increases in raw material costs and employee expenses. The firm's revenue growth of 49.5% YoY was not enough to offset the effects of rising input costs. It shows up in a screener for companies with net profit declining sequentially over the past three quarters. 

However, Tejas Networks has not lost its positive momentum entirely. It achieved robust top-line growth in its domestic and international segments. The company's order book for the wireless business at the end of Q1FY24 stood at Rs 1,909 crore, with 86.5% of the orders coming from the Indian market. Arnob Roy, the Chief Operating Officer of Tejas Networks, said, “Around 50-60% of the company’s total order book will be executed by the end of FY24.” In addition, the recent deal win from TCS adds to the already healthy order book. However, the focus falls on order execution to bring the firm back to profit from loss. 

5. FSN E-Commerce Ventures (Nykaa):

This internet and catalogue retail company plunged over 8% on Monday after reporting a 27.4% fall in its Q1FY24 net profit, missing Forecaster estimates by 83.2%. The net profit decline can be attributed to increased costs of raw materials, finance, and employee benefits. The slowdown in discretionary spending also dragged the net profit down during the quarter. However, its revenue has improved by 23.8% YoY, driven by the beauty & personal care (BPC) and fashion segments. 

During the quarter, Nykaa’s GMV (gross merchandise value) grew by 24% YoY. Specifically, the GMV of the BPC segment (constituting 63.7% of the total GMV) rose by 24%, while the fashion segment’s GMV (24.5% of the total GMV) increased by 12% YoY. Nykaa’s BPC business has remained strong despite a slowdown in discretionary spending, while the fashion segment saw muted growth. Falguni Nayar, the CEO, said, “During the quarter, growth in fashion has been below our long-term expectation. I think it was a particularly tough quarter for fashion and the industry is hoping for a revival." She has also highlighted that the company remains focused on its own brands as it is key to profitability. Own brands now constitute 14% of Nykaa’s overall Fashion GMV, up from the earlier 12%, and they achieved a 30% YoY growth in Q1. 

ICICI Securities highlights that the company’s EBITDA margins have expanded at a slower pace than expected. Nykaa’s EBITDA margin improved 120 bps YoY to 5.2%, largely driven by lower marketing & advertising expenses. However, the management foresees margin expansion through the scaling up of its eB2B business and the optimisation of marketing spends. The brokerage has downgraded its rating to ‘Add’ with an unchanged target price of Rs 165. As a result, Nykaa  makes it to a screener of companies with broker downgrades in price or recommendation in the past month.

Oil is not a dependable bet. Like other commodities, its price seesaws in unpredictable ways, and many analysts who tried to predict the future price of oil have got their fingers burned (remember the $200 price per barrel predictions in early 2022?)

Oil-producing nations have also taken a hit recently from the price volatility.

For a time, things were good. The OPEC countries saw windfall profits from April 2022 to January 2023 due to the Russia-Ukraine war. But the trend has since reversed. Excess supply is sloshing around in the market, and the unexpected slowdown of China's economy has hit oil prices hard.

in response, OPEC cut oil production, which drove oil prices higher by 18% since June 2023. But the cuts didn't have the full price impact they had hoped for. The S&P had projected that oil prices would be around $90 in 2023, but the ramp-up in Iranian oil production has cut short the rally, pushing prices down to $84 from a recent peak of $88.

In the meantime, India and China have benefited from cheap Russian Ural. But the price gap between Russian Ural and Saudi crude on delivery has narrowed,  from a $20 difference in the first quarter of 2023 to $8 in August. 

In this week’s Analyticks:

• Oil price dynamics: Oil prices are defying analyst predictions
• Screener: Commodities stocks with the highest revenue and net profit growth in Q1FY24

Let’s get into it.

As oil consumption slows, OPEC makes production cuts to keep prices up

GDP growth hasslowed down for most countries this year, resulting in lower crude oil consumption. China, the largest crude oil importer, and other developed nations are consuming less oil than expected.  The increasing adoption of electric vehicles across Europe, the US, and China has also limited the demand for crude.

The slowdown in consumption has resulted in higher inventory levels over the past four quarters.

Production cuts will lower inventory levels in the second half of 2023

To improve their revenue streams and get a better price for their oil, the OPEC cartel collectively reduced oil production by 1.2 million barrels per day. They are now looking to extend these cuts beyond September 2023. 

Saudi Arabia faces a potential budget deficit

Saudi Arabia depends on oil and petroleum for nearly 75% of its budget revenue. The surge in oil prices in 2022 gave  the Saudis a fiscal surplus of $27.7 billion. The country used the money to increase its defense spending. It also spent around $6 billion to acquire famous football players for its sports teams - including Portugal's Cristiano Ronaldo and Brazil's Neymar. 

However, with oil prices below $80 in the first half of 2023 and exports falling to a 19-month low, Saudi Arabia has had to pause its spending spree. Now the country is staring at a possible fiscal deficit. It already saw a budgetary deficit of roughly $2.2 billion in the first half of 2023.

Saudi Arabia saw budget surplus in 2022, after eight years of deficit 

According to the IMF, Saudi Arabia needs oil prices to be above $81 in 2023 to break even in its budget spending. TheIMFhas cut the Saudi economy's GDP growth forecast for 2023 from 3.1% to 1.9%, owing to lower oil prices and production cuts.

Saudi Arabia’s breakeven price of crude to meet its expenses stands at $81 per barrel in 2023 

As India and China turn to Russian Ural, Europe has replaced Asia as the top destination for Saudi crude oil. But Europe has not entirely compensated for Asia’s demand decline. To boost oil prices, Saudi Arabia inJune 2023 announced a voluntary production cut of 1 million barrels per day till September, on top of OPEC’s production cut of 1.2 million barrels per day.

Russia's cash crunch is also forcing it to cut oil production

The other big oil producer, Russia finds itself in a tough spot due to its expensive military campaign in Ukraine, and price caps on Ural exports imposed by the US and its allies. The Russian Ural, which is trading at a significant discount to crude, is being snapped up by India and China.

But higher volumes sold have not been able to make up for the revenue loss due to the price cap. This has led to a fiscal deficit of $28.3 billion fir Russia in the first half of 2023.

Russia is expected to have a budget deficit of 2.6% in 2023

Russia sold its oil for around $50-55 per barrel in the first half of 2023, but higher Ural prices in the second half of 2023 (around $60) are expected to reduce its deficit. To increase its revenue, Russia raised taxes on oil exports by 8% in August 2023.

Russia is taking steps to raise its oil price. It has pledged to reduce its crude exports by 5,00,000 barrels per day in August and an additional 3,00,000 barrels per day in September. A recent drone attack by Ukraine on a Russian oil tanker has also raised concerns about Ural supply, causing Ural prices to breach the $60 cap.

India walks the line, buying Russian oil at rates above price caps

China and India have been vocally against the price cap on Russian oil. They argue that since they aren't involved in the Russia-Ukraine conflict, their economies shouldn’t suffer. Finance Minister Nirmala Sitharman insisted that India will buy Russian Ural above the $60 price cap as long as it is cheaper than the market rate.

Right now, there are ways to get around the price cap. Unlike the free on board (FOB) basis, India’s crude import price is decided on a delivery basis (which includes the price of crude, insurance, shipping and other handling charges). This limits the transparency on the final price India is paying to Russia. 

India’s on-delivery price of Russian Ural for June stood at $68.2, while for Saudi crude oil it was $81.8. However, the latest data from Argus Media suggests that August's Ural crude delivered to India’s west coast is around $82. 

Russian Ural prices are at a discount of 16.6% compared to Saudi crude on a delivery basis

With the Ural price now significantly above the $60 per price cap, freight cost adjustments will be too large to go unnoticed. India and Russia need to find financiers, insurance providers, and shipping lines unaffected by Western sanctions. China, on the other hand, can substitute Russian Ural with Iranian oil. For India discounted Russian oil is the only way out to soften the blow of rising crude prices. 

India is now limiting its Russian imports

India depends on imports to fulfill 85% of its crude consumption, with Russian crude accounting for about 45% of these imports. India cannot buy more Russian oil because it has limited storage space (strategic reserves), which can hold only 9.5 days' worth of crude. And due to India's minimum purchase agreements with other traditional suppliers, it can't replace all of them with Russian imports. 

As the discount on Russian oil narrows, it becomes less appealing to export refined oil to Europe. This and India’s limited refining capacity for Russian Ural has restricted Ural imports to 2 million barrels per day.

Russian oil imports to India peak at 2 million barrels per day

While India has maintained a steady supply of refined oil exports to Europe so far, rising Ural prices could pose a challenge in India avoiding sanctions. As Western scrutiny intensifies, it remains to be seen whether India will persist in purchasing Russian Ural above the $60 cap. 

Screener: Oil, cement, utilities stocks with the highest revenue and profit growth in Q1FY24

HPCL shows strong growth in QoQ revenue and operating profit margin

As prices of raw commodities soften, margins for companies in key sectors have improved, resulting in increased profits. This screener shows stocks from the oil & gas, cement & cement products and utilities sectors with the highest growth in revenue and net profit in Q1FY24, along with an expansion in operating profit margin.

Significant stocks that appear in the screener are GMR Airports Infrastructure, Tata Power, Hindustan Petroleum Corp, JSW Energy, Bharat Petroleum Corp and ACC.

Hindustan Petroleum Corp’s revenue grew by 10.3% QoQ to Rs 1.2 lakh crore in Q1FY24, while its net profit improved by 87.5% QoQ to Rs 6,765.5 crore compared to a loss in Q1FY23. The oil & gas company has also posted an operating profit margin of 8.1% during the quarter. This was aided by a decline in the cost of raw materials due to an 8.7% decline in Brent crude oil to $72.7 per barrel.

Another oil & gas company, Bharat Petroleum Corp, also gained from the decline in crude oil prices. Its operating profit margin increased by 17.1% QoQ in Q1FY24. This contributed to a 54.9% YoY increase in net profit to Rs 10,644.3 crore during the quarter.

Cement company ACC’s revenue improved by 8.6% QoQ to Rs 5,278 crore in Q1FY24. Its net profit improved by 97.8% QoQ to Rs 466.1 crore, aided by a reduction in power &  fuel and employee benefit expenses. This led to an improvement in margins, with the operating profit margin rising 5.3 percentage points to 14.8%.

You can find more screeners here.

This week’s analyst picks look at stocks with high net profit and revenue growth in the recent Q1FY24 results.

1. Tata Motors: 

Geojit BNP Paribas upgrades its rating on this automobile company to a ‘Buy’ with a target price of Rs 737. This indicates an upside of 19.1%. In Q1FY24, Tata Motors reported a profit of Rs 3,202.8 crore, as against a loss of Rs 5,006.6 crore in Q1FY23. Its revenue has also grown by 42.3% YoY to Rs 1,03,596.6 crore. Analyst Saji John says, “Tata Motors reported strong profitability, driven by robust demand for luxury cars and continued growth in the commercial vehicles and private vehicles segments.”

The analyst believes that Tata Motors’ Indian business is steadily recovering, and anticipates sustained growth in the near term. He expects the company’s continuous efforts to minimise cost, especially in the Jaguar-Land Rover (JLR) division, and the favourable product mix to drive margin expansion in the coming quarters. John is optimistic on the stock, given JLR’s robust order backlog, rising demand, awareness of electric vehicles and favourable industry trends.

2. Maruti Suzuki India: 

KRChoksey maintains its ‘Buy’ call on this vehicle manufacturer with a target price of Rs 11,170, indicating an upside of 18.6%. In Q1FY24, the company’s net profit grew by 143.7% YoY to Rs 2,525.2 crore, while its revenue increased by 25.3% YoY to Rs 33,316.9 crore. Analyst Ashvath Rajan says, “Maruti Suzuki  outperformed the industry and the management expects the demand momentum to continue on the back of a good model lineup.”

The analyst believes that the growth in Q2FY24 will be impacted due to a high base effect, but absolute sales will continue. He also believes that the company has seen consistent improvement in its product mix due to the growing share of utility vehicles and new launches, which has led to better realizations. Rajan expects margin expansion to be led by stable commodity costs, a better product mix, better realizations and cost-saving efforts. He expects the company’s revenue and profit to achieve a CAGR of 14.9% and 25.7%, respectively, over FY24-25.

3. APL Apollo Tubes: 

ICICI Securities maintains its 'Buy' rating on this iron & steel products company with a target price of Rs 1,740, indicating an upside of 10.4%. Analysts Aman Dixit, Mohit Lohia and Pritish Urumkar hold a positive outlook due to the management's commitment to achieving a capacity of four metric tonnes per annum (MTPA) by the end of FY24 and five MTPA by the close of FY25. In Q1FY24, the company's profit surged by 80.8% YoY to Rs 193.6 crore, while revenue witnessed a 32.2% YoY increase.

The analysts believe that the company is resolute in its growth trajectory, focusing on capacity expansion, geographical diversification, and enriching the product mix. They project the company achieving a 10 MTPA capacity by FY30. Additionally, the management plans to raise the share of value-added sales to 70% by the end of FY25, compared to 57% in Q1FY24. The analysts see potential for a stock rally, given the management's growth plans and the expectation of improved profitability through value-added products and the advantages of scale in the short term.

4. Indigo Paints: 

Sharekhan maintains its ‘Buy’ rating on this paint manufacturer with a target price of Rs 1,850. This implies an upside of 21.8%. In Q1FY24, the company’s net profit surged by 57.2% YoY to Rs 31.3 crore and revenue grew by 23.7% YoY. Analysts at Sharekhan point out that the firm’s YoY revenue growth rate has outperformed the industry rate by nearly three times. They attribute this to “the company’s special focus on Tier-1 and 2 cities, along with various initiatives. Growth in Tier-1 and 2 cities is ahead of Tier-3 and 4, and rural areas. The management expects the trend to continue”

The analysts believe that the company’s strategy of focusing on Tier 1 & 2 cities will help it outperform the industry’s growth rate over the next 2-3 years. They also view  Indigo’s entry into the construction chemicals and waterproofing segments as an additional growth driver. Also, the analysts see the firm’s capacity expansion in water-based paints as a positive indicator for the coming quarters. They expect the company’s revenue to grow at a CAGR of 21.7% over FY23-25. 

5. Max Healthcare Institute: 

Edelweiss keeps its ‘Buy’ rating on this healthcare facilities company with a target price of Rs 680, implying an upside of 27.8%. In Q1FY24, the firm’s net profit grew by 38.9% YoY to Rs 240.1 crore and revenue increased by 20.5% YoY to Rs 1,285 crore. 

Analysts Thakur Ranvir Singh and Harsh Shah say that the company’s healthy Q1FY24 performance was “driven by higher average revenue per operating bed (ARPOB), healthy occupancy, increased revenue from international patients, and a rise in operating beds.” They add that the firm’s ARPOB grew by 13% YoY. 

The analysts are optimistic about the stock, given its focus on capacity expansion, scaling up in its asset-light business, and scouting for potential acquisitions. They also highlight the firm’s healthy balance sheet, which positions it to expand organically and inorganically without taking on too much debt. The analysts expect the hospital chain’s revenue to grow at a CAGR of 19.9% over FY23-25.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

Investors pay close attention to the changes in superstar investors’ portfolios, as they provide valuable insights into which stocks and sectors the big guns are bullish and bearish on. 

Previously, we looked at the key superstar buys in Q1FY24. Now, let's analyse their sells. 

Rakesh Jhunjhunwala/RARE Enterprises reduces stakes in BFSI and pharma stocks

Rakesh Jhunjhunwala’s portfolio, which is currently managed by Rekha Jhunjhunwala (his wife) and Rare Enterprises, cut its stake in 15 companies in Q1FY24. The late big bull’s portfolio grew by 21.6% QoQ to Rs 38,885.3 crore.

The portfolio scaled down its holdings below 1% in three companies - Prozone Realty, a small-cap realty firm, (from 2.1%), Karur Vysya Bank (from 4.7%) and Edelweiss Financial Services (from 1.3%).

However, the biggest sell in the late Big Bull’s portfolio was in Metro Brands, where the stake in the footwear retailer was lowered by 4.8% from 14.4% to 9.6%, reducing its holding value in the firm from Rs 3,111.3 crore in Q4FY23 (March 31 closing price) to Rs 2,859.3 crore in Q1FY24. In the April-June quarter, the stock gained 17.9%. 

The Rare Enterprises managed portfolio also sold 2.55% and 1.44% stakes respectively in Rallis India (an agrochemicals company) and Autoline Industries (an auto parts & equipment maker), bringing its holdings in the companies down to 7.75% and 2.52% respectively. The portfolio also sold a 0.2% stake in Geojit Financial Services, bringing its holding to 8.2%.

It cut a 0.1% stake each in Raghav Productivity Enhancers, Jubilant Pharmova and Agro Tech Foods, reducing its holdings in these companies to 5.1%, 6.7% and 8.1% respectively. The investment company also made minor stake cuts in Wockhardt, Jubilant Ingrevia, Aptech, Star Health & Allied Insurance Co and Federal Bank bringing the holdings to 2.04%, 3.12%, 43.7%, 17.3% and 3.5% respectively. 

Sunil Singhania drops stake in a microcap company to below 1%

Sunil Singhania’s Abakkus Fund pared stake in nine companies in Q1FY24. The Fund’s net worth fell 2.3% QoQ to Rs 2,115.6 crore in Q1. It sold its stake in Tracxn Technologies, an IT platform, to below 1%. It held a 1.3% stake in the company in the previous quarter. The fund also sold 1.3% and 0.4% stakes respectively in Rajshree Polypack and Technocraft Industries (India), both commercial services and supplies companies. It now holds 6.2% and 2.8% stakes in the respective companies.

Over the past year, Abakkus has gradually reduced its stake in The Anup Engineering, an industrial machinery company. It now holds a 3.8% stake, against 5.7% in Q1FY23. It sold a 0.2% stake in the latest quarter. Similarly, it cut 0.2% stake each in Carysil (consumer durables manufacturer) and Siyaram Silk Mills (textile company) to now hold 5.9% and 1.9% respectively. 

The fund now holds a 1.7% stake in AGI Greenpac and a 1.5% stake in HG Infra Engineering after selling a 0.1% stake in both. It also cut a minor stake in Dreamfolks Services and now holds 1.8%.

Ashish Kacholia reduces stakes in five companies to below 1%

Ashish Kacholia sold stake in 11 companies in Q1FY24. During the quarter, his net worth increased by 22.4% QoQ to Rs 2,028.4 crore. He reduced his stakes in Creative Newtech (internet catalogue company), Megastar Foods (food products manufacturer), United Drilling Tools (industrial goods company), Goldiam International (apparels and accessories manufacturer) and D-Link (India) (IT company) to below 1%. He held 2.7%, 1.1%, 2.8%, 1% and 2.1% in them respectively in the previous quarter.

The next biggest sell Kacholia made was in plastic products company Shaily Engineering Plastics. He sold 1% and now holds 9.6%. He cut his stake in Likhitha Infrastructure (engineering company) to 1.8% by selling a 0.2% stake. 

The ace investor also trimmed 0.1% stake each in Repro India and SJS Enterprises (auto parts manufacturers) and now holds 3.5% and 4.3% respectively. He also slightly reduced his stake in Safari Industries (India) to 2.3% and in Carysil to 3.7%.

Vijay Kedia cuts stake in loss-making company to below 1%

Vijay Kedia cuts stake in five companies in Q1FY24. His net worth increased by 65.3% QoQ to Rs 985 crore. He has been reducing his stake in Ramco Systems for six consecutive quarters and now holds below 1% of the company. The IT company has reported losses for nine consecutive quarters. 

Kedia cut his stake in Repro India to 6.8% by selling 0.3% in the publishing company. He sold 0.2% and 0.1% stakes in Elecon Engineering and Talbros Automotive Components, respectively. He now holds 1.8% and 1.2% in them respectively. He also cut his stake in Tejas Networks (a telecom company) to 2%. 

Dolly Khanna slows down after heavy offloading in the previous quarters

In Q1FY24, Dolly Khanna reduced her stakes in only five companies and the value of her portfolio increased by 37.1% QoQ to Rs 308.9 crore. Among her sells, she took her holdings below 1% in only Ajanta Soya (from 1.3%), an edible oils company. The stock fell by 4.2% in Q1FY24. 

She trimmed a 0.6% stake in KCP, a cement manufacturer, taking it to 1.7%. The ace investor also pared her stake in Chennai Petroleum Corp by 0.3% to 1.8%. She sold 0.16% and 0.1% stakes in Simran Farms and Tinna Rubber and Infrastructure, respectively, reducing her holdings in them to 1.88% and 1.3%.  

Porinju V Veliyath pares holding in only one stock in Q1FY24

Porinju V Veliyath sold his stake in only one company in Q1FY24, while the value of his portfolio grew by 9.7% QoQ to 151.3 crore. He reduced his holding in TCM, a micro-cap agrochemicals company, from 1% to below 1%. The company gained 17.2% during Q1FY24.

This analysis by Trendlyne is meant for investor education - to help understand companies and make informed investment decisions on their own. It should not be considered an investment recommendation.