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Trendlyne Marketwatch
Trendlyne Marketwatch
01 Aug 2023
Market closes flat, Bosch's Q1 net profit up by 22.5% YoY to Rs 409.3 crore

Trendlyne Analysis

Nifty 50 closed at 19,733.55 (-20.3, -0.1%) , BSE Sensex closed at 66,459.31 (-68.4, -0.1%) while the broader Nifty 500 closed at 17,051.15 (-7.9, -0.1%). Of the 1,950 stocks traded today, 1,146 were in the positive territory and 745 were negative.

Indian indices pare the early gains from the morning session and close flat, with the Nifty 50 closing at 19,734. The volatility index, Nifty VIX, dropped by 1.2% and closed at 10.3 points. Bosch’s Q1FY24 net profit increases by 22.5% YoY to Rs 409 crore against the consensus estimates of Rs 384 crore.

Nifty Smallcap 100 closed in the green, while Nifty Midcap 100 closed flat, following the benchmark. Nifty IT and Nifty Metal closed higher, compared to Monday’s closing levels. According to Trendlyne’s sector dashboard, coal emerged as the top-performing sector of the day, with a rise of over 4.3%.

Most European indices trade in the red. US indices futures trade lower, indicating a negative start. The data released by Hamburg Commercial Bank (HCOB) indicated that the Eurozone’s July manufacturing purchasing managers’ index (PMI) contracted to 42.7 from 43.4 in June. The Eurozone manufacturing PMI for July is at a 38-month low, with the sharpest decline reported from France, Germany, Austria and Ireland.

  • Escorts Kubota sees a long buildup in its August 31 future series as its open interest rises 29% with a put-call ratio of 0.72.

  • Escorts Kubota touches a 52-week high as its net profit jumps 106.2% to Rs 289.9 crore in Q1FY24. Its revenue rises 15.9% YoY to Rs 2,355.2 crore. The company features in a screener of stocks with strong momentum.

  • Yes Bank rises as it clarifies reports about the acquisition of Spandana Sphoorthy. The bank aims to enhance its business in priority sectors through organic and inorganic sources, but at present, it has not made any acquisitions. It appears in a screener of stocks with increasing profits for the past two quarters.

  • PVR Inox rises despite reporting a net loss of Rs 44.1 crore in Q1FY24, against a net profit of Rs 68.3 crore in Q1FY23. The loss is due to higher consumption of food & beverage and finance expenses. Its revenue grows by 32.4% YoY on the back of robust growth in the movie exhibition segment. The company appears in a screener of stocks with declining net profit and margins.

  • Mahindra & Mahindra is rising as its total auto wholesales in July grow by 18% YoY to 66,124 units. The increase is led by utility vehicle sales volumes increasing by 30% YoY to 36,205 units, its highest-ever SUV sales in a month. The company’s farm equipment segment also sees its total wholesales rise by 8% due to healthy domestic demand, which offsets the fall in exports.

  • Coal India rises as its July production grows by 13.4% YoY to 53.6 metric tons. The company appears in a screener of stocks with improving RoA.

  • India’s fiscal deficit widens by 21.2% YoY to $4.51 trillion in Q1FY24. This increase is due to a strong improvement in capital expenditure, a rise in tax devolution to state governments, and efforts to offset the increase in non-tax revenues.

  • Ambuja Cements, Carborundum Universal, Engineers India and Hindustan Petroleum’s weekly average delivery volumes rise ahead of their Q1FY24 results tomorrow.

  • Axis Direct downgrades its rating on IDFC First Bank to ‘Hold’ from ‘Buy’ but raises the target price to Rs 90. This implies an upside of 1.9%. The brokerage sees a limited upside for the stock, given its current valuation. However, it remains positive about the bank’s prospects due to its stable margins, strong growth in advances, and improving asset quality.

  • Bosch rises as its Q1FY24 net profit increases by 22.5% YoY to Rs 409.3 crore. Its revenue also grows by 20.7% YoY, driven by the automotive products segment. The company appears in a screener of stocks with high TTM EPS growth.

  • Bajaj Auto’s total monthly wholesales in July fall by 10% YoY to 3,19,747 units due to a 15% YoY decline in total two-wheeler wholesales. However, the company’s commercial vehicle wholesales rise by 29% YoY. The stock shows up in a screener for companies with declining cash flows.

  • Larsen & Toubro's arm, L&T Construction, wins multiple orders worth Rs 2,500-5,000 crore for its heavy civil infrastructure business. The orders include an underground metro project from Rail Vikas Nigam and a mandate and rehabilitation of structures for special systems from a Middle Eastern client.

  • Hero MotoCorp's stock falls over 4% as ED reportedly raids its chairman Pawan Munjal’s residence in connection with a case by the Directorate of Revenue Intelligence. It appears on a screener for volume shocker stocks.

  • Reliance Jio gains 30.4 lakh wireless subscribers in May on a net basis, while Bharti Airtel adds 13.3 lakh and Vodafone Idea loses 28.9 lakh.

  • Cochin Shipyard rises as it is upgraded to 'Schedule A' from 'Schedule B' of central public sector enterprise. This will enable the company to operate with the larger senior management capacity required for managing its seven units across the country. The company appears in a screener of stocks nearing a 52-week high with significant volumes.

  • IRB Infrastructure Developers is falling as its Q1FY24 net profit decreases by 63.2% YoY to Rs 133.8 crore due to increased roadwork and site expenses. Revenue also declines by 12.5% YoY due to poor performance in the construction & unallocated corporate segment. It appears in a screener of stocks with weak momentum.

  • Reliance Industries is falling despite signing an MoU with Brookfield Asset Management to explore opportunities to manufacture renewable energy and decarbonization equipment in Australia. Brookfield has outlined a plan to invest $20-30 billion over the next 10 years to accelerate its energy transition.

  • Petronet LNG is rising as its Q1FY24 net profit increases by 13% YoY to Rs 819.3 crore, aided by a 20.2% YoY fall in the cost of raw materials. However, its revenue declines by 18.3% YoY to Rs 11,656.4 crore. The stock shows up in a screener for companies with net profit growth and profit margin growth.

  • Transport Corporation of India is rising as its Q1FY24 net profit increases by 5.9% YoY to Rs 82.3 crore. However, its revenue falls by 4.6% YoY due to poor performance in the seaways division. It appears in a screener of companies with zero promoter pledge.

  • India’s manufacturing PMI falls marginally to 57.7 in July from 57.8 in June. The PMI reading, however, stays above the 50-mark for the 25th consecutive month, indicating an expansion in manufacturing activity.

  • Rail Vikas Nigam rises as it bags two projects worth Rs 331.6 crore from Madhya Pradesh Poorv Kshetra Vidyut Vitran Co. The order involves the supply, installation, testing and commissioning of new transmission lines in two packages of Jabalpur Company Area. The company appears in a screener of stocks with improving cash flow from operations.

  • Sterling and Wilson Renewable Energy is falling as promoter Shapoorji Pallonji and Co sells a 0.4% stake in the company. It now holds an 18.1% stake.

  • DLF is falling as reports suggest that a promoter sells a 0.9% stake worth Rs 1,185 crore in the company in a block deal.

  • Jefferies downgrades its rating on GAIL to 'Underperform' with a target price of Rs 105. The brokerage says the company's Q1FY24 results took a hit due to the transmission and petrochemical segments. It also expects high gas prices to restrain EBITDA growth in transmission.

  • Engineers India is falling despite bagging an order worth Rs 837.3 crore from Oil and Natural Gas Corp for the renovation of the Hazira plant in Gujarat. The project is estimated to be completed in 45 months. The stock shows up in a screener for companies with declining cash flows from operations over the past two years.

  • KEI Industries falls despite its Q1FY24 net profit rising by 17% YoY to Rs 121.4 crore due to lower inventory expenses. However, its revenue grows by 14.1% YoY on the back of the cables & wires and engineering, procurement & construction projects segments. The company appears in a screener of stocks with improving book value per share.

  • Centre raises windfall tax on locally produced crude oil to Rs 4,250 per tonne from Rs 1,600 earlier. It also increases the export tax on diesel to Rs 1 per litre from 'Nil', while keeping it unchanged on petrol and aviation turbine fuel (ATF).

  • Adani Energy Solutions (formerly Adani Transmission) rises despite its Q1FY24 net profit decreasing by 5.9% YoY to Rs 175.1 crore. However, its revenue grows by 16.1% YoY on the back of robust growth in the generation, transmission & distribution and trading segments. The company appears in a screener of stocks with declining quarterly profits.

  • Maruti Suzuki India’s Q1FY24 net profit jumps 143.7% YoY to Rs 2,525.2 crore, aided by better realisations and a 14.3% YoY decline in raw materials prices. The revenue rises by 22% YoY, driven by a 6.4% YoY growth in total sales volume in Q1. The stock shows up in a screener for companies with high TTM EPS growth.

Riding High:

Largecap and midcap gainers today include IDBI Bank Ltd. (62.95, 8.63%), Atul Ltd. (7210.30, 6.09%) and Indian Railway Finance Corporation Ltd. (40.50, 6.02%).

Downers:

Largecap and midcap losers today include Power Grid Corporation of India Ltd. (251.80, -5.36%), Polycab India Ltd. (4,630.20, -3.87%) and Max Healthcare Institute Ltd. (572.30, -3.80%).

Crowd Puller Stocks

38 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included KIOCL Ltd. (237.95, 15.09%), Jindal Worldwide Ltd. (339.50, 9.68%) and IDBI Bank Ltd. (62.95, 8.63%).

Top high volume losers on BSE were KEI Industries Ltd. (2,270.35, -6.55%), Aptus Value Housing Finance India Ltd. (267.90, -5.34%) and Hero MotoCorp Ltd. (3,102.10, -3.17%).

Affle (India) Ltd. (1,138.85, 6.06%) was trading at 9.8 times of weekly average. Polyplex Corporation Ltd. (1,282.70, 4.79%) and Grindwell Norton Ltd. (2,439.50, 5.24%) were trading with volumes 8.3 and 8.1 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

70 stocks took off, crossing 52 week highs, while 1 stock tanked below their 52 week lows.

Stocks touching their year highs included - Akzo Nobel India Ltd. (2,820.00, 1.61%), Apollo Tyres Ltd. (427.25, -1.28%) and Astral Ltd. (2,000.60, 1.59%).

Stock making new 52 weeks lows included - UPL Ltd. (625.70, 0.16%).

18 stocks climbed above their 200 day SMA including KIOCL Ltd. (237.95, 15.09%) and Jindal Worldwide Ltd. (339.50, 9.68%). 4 stocks slipped below their 200 SMA including Aptus Value Housing Finance India Ltd. (267.90, -5.34%) and Blue Dart Express Ltd. (6,611.30, -1.74%).

 
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The Baseline
01 Aug 2023
Five Construction and Metal Stock Picks from Analysts
By Satyam Kumar

This week we look at five analyst picks from the construction and metal sector: 

  1. Larsen & Toubro: HDFC Securities maintains its 'Buy' rating on this construction and engineering company, with a target price of Rs 3,002, implying an upside of 12.2%. Analysts Parikshit D Kandpal, Nikhil Kanodia, and Manoj Rawat are optimistic about its all-time high order book of Rs 4.1 lakh crore. In Q1FY24, the company's profit surged by 46.5% YoY to Rs 2,493 crore, while revenue saw a 33.5% YoY increase, surpassing Trendlyne Forecaster's estimates by 18% and 19%, respectively.

The analysts at HDFC Securities are confident in the company's consistent outperformance, driven by robust execution. They believe that infrastructure margins have reached the lowest point and are likely to improve in the future. Analysts also expect an improvement in the performance of its subsidiaries.

The analysts estimate a robust prospects pipeline for 9MFY24, with an estimated value of Rs 10 lakh crore compared to Rs 7.5 lakh crore a year ago, indicating promising growth opportunities. Notably, they estimate a significant uptick in the hydrocarbon prospect pipeline, valued at Rs 3.5 lakh crore, suggesting potential opportunities in the energy sector.

  1. Jindal Stainless: ICICI Securities maintains a ‘Buy’ call on this steel manufacturer with a target price of Rs 445. This indicates an upside of 13.1%. In Q1FY24, the company reported a 132.1% YoY growth in net profit to Rs 745.8 crore and an 86.3% increase in revenue. It beat Trendlyne Forecaster’s net profit estimate by 23.9%. The company’s EBITDA stands at Rs 1,120 crore, up 35% YoY (beating the brokerage’s estimate by 9%). 

Analysts Amit Dixit, Mohit Lohia and Pritish Urumkar remain positive about Jindal Stainless as its shipments rose by 54% YoY to a record level. Its domestic subsidiaries have also performed well, while overseas subsidiaries faced challenges. The management foresees a 20-25% growth in volume in FY24 and FY25 each. They expect the acquisition of Jindal United Steel to eliminate related-party transactions and drive synergies across the full value chain. 

The analysts say, “We perceive Jindal Steel to be in the pole position to capture domestic growth as it is the only domestic producer with spare capacity.” They have raised their EBITDA estimates for FY24 and FY25  to  16% and 12%, respectively, factoring in higher sales volume and lower power and fuel costs.

  1. Dalmia Bharat: Geojit BNP Paribas upgrades its rating on this cement manufacturer to ‘Buy’ from ‘Hold’ and raises the target price to Rs 2,234 from Rs 2,200. This implies an upside of 14.3%. In Q1FY24, the firm’s net profit fell 33.7% YoY to Rs 130 crore but revenue grew by 9.8% YoY. 

Despite the fall in net profit, analyst Vincent Andrews turns positive about the company’s prospects, given its healthy volume growth and a strong focus on capacity expansion. He is optimistic about its FY24 volume growth guidance of 15-17% and believes it is on track to achieve this target through organic expansion and acquisitions. He adds, “The demand outlook is positive, given the Centre’s focus on infrastructure & housing and pre-election spending.”

Although Dalmia Bharat’s EBITDA margin contracted despite volume growth in Q1, the analyst anticipates margins to improve in the coming quarters due to declining fuel costs. He expects the company’s net profit to grow at a CAGR of 38.3% over FY23-25. 

  1. Tata Steel: Bob Capital Markets maintains a ‘Buy’ call on this steel manufacturer with a target price of Rs 145, indicating an upside of 17.6%. In Q1FY24, the company’s profit fell by 91.8% YoY to Rs 634 crore, and revenue declined by 4.8% YoY. Its EBITDA was 6% ahead of consensus but 1% below BoB’s forecast. 

Analysts Kirtan Mehta and Yash Thakur remain positive as Tata Steel is prioritizing capex plans over leverage targets. They say, “This is a positive decision as completion of ongoing capex will generate cash flows and help lower leverage over the medium term.” The company has maintained its capex plan of Rs 16,000 crore for FY24. 

The analysts also remain optimistic about Europe operations turning EBITDA-positive, the potential resolution of the restructuring in UK operations, and the startup of the blast furnace at TSK. “We remain confident of Tata Steel’s ability to weather the downturn and deliver on earnings-accretive growth,” they conclude.

  1. UltraTech Cement: KRChoksey keeps its ‘Buy’ rating on this cement maker and raises the target price to Rs 9,439 from Rs 9,105. This implies an upside of 13.5%. In Q1FY24, the company’s net profit rose by 6.6% YoY to Rs 1,688.5 crore and revenue grew by 17%. It beat Trendlyne Forecaster’s revenue and profit estimates by 2% and 0.8% respectively. 

Analyst Abhishek Agarwal attributes the firm’s healthy Q1 performance to a 20% YoY growth in volume, led by robust demand. He also cites lower energy costs for margin expansion and profit growth. He believes that “the recent correction in energy prices will continue to ease margin pressures in the medium-term”.

With the demand environment remaining strong, Agarwal expects the company’s capacity expansion efforts to drive future growth and market share gains. “Given the ongoing capex, UltraTech Cement is poised to maintain its industry leadership,” he adds. The analyst anticipates the company’s revenue to grow at a CAGR of 16.4% over FY23-25. 

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

(You can find all analyst picks here)

 
Trendlyne Marketwatch
Trendlyne Marketwatch
31 Jul 2023
Market closes higher, UPL's Q1FY24 net profit drops 81.1% YoY to Rs 166 crore

Trendlyne Analysis

Nifty 50 closed at 19,753.80 (107.8, 0.6%), BSE Sensex closed at 66,527.67 (367.5, 0.6%) while the broader Nifty 500 closed at 17,059.00 (110.7, 0.7%). Of the 1,978 stocks traded today, 1,257 were on the uptick, and 670 were down.

Indian indices closed in the green, with the Nifty 50 rising above the 19,750 mark. The Indian volatility index, Nifty VIX, rose sharply by 2.7%. NTPC closed over 3.6% higher as its Q1FY24 net profit increased by 23.8% YoY to Rs 4,873.2 crore, led by a decline in fuel costs.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green and outperformed the benchmark index. Nifty Energy and Nifty Realty closed higher than Friday’s close. According to Trendlyne's sector dashboard, General Industrials was the top-performing sector of the day.

Major Asian indices closed in the green, except for Taiwan’s TSEC 50 index, which closed lower. European indices recovered from their day lows and traded flat or higher, in line with the US index futures. Investors awaited key eurozone growth and inflation data, scheduled to be released later today. Brent crude oil futures traded higher and are set to post their biggest monthly gains since January 2022.

  • Money flow index (MFI) indicates that stocks like Finolex Industries, Sterling and Wilson Renewable Energy, Engineers India and Finolex Cables are in the overbought zone.

  • UPL is falling as its Q1FY24 net profit plunges by 81.1% YoY to Rs 166 crore, and revenue decreases by 17.2% YoY due to a 21.2% YoY drop in its crop protection business. The company has also slashed its FY24 revenue guidance to 1-5% from 6-10% earlier. Mike Frank, the CEO of UPL, says, "The global agrochemical industry has been going through a challenging phase over the past two quarters as distributors prioritized destocking and focused on tactical purchases amid high channel inventories."

  • NHPC touches a 52-week high as reports suggest that 2.3 crore shares (0.2% equity), amounting to Rs 116.1 crore, have changed hands in a block deal.

  • Piramal Enterprises plunges more than 5% as its net profit declines 95% YoY to Rs 577 crore in Q1FY24. This fall is due to a one-time exceptional profit the company earned in Q1FY23. Its revenue improves by 126.3% YoY, aided by growth in assets under management. The company appears in a screener of stocks with a decline in net profit and profit margin (YoY).

  • IDFC First Bank rises to a new 52-week high of Rs 88.3 as its Q1FY24 net profit increases by 61.3% YoY to Rs 765.2 crore. Its net interest income also grows by 39.5% YoY, driven by the treasury and retail banking segments. The bank's asset quality improves as its gross and net NPA ratios fall by 119 bps and 60 bps YoY respectively. It appears in a screener of stocks with increasing quarterly net profit and margins.

  • Welspun India surges by more than 10% as its Q1FY24 net profit jumps 621.4% YoY to Rs 162.7 crore, and its EBITDA margin expands by 6.5 percentage points YoY to 14.2%. Its revenue rises 11.6% YoY, led by healthy growth in the home textiles and flooring segments. BK Goenka, the Chairman of Welspun Group, says, "The domestic consumer business further strengthened its market leadership, with Brand Welspun being the most widely distributed Home Textile brand in India, increasing its reach with a presence at more than 13,000 outlets pan India."

  • Bharti Airtel prepays a loan of Rs 8,024 crore to the Department of Telecommunications. The loan is part of its deferred liabilities for the spectrum acquired in the 2015 auction. The company appears in a screener of stocks with strong momentum.

  • Mangalore Refinery And Petrochemicals is falling as its Q1FY24 net profit declines by 62.6% YoY to Rs 1014.8 crore. Revenue also decreases by 23% YoY. It appears in a screener of stocks with falling profit margins YoY.

  • Rajneesh Karnatak, MD & CEO of Bank of India, says it targets a deposit growth of 10-11% and loan growth of Rs 11-12% in FY24. He adds that the bank will maintain its net interest margins at 3-3.05%.

  • HDFC Securities downgrades its rating on JK Lakshmi Cement to ‘Add’ from ‘Buy’ and lowers the target price to Rs 700 from Rs 815. This implies an upside of 13.4%. The brokerage believes the company’s plans of capacity expansion and acquisitions by raising debt will impact its balance sheet and return ratios. It also adds that the firm’s net profit in Q1FY24 missed its estimates.

  • NTPC is rising as its Q1FY24 net profit increases by 23.8% YoY to Rs 4,873.2 crore, led by a decline in fuel costs. However, its revenue marginally falls by 0.2% YoY due to a 1.3% YoY decrease in its generation segment. The management also announces the separation of its coal mining business into a 100% subsidiary, NTPC Mining.

  • UCO Bank falls despite its Q1FY24 net profit rising by 80.8% YoY to Rs 223.5 crore. Its net interest income grows by 35.6% YoY on the back of robust growth in the treasury, corporate banking and retail banking operations segment. The bank's asset quality improves as its gross and net NPA ratios fall by 294 bps and 131 bps YoY respectively. The company appears in a screener of stocks with increasing quarterly revenue.

  • GAIL is rising as UBS double-upgrades its rating to ‘Buy’ from ‘Sell’ and raises the target price to Rs 150. The brokerage believes that the markets are yet to fully factor in the benefits of realized tariffs (from tariff integration), the scope of India's growing gas consumption, and the expansion of GAIL's pipeline.

  • SBI Cards and Payment Services falls as its net profit decreases by 0.5% YoY to Rs 593.3 crore. However, its revenue rises by 4% YoY on the back of growth in interest and fees & commission income. The NBFC's asset quality declines as its gross and net NPA ratios increase by 17 bps and 9 bps YoY respectively. The company appears in a screener of stocks with declining net profit and margins.

  • Glenmark Life Sciences is rising as reports suggest that Nirma Group is the frontrunner to acquire the company for an estimated consideration of Rs 6,664 to 7,000 crore from Glenmark Pharmaceuticals.

  • The Delhi High Court rejects SpiceJet’s former promoter Kalanithi Maran’s plea seeking Rs 1,323 crore damage claim from the company, according to reports. The high court also refuses to interfere with the 2018 arbitral award that has asked SpiceJet to refund Rs 579 crore along with interest to Maran.

  • Nazara Technologies rises as its net profit increases 7.6X QoQ to Rs 19.5 crore due to lower content, event and web server expenses. However, its revenue falls by 12% QoQ on the back of a decline in the gaming and eSports segments. The company appears in a screener of stocks with increasing quarterly net profit and margins.

  • Metal stocks like APL Apollo Tubes, NMDC, Hindalco Industries, Tata Steel and Steel Authority of India are rising in trade. All the constituents of the broader sectoral index, BSE Metal, are also trading in the green.

  • Bandhan Bank rises more than 2% in trade as reports suggest that 1.8 crore shares (1.1% equity), amounting to Rs 385.4 crore, have changed hands in a block deal.

  • Chalet Hotels rises as its Q1FY24 net profit increases by 210.6% YoY to Rs 88.7 crore, while revenue improves by 21% YoY. The profit rise is on the back of high deferred tax credit. The company features in a screener for stocks with strong annual EPS growth.

  • Bank of India rises as its Q1FY24 net profit increases 2.8X YoY to Rs 1,551.1 crore. Its net interest income also grows by 44% YoY on the back of robust growth in the treasury, wholesale banking and retail banking operations segment. Its asset quality improves as the gross and net NPAs decline by 263 bps and 56 bps YoY respectively. The company appears in a screener of stocks with increasing quarterly profits.

  • Power Grid Corp of India rises as it wins transmission system projects for the evacuation of power from a renewable energy zone in Rajasthan and for a solar energy zone in Ananthpuram and Kurnool, Andhra Pradesh.

  • Macquarie remains cautious on the hospitals space in the medium term as it believes that soft demand and capacity expansion may impact the companies’ profitability. It initiates an ‘Underperform’ rating on Apollo Hospitals and Max Healthcare.

  • Power Mech Projects surges to a new all-time high of Rs 5,069.5 per share as it bags an order worth Rs 30,438 crore from SAIL in a consortium with PC Patel Infra. The order is for a mine development & operation (MDO) project of the Tasra open cast project (OCP) in Dhanbad, which will also include setting up a 3.5 MTPA coal washery and supplying steel grade coking coal to SAIL.

  • United Breweries falls as its Q1FY24 net profit decreases by 16% YoY to Rs 136.2 crore due to higher excise duty expenses. However, its revenue rises by 0.9% YoY on the back of marginal growth in the beer segment. The company appears in a screener of stocks with a major fall in TTM net profit.

  • Marico remains flat despite a 15.6% YoY rise in its net profit to Rs 427 crore in Q1FY24. However, its revenue declines by 3.2% YoY on the back of a fall in the prices of products. Its EBITDA margin improves by 494 bps YoY, aided by a reduction in the cost of raw materials. The company appears in a screener of stocks with high promoter pledges.

Riding High:

Largecap and midcap gainers today include Indian Railway Finance Corporation Ltd. (38.20, 8.99%), Adani Power Ltd. (273.30, 5.70%) and Supreme Industries Ltd. (3,550.00, 5.66%).

Downers:

Largecap and midcap losers today include Syngene International Ltd. (796.10, -3.49%), Apollo Hospitals Enterprise Ltd. (5,173.45, -3.24%) and Zomato Ltd. (84.10, -3.11%).

Crowd Puller Stocks

36 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Hindustan Copper Ltd. (141.10, 10.36%), Welspun India Ltd. (109.65, 9.32%) and Indian Railway Finance Corporation Ltd. (38.20, 8.99%).

Top high volume losers on BSE were Rossari Biotech Ltd. (840.00, -3.97%), Narayana Hrudayalaya Ltd. (1,010.50, -3.50%) and NLC India Ltd. (117.00, -1.60%).

KIOCL Ltd. (206.75, 7.99%) was trading at 15.0 times of weekly average. Eris Lifesciences Ltd. (791.70, 2.12%) and NOCIL Ltd. (220.80, 2.96%) were trading with volumes 11.4 and 10.0 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

81 stocks took off, crossing 52-week highs, while 1 stock hit their 52-week lows.

Stocks touching their year highs included - Abbott India Ltd. (23,999.35, -0.25%), Balkrishna Industries Ltd. (2,542.35, 3.16%) and Bharat Forge Ltd. (931.45, 3.17%).

Stock making new 52 weeks lows included - UPL Ltd. (624.70, -0.07%).

17 stocks climbed above their 200 day SMA including KIOCL Ltd. (206.75, 7.99%) and Adani Power Ltd. (273.30, 5.70%). 6 stocks slipped below their 200 SMA including Blue Dart Express Ltd. (6,728.15, -2.87%) and United Breweries Ltd. (1,540.25, -1.92%).

 
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The Baseline
28 Jul 2023
Five Interesting Stocks Today
  1. Tanla Platforms: This software and services company’s share price grew by 79.4% in the past quarter and hit its 52-week high of Rs 1,317.5 on Monday. In Q1FY24, the company’s profit improved by 12.6% QoQ, while the revenue increased by 9.3%, beating Trendlyne’s Forecaster estimates by 16.2% and 7.6%, respectively. The company also features in a screener for stocks with QoQ growth in net profit and increasing profit margin.

The revenue from the enterprise communications segment(90% of total revenue) has also risen by 9% QoQ, marking growth after four quarters in a seasonally weak period. It was driven by an increase in transactional app-to-customer messaging volume and a price hike in the international long-distance segment. The Chairman and Chief Executive Officer Uday Reddy said, “We are now in the phase of price expansion and expect further increases in  Q2.” The firm anticipates price hikes in its domestic business to drive growth.

Tanla Platforms recently acquired ValueFirst Digital Media for $45.5 million, leading to a gain in market share of over 35% in India. Speaking about the acquisition, Reddy said, “We expect to achieve double-digit EBITDA in a couple of quarters.” 

The digital platforms segment’s revenue also grew by 8% QoQ, driven by Wisely, a patented anti-phishing platform. Wisely has completed proof-of-concept with three leading banks and has a revenue potential of Rs 50-100 crore per year. “The focus in Q2 will be on accelerating the go-to-market strategy and commercial holders,” Reddy added.

HDFC Securities is optimistic about Tanla Platforms and expects a revenue CAGR of 24% over FY24-26, led by a revival in the enterprise business and new product launches in the platform business. 

  1. Cipla: This pharma company’s stock surged by 9.6% on Thursday, and hit a new all-time high of Rs 1,219.4 per share, as its net profit jumped by 45.1% YoY to Rs 995.7 crore in Q1FY24. This helped the company beat Trendlyne’s Forecaster estimates for net profit by 22.7%. Its revenue has also risen by 17.7% YoY to Rs 6,329 crore, helped by increased sales from India, the US, and South Africa, with improvements in the prescription, trade generic, and consumer health segments.

Cipla’s EBITDA margin also expanded by 230 bps YoY to 23.6%, owing to lower raw material costs and reduced price erosion in the US market due to declining competition. This helped the company appear in a screener of stocks with increasing net profit and profit margin (YoY). 

Umang Vohra, Managing Director and Chief Executive Officer (CEO) of the company, said, “The company plans to launch 30 to 35 products in the Indian market, which will contribute to 2.5-3% of revenue. A large number of these products will be in the respiratory segment.” The management is optimistic about revenue growth in the US business.

Post results announcement, Motilal Oswal Financial Services maintains its ‘Neutral’ rating on the stock with a target price of Rs 1,130 owing to limited upside at the current price. This indicates a potential downside of 4.2%. However, the brokerage is optimistic about the company's profitability growth, as it expects a revival in the US market and strong performance in the branded generics segment in India and South Africa.

According to reports, the promoters of Cipla are considering  selling a portion of their overall stake in the company. However, Cipla has issued a clarification stating that they are not aware of any specific event that requires disclosure under the listing regulations.

  1. Nestle India: This FMCG stock declined by 3.3% in Thursday’s intra-day trade after announcing its Q2CY23 results. This is despite its net profit rising by 35.5% YoY and revenue growing by 15.4% YoY. However, this has not cheered investors as its revenue growth seems to be mostly led by price hikes, with underlying volume growth of 4-5%. According to reports, its volume growth is below the street’s estimates.

    Although the firm saw healthy growth on a YoY basis, its net profit and revenue fell by 5.2% and 3.6% QoQ respectively. The stock shows up in a screener for companies with declining revenue, profit and operating profit margin on a QoQ basis. 

The company’s top-line growth is driven by a 14.6% YoY increase in domestic sales, with healthy contributions from categories like milk products, beverages and nutrition, despite inflationary pressures. Suresh Narayanan, Chairman and MD of the firm, said, “Our RURBAN strategy was successful as we expanded our distribution footprint in key portfolios, leading to higher penetration. We witnessed strong growth across megacities and metros, robust performance in Tier 1 to 6 towns, and continued strength in rural markets.” 

The company’s gross margins have expanded by 80 bps YoY to 54.6%, aided by stable fresh milk prices and declines in prices of edible oils, wheat, and packaging materials. However, its beverages segment saw inflationary pressures due to elevated robusta (coffee beans) prices, which are expected to remain volatile. ICICI Securities believes that a correction in milk prices will free up more resources for advertising spends and innovation to drive growth.  

  1. Mphasis Ltd: Thesoftware and services firm saw its stock price increase by 22.3% in the past month, according toTrendlyne’s Technicals. On July 20, the company announced its Q1FY24 earnings, reporting a decline of 3.2% QoQ on a constant currency basis. However, the stock rose 5.3% the next day. This rise was primarily driven by high deal wins in the quarter, which amounted to $707 million, almost twice the average of the past four quarters. 

The decline in revenue was on account of a cut down in discretionary spending by clients in the banking and mortgage sector. The firm is trying to diversify itself by acquiring deals in the non-banking and financial services (BFS) sector. Nearly 60% of the deal wins are from non-BFS verticals in the quarter.

The firm has launched an AI business unit which bagged nearly one-third of the deal wins in Q1FY24. This includes one deal with a ticket size greater than $100 million. Its EBIT margins expanded by10 bps QoQ to 15.4%. The company plans to increase its margins to around 16% in the following quarters by improving the productivity of its offshore workforce. Its net profit declined by 2.2% QoQ. Mphasis shows up in ascreener for stocks with strong momentum, with prices above short, medium and long-term averages.

Commenting on the earnings, Mphasis CEONitin Rakesh said, “Revenue growth will pick up in FY24 as the firm currently has a good pipeline of deals. The mortgage industry will also ramp up from current levels.”

HoweverICICI Securities holds a less favourable view. It cites the global slowdown and banking crisis in the US and Europe, which have led to delayed decision-making around discretionary projects and spending cuts in banking and capital markets. This will lead to muted growth for Mphasis. The brokerage has downgraded its rating from ‘Hold’ to ‘Sell’.

  1. Jyothy Labs: This personal products company has risen over 25% since Monday after reporting robust Q1FY24 results, beating consensus estimates. This recent surge has driven the company’s share price up by 84.2% in the past year. However, over five years, the share price has grown by only 36.2%. 

During the quarter, Jyothy Labs’ revenue increased by 15.1% YoY to Rs 687.1 crore, beating Trendlyne’s Forecaster estimates by 4.7%. This was fueled by strong performance across the company’s major segments. Its net profit jumped by 101.7% YoY to Rs 96.3 crore, and beat estimates by 27.2%. This was due to moderating input costs and an increase in the disposable income of consumers. 

The company’s fabric care segment (which markets Henko and Ujala, and contributes 43% of the total revenue) has seen an 18% YoY rise in revenue. Its dish wash segment (that houses brands like Exo Bar and Pril) also improved by 11% YoY. 

Managing Director M R Jyothy said, “The company will deliver double-digit revenue growth, and EBITDA margin will be in the range of 15-16% in FY24.” She also highlighted the company’s plan to strengthen distribution, increase marketing investment, and optimize cost structures. 

Following the company’s strong performance, ICICI Securities maintains its ‘Buy’ rating but raises its target price by 16.8% to Rs 340. The brokerage says the company remains its top pick in the consumer staples space and is positive about the management’s strategy of prioritising market share gains and volume growth. As a result, the company features in a screener of stocks where brokers have upgraded their recommendations or target prices in the past month.

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

 
Trendlyne Marketwatch
Trendlyne Marketwatch
28 Jul 2023
Market closes flat, Rail Vikas Nigam bags an order worth Rs 1,088 crore

Trendlyne Analysis

Nifty 50 closed at 19,646.05 (-13.9, -0.1%), BSE Sensex closed at 66,160.20 (-106.6, -0.2%) while the broader Nifty 500 closed at 16,948.35 (29.2, 0.2%). Of the 1,943 stocks traded today, 984 were in the positive territory and 888 were negative.

Indian indices recovered from their day lows and closed flat, with the benchmark Nifty 50 closing just below the 19,650 mark. The Indian volatility index, Nifty VIX, fell sharply by 3.5%. Macrotech Developers hit a 52-week high and closed 2.7% higher after its pre-sales jumped 17% YoY to Rs 3,350 crore in Q1FY24. 

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, outperforming the benchmark index. Nifty Metal and Nifty Media closed higher than Thursday's close. According to Trendlyne's sector dashboard, Healthcare Equipment & Supplies was the top-performing sector of the week.

Major European indices traded in the red, despite the Asian indices closing mixed. However, US index futures traded in the green, indicating a positive start to the trading session. Brent crude oil futures traded higher and are set to post gains for a fifth straight week.

  • Relative strength index (RSI) indicates that stocks like Cipla, Alkem Laboratories, Natco Pharma and Zydus Lifesciences are in the overbought zone.

  • Route Mobile is falling as its net profit declines by 9% QoQ to Rs 92.4 crore in Q1FY24. Its revenue is also down by 4.1% YoY, impacted by the overseas segment. It shows up in a screener of stocks where mutual funds have reduced their shareholdings over the past quarter.

  • Motherson Sumi Wiring India is falling as its Q1FY24 net profit declines by 2.2% YoY to Rs 123.1 crore due to higher raw material costs and employee expenses. Its revenue rises by 11.2% YoY to Rs 1,858.8 crore.

  • AstraZeneca Pharma India and Anand Rathi Wealth touch their 52-week highs of Rs 3,901.25 and Rs 1,141.65 respectively. The former has risen 4.3% over the past month, while the latter increased by 30.5%.

  • Castrol (India), GAILand Power Grid Corp of India rise more than 6% during the past week, ahead of their Q1FY24 results on Monday.

  • Godawari Power & Ispat falls as its Q1FY24 net profit drops by 29.4% YoY to Rs 230.9 crore due to higher inventory and finance expenses. Its revenue decreases by 20.1% YoY on the back of declining realization in the iron ore pellets and ferroalloys segments. The company appears in a screener of stocks with a major fall in TTM net profit.

  • Mahindra & Mahindra Financial Services falls despite posting a 52.8% YoY growth in its net profit to Rs 352.7 crore in Q1FY24. Revenue surges by 24.5% YoY, backed by the financing activities segment. It appears in a screener of stocks with increasing debt.

  • Rail Vikas Nigam bags an order worth Rs 1,088 crore from the Haryana Rail Infrastructure Development Corp for the construction of railway infrastructure. The stock shows up in a screener for companies with improving cash flows and high durability scores.

  • Yatharth Hospital & Trauma Care Services' Rs 686.5 crore IPO gets bids for 36.15X the available 1.7 crore shares on offer on the third day of bidding. The retail investor quota gets bids for 8.3X of the available 83.1 lakh shares on offer.

  • Rakesh Jhunjhunwala's portfolio sells an 8.2% stake in Rallis India between March 11 and July 20. It now holds a 2.3% stake in the company.

  • LT Foods is rising as its Q1FY24 net profit improves by 44.4% YoY to Rs 137.4 crore. Revenue rises by 10.4% YoY due to strong performance in basmati & other specialty segment. It appears in a screener of stocks with strong momentum.

  • KRChoksey downgrades its rating on HDFC Life Insurance Co to ‘Add’ from ‘Buy’ but raises the target price to Rs 720 from Rs 650, implying an upside of 9.8%. The brokerage remains positive about the firm’s growth prospects given its healthy product launch pipeline. However, it revises its rating as it believes the stock is trading at an expensive level.

  • Shyam Metalics & Energy is falling as its net profit declines 43% YoY to Rs 235 crore in Q1FY24. Revenue grows by 3% YoY due to reduction in sales of ferro products, finished steel and steel billets. Its EBITDA margin plunges 660 bps YoY caused by a rise in cost of raw materials and employee benefit expenses. The company appears in a screener of stocks with declining net profit and profit margin (YoY).

  • Indian rupee depreciates 31 paise to 82.23 against the US dollar in early trade today, due to the outflow of foreign funds and higher crude oil prices, among other factors.

  • IT stocks like Mphasis, Tata Consultancy Services, HCL Technologies, Coforge andTech Mahindra are falling in trade. Barring L&T Technology Services, all the other constituents of the broader sectoral index, Nifty IT, are trading in the red.

  • Ajanta Pharma hits a new 52-week high of Rs 1,735 as Q1FY24 net profit rises by 19.2% YoY to Rs 208.1 crore and revenue increases by 7% YoY. The company's EBITDA margin also improves by 300 basis points YoY. The company features in a screener for stocks with low debt.

  • Sona BLW Precision Forgings' Q1FY24 net profit rises 47.7% YoY to Rs 112 crore due to lower inventory expenses. Its revenue grows by 25% YoY on the back of robust growth in the battery electric vehicle (BEV), non-BEV and international light vehicle segments. The company appears in a screener of stocks with strong momentum.

  • Macrotech Developer rises to its 52-week high of Rs 745 per share as its pre-sales jump 17% YoY to Rs 3,350 crore in Q1FY24. However, its net profit falls 34.1% YoY to Rs 178.4 crore, while revenue declines 39.6% YoY. The company features in a screener of stocks with a decline in quarterly net profit (YoY).

  • Bharath Uppiliappan, CEO of Dr Lal PathLabs, says that the company's non-covid revenue has risen by 9.7% in Q1FY24 and expects an improvement in volume growth. He believes that Lal PathLabs will achieve its pre-covid margin target of 26%.

  • Utilities stocks like Tata Power Co, Torrent Power, Power Grid Corp of India, NTPC and NAVA are rising in trade. The broader sectoral index, S&P BSE Utilities, is also trading in the green.

  • Intellect Design Arena surges more than 10% as its net profit jumps 3.1% QoQ to Rs 934.7 crore in Q1FY24. Revenue grows 3.9% QoQ helped by improvement in the platform, license and AMC segments. It shows up in a screener of stocks with increasing net profit and profit margin (YoY).

  • Indus Towers falls despite its Q1FY24 net profit rising 182.4% YoY to Rs 1,348 crore. Its revenue grows by 2% YoY on the back of growth in tower additions and tenancies. The company appears in a screener of stocks with strong momentum.

  • HSBC maintains its ‘Buy’ rating on Shriram Finance with a target price of Rs 228. The brokerage says the company’s profit beat estimates by 4% due to lower provisions, despite an increase in operating costs.

  • Societe Generale buys a 0.6% stake in Indiabulls Housing Finance for approx Rs 35.6 crore in a bulk deal on Thursday.

  • Indian Hotels Company rises as its Q1FY24 net profit increases by 30.8% YoY to Rs 222.4 crore due to lower finance expenses. Its revenue grows by 15.8% YoY on the back of robust growth in the room and food & beverage segments. The company appears in a screener of stocks with high momentum scores.

  • Bharat Electronics’ Q1FY24 net profit rises by 47.3% YoY to Rs 538.5 crore and revenue grows by 12.5% YoY, led by order wins and healthy execution. Its order book, as of July 1, stands at Rs 65,356 crore. The stock shows up in a screener for companies with consistently high returns over the past five years.

Riding High:

Largecap and midcap gainers today include Torrent Power Ltd. (671.80, 6.29%), Tata Power Company Ltd. (234.65, 6.22%) and Indian Bank (344.55, 4.89%).

Downers:

Largecap and midcap losers today include Supreme Industries Ltd. (3,359.80, -7.86%), Sona BLW Precision Forgings Ltd. (565.10, -4.47%) and Mahindra & Mahindra Financial Services Ltd. (299.60, -3.96%).

Movers and Shakers

40 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Intellect Design Arena Ltd. (690.90, 19.70%), Godfrey Phillips India Ltd. (2,073.00, 8.64%) and Prestige Estates Projects Ltd. (590.30, 8.14%).

Top high volume losers on BSE were Supreme Industries Ltd. (3,359.80, -7.86%), JK Lakshmi Cement Ltd. (617.80, -7.65%) and Blue Dart Express Ltd. (6,926.75, -4.18%).

Orient Electric Ltd. (229.15, -1.06%) was trading at 35.0 times of weekly average. JM Financial Ltd. (76.80, 3.85%) and Sundram Fasteners Ltd. (1,240.75, 1.86%) were trading with volumes 14.8 and 10.8 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

52 stocks hit their 52-week highs, while 2 stocks tanked below their 52-week lows.

Stocks touching their year highs included - Abbott India Ltd. (24,040.00, 1.41%), Ajanta Pharma Ltd. (1,615.75, 4.07%) and Alembic Pharmaceuticals Ltd. (777.20, 6.10%).

Stocks making new 52 weeks lows included - Rajesh Exports Ltd. (511.75, 1.02%) and UPL Ltd. (625.15, -0.26%).

13 stocks climbed above their 200 day SMA including Godfrey Phillips India Ltd. (2,073.00, 8.64%) and Tata Chemicals Ltd. (1,051.05, 5.78%). 6 stocks slipped below their 200 SMA including Affle (India) Ltd. (1,046.80, -1.82%) and Coal India Ltd. (227.10, -0.85%).

 
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The Baseline
27 Jul 2023
By Akshat Singh

Most governments have some debt on their books. It helps fund the country’s public expenditure, capital investment, and crisis response. So a country’s debt-to-GDP ratio is key to measuring its fiscal health and economic stability. A high debt-to-GDP ratio means more money going into interest payments, making countries vulnerable in times of crisis and downturns. 

In this edition of Chart of the Week, we take a look at the government debt-to-GDP ratios of various countries.

India’s debt to GDP improves from pandemic peak

India’s quarterly debt-to-GDP ratio stands at 55.7% as of March 2023, according to the latest estimates by the Ministry of Finance. During the COVID-19 pandemic in March 2021, the debt to GDP ratio reached 58.7% (an increase of 11.6 percentage points from the previous year) as the government borrowed more to cover additional expenses, amid declining revenues and a sharp fall in GDP. The quarterly ratio has fallen by 300 bps since the pandemic peak in March 2021. The country’s government debt levels have stabilized, with low risks of currency fluctuations and high interest rates. 

India’s annual debt to GDP is estimated to fall from 84.5% in 2022 to 83.8% by 2025, driven by capex-led growth planned in the 2023 fiscal budget. For reference, the annual 10-year average ratio of the country hovers around 74.2%.

The United States made headlines recently for blowing past its debt limit. As of March 2023, its quarterly debt-to-GDP ratio stands at 121.3%, a significant jump from 108.1% in March 2020. The pandemic in the US played a starring role in this escalation, with the ratio surging by 25.7 percentage points to 133.8% in March 2021. This jump was due to the government's aggressive spending on stimulus measures and the public health crisis. 

Japan, US and UK see soaring debt levels

As a result, US debt crossed $31 trillion for the first time, raising concerns that it would breach the $31.4 trillion debt ceiling. However, a fresh debt limit bill signed on June 3 raised the ceiling and averted a default.

The United Kingdom has rejoined “100% debt to GDP ratio club” after 60 years, with a quarterly ratio of 100.1% as of May 2023. Debt  has been increasing since the pandemic due to rising costs post-Brexit, energy subsidy schemes, inflation-linked benefit payments, and interest payments on debt. 

In contrast, France has shown a declining debt trend post-pandemic, despite increased social security payments and an ageing population. Finance Minister Bruno Le Maire expects the debt to GDP ratio to decline to 108.3% by 2027 on the back of plans to control spending and use 30 billion euros in savings from the relief fund for the energy crisis towards lowering the debt.

Let’s now focus on Asian countries. As of March 2023, Japan's quarterly debt-to-GDP ratio stands at 226.1%, the highest globally, and its debt has hit $9.2 trillion. 

Over the past three years, its ratio has risen by 25.9 percentage points due to social welfare packages and the costs of an ageing population. As a result, last year, Japan allocated 22% of its annual budget to debt redemption and interest payments, which exceeded the combined 15% spending on public works, education, and defence. 

China’s debt to GDP still the lowest, Brazil’s falls

Meanwhile, China’s debt ratio is at 21.4%, the lowest among the countries in focus. However, it has increased by 4 percentage points since the pandemic, driven by local authorities borrowing heavily to support the economy amid the central government's zero-COVID policy. As a result, credit to the nonfinancial sector reached $51.87 trillion, accounting for 295% of GDP in 2022. China’s debt as of April 2023 stands at $14.4 trillion.

Moving on to countries with relatively lower debt-to-GDP ratios, Brazil’s figure as of March 2023 stands at 72.8%, which is well under its general threshold limit of 77%. Crossing this threshold could result in a 1.7 bps decrease in annual real growth for each additional percentage point of debt. Despite higher government spending, Brazil has managed to reduce its debt to GDP ratio by approximately 15.8 percentage points since the pandemic. The Brazilian central bank says this was due to a higher-than-expected economic growth (3%) in 2022, the rise of the Brazilian currency against the US dollar, and net debt redemption. As of December 2022, total government debt stands at $36.6 billion, the lowest in five years. 

South Korea and Indonesia are the other two countries with low debt-to-GDP ratios, at 47.8% (December 2022) and 39.1% (March 2023) respectively. However, South Korea’s annual ratio has also increased since the pandemic and is estimated to reach 57.2% by 2026. The government has proposed spending cuts for the first time in 13 years to cope with the pandemic’s effects and inflationary pressure. 

Indonesia has reduced its ratio by 120 bps in the past year, thanks to a 7.6% YoY fall in external debt as of December 2022. This declining trend is because of the government moving its bonds to local markets amid unstable global financial conditions. Currently, the country is facing loan default problems from various construction companies, including the $8.3 billion default by Waskita Karya. As of April 2023, the total government debt stands at $532.2 billion.

Recently hit by recession, Germany has a quarterly debt-to-GDP ratio of 65.9% as of March 2023. The country has maintained a stable ratio over the years, but the pandemic caused an abrupt increase of 9 percentage points. Currently going through an energy crisis, the government has allocated $800 billion to address the situation. To manage the situation better, the Finance Ministry is also planning to restore the borrowing cap known as the debt brake. As a result, the annual ratio is expected to fall by another 220 bps to 64.1% in 2024.

 
Trendlyne Marketwatch
Trendlyne Marketwatch
27 Jul 2023
Markets closes lower, Jindal Stainless' Q1 net profit jumps 132.1% YoY to Rs 745.8 crore

Trendlyne Analysis

Nifty 50 closed at 19,659.90 (-118.4, -0.6%) , BSE Sensex closed at 66,266.82 (-440.4, -0.7%) while the broader Nifty 500 closed at 16,919.20 (-55.8, -0.3%). Of the 1,936 stocks traded today, 931 were in the positive territory and 950 were negative.

Indian indices extended the losses from the afternoon session and closed in the red, with the Nifty 50 closing at 19,660. The volatility index, Nifty VIX, rose by 0.5% and closed at 10.5 points. Tata Consumer’s Q1FY24 net profit increased by 23.9% YoY to Rs 317 crore against the consensus estimates of Rs 336 crore.

Nifty Midcap 100 closed in the green, but Nifty Smallcap 100 closed flat, with the benchmark index closing lower. Nifty Healthcare and Nifty Realty closed higher compared to Wednesday’s closing levels. According to Trendlyne’s sector dashboard, healthcare equipment & supplies emerged as the top-performing sector of the day, with a rise of over 3.4%.

Most European indices trade in the green. US indices futures trade higher, indicating a positive start. Meta share surged by 8% after market hours as its second-quarter earnings indicated a 12% rise in advertisement revenue driven by artificial intelligence. The firm guided a 15-24% growth rate by the end of 2023. Its competitor Google saw its advertisement revenue grow by 3% in the same period.

  • Money flow index (MFI) indicates that stocks like Rites, Sterling and Wilson Renewable Energy, Engineers India and Jyothy Labs are in the overbought zone.

  • Indian Energy Exchange (IEX) is falling despite its Q1FY24 net profit rising 9.7% YoY to Rs 75.8 crore and revenue growing by 5.8% YoY. The stock shows up in a screener for companies with sequentially rising net profits over the past three quarters.

  • Escorts Kubota and Castrol India touch their 52-week highs of Rs 2,475.9 and Rs 148.5 respectively. The former has risen 10.5% over the past month, while the latter increased by 21.5%.

  • Shriram Finance is falling despite its Q1FY24 net profit rising 25.1% YoY to Rs 1,675.4 crore and net interest income growing by 11.3% YoY. Its total assets under management also increases by 18.6% YoY. The stock shows up in a screener for companies with book value per share improving over the past two years.

  • CG Power and Industrial Solutions falls despite its Q1FY24 net profit rising by 56.9% YoY to Rs 203.7 crore. Its revenue grows by 14.1% YoY on the back of robust growth in the power and industrial systems segments. Its EBITDA margins also improve by 340 bps YoY due to lower inventory expenses. The company appears in a screener of stocks with increasing quarterly profits.

  • Birlasoft rises to its 52-week high of Rs 411.8 per share as its net profit grows by 22.6% YoY to Rs 137.5 crore in Q1FY24. Revenue increases by 3% YoY, aided by improvement in revenue from the BFSI, manufacturing and energy & utilities segments. It features in a screener of stocks near their 52-week highs with significant volumes.

  • Tata Consumer falls despite its Q1FY24 net profit rising by 23.9% YoY to Rs 316.6 crore. Its revenue grows by 13% YoY on the back of growth in the domestic and international business segments. The company appears in a screener of stocks nearing their 52-week highs with significant volumes.

  • Yatharth Hospital & Trauma Care Services' Rs 686.5 crore IPO gets bids for 2.13X the available 1.7 crore shares on offer on the second day of bidding. The retail investor quota gets bids for 2.52X of the available 83.1 lakh shares on offer.

  • Maricois rising as it signs a definitive agreement to acquire a 58% stake in Satiya Nutraceuticals, which owns the brand The Plant Fix-Plix, for a consideration of Rs 369 crore.

  • BoB Capital Markets downgrades its rating on Dixon Technologies to ‘Hold’ from ‘Buy’ but raises the target price to Rs 4,300 from Rs 4,100. This implies an upside of 1.6%. The brokerage believes the company is trading at an expensive valuation, given its recent run-up. However, it remains positive about the company’s growth prospects, as it believes the firm is better positioned in the electronic manufacturing space compared to its peers.

  • Jindal Stainless rises to an all-time high of Rs 386.9 as its Q1FY24 net profit grows by 132.1% YoY to Rs 745.8 crore due to lower power & fuel expenses. Its revenue increases by 86.3% YoY on the back of growth in sales in the domestic and export segments. The company appears in a screener of stocks with increasing quarterly revenue.

  • Zydus Lifesciences rises as it receives final approval from the US FDA for plerixafor injection, which is used to prepare patients with certain types of cancer for stem cell transplant. It has an annual sales of $210 million in the United States.

  • Nestle India is falling despite its Q2CY23 net profit rising 36.9% YoY to Rs 698.3 crore and revenue increasing by 15.1% YoY, driven by healthy growth in domestic sales and exports. Suresh Narayanan, Chairman & MD of the firm, says, “This marks the fifth consecutive quarter of double-digit growth across all product groups. Domestic sales growth is broad-based and grew by 14.6%."

  • Sunil D’Souza, Managing Director of Tata Consumer Products, says the FMCG industry is under pressure globally as the Canadian market is contracting. He adds that the company is implementing structural cost corrections in the UK and it will continue to deliver double-digit growth.

  • Pharmaceutical stocks like Cipla, Gland Pharma and Aurobindo Pharma rise more than 5% in trade. The broader Nifty Pharma index is trading 3.6% higher.

  • Colgate Palmolive rises to an all-time high of Rs 2,009.9 as its Q1FY24 net profit increases by 30.5% YoY to Rs 273.7 crore. Its revenue also grows by 10.8% YoY on the back of robust growth in the domestic segment. The company appears in a screener of stocks with a positive breakout at third resistance.

  • SIS falls despite its Q1FY24 net profit rising by 8.4% YoY to Rs 89.5 crore on the back of lower inventory expenses. Its revenue grows by 11.2% YoY aided by robust growth in domestic security services and facilities management. The company appears in a screener of stocks with strong momentum.

  • Cipla surges more than 5% as its net profit rises 45.1% YoY to Rs 995.7 crore in Q1FY24. Its revenue also grows by 17.7% YoY, aided by India, the US and South Africa, and EBITDA margin expands 233 bps YoY on the back of reduced raw material expenses. The company appears in a screener of stocks with a shift from negative to positive growth in sales and net profit, with strong price movement.

  • Rail Vikas Nigam declines by more than 4% as its two-day offer for sale (OFS) begins. Through the OFS, the Centre plans to offload around 5.36% stake in the company, amounting to Rs 1,330 crore, and has set a floor price of Rs 119.

  • Kalpataru Projects International touches a new 52-week high today as it bags new orders worth Rs 2,261 crore. Out of this, Rs 2,036 crore is for orders in the transmission and distribution (T&D) business in overseas markets, and Rs 225 crore is for the oil & gas pipeline project in India. It appears in a screener of stocks with strong momentum.

  • Tech Mahindra is falling as its Q1FY24 net profit drops by 38% QoQ to Rs 692.5 crore, and revenue decreases by 4.1% QoQ. This decline is due to continued weakness in the communications, media and entertainment (CME) vertical. Its total contract value (TCV) of deal wins has reduced for the second consecutive quarter, falling by 39% QoQ to $359 million. The stock shows up in a screener for companies with declining net profit sequentially over the past two quarters.

  • Netweb Technologies India's shares debut on the bourses at an 89.4% premium to the issue price of Rs 500. The Rs 631 crore IPO has received bids for 90.4 times the total shares on offer.

  • JP Morgan maintains its ‘Overweight’ rating on Axis Bank with a target price of Rs 1,000. The brokerage says the bank’s PAT was 2% higher than estimates led by lower provisions, while core PPoP (pre-provision operating profit) missed estimates. It highlights that loan growth was moderate at 2% QoQ.

  • BofA Securities Europe SA buys a 0.59% stake in Delta Corp for approx Rs 31 crore in a bulk deal on Wednesday.

  • Mahindra & Mahindra is falling after it acquires a 3.5% stake in RBL Bank for Rs 417 crore. It may also consider increasing its stake in the bank to 9.9%.

  • Schaeffler India rises as its Q2CY23 net profit increases by 5.1% YoY to Rs 237.3 crore due to lower inventory expenses. Its revenue grows by 5.4% YoY, driven by the automotive technologies and automotive aftermarket segments. The company appears in a screener of stocks with improving quarterly net profit and margins.

  • Reliance Industries is rising as Jio Financial Services enters a 50:50 joint venture (JV) with BlackRock. Both companies are targeting an initial investment of $150 million each towards this Indian asset management venture called Jio BlackRock.

Riding High:

Largecap and midcap gainers today include Cipla Ltd. (1,171.45, 9.64%), REC Ltd. (188.20, 8.44%) and Colgate-Palmolive (India) Ltd. (2,001.90, 6.28%).

Downers:

Largecap and midcap losers today include Mahindra & Mahindra Ltd. (1,447.40, -6.31%), Tech Mahindra Ltd. (1,099.90, -3.79%) and Hindustan Petroleum Corporation Ltd. (290.70, -3.65%).

Volume Rockets

34 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Godfrey Phillips India Ltd. (1,908.15, 10.71%), Cipla Ltd. (1,171.45, 9.64%) and REC Ltd. (188.20, 8.44%).

Top high volume losers on BSE were Mahindra & Mahindra Ltd. (1447.40, -6.31%), Fine Organic Industries Ltd. (4462.00, -5.40%) and Tech Mahindra Ltd. (1,099.90, -3.79%).

Mas Financial Services Ltd. (789.55, 2.77%) was trading at 30.7 times of weekly average. MMTC Ltd. (35.85, 6.70%) and Nesco Ltd. (661.95, 5.12%) were trading with volumes 14.6 and 11.1 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

56 stocks overperformed with 52 week highs, while 2 stocks tanked below their 52 week lows.

Stocks touching their year highs included - Ajanta Pharma Ltd. (1,552.55, 3.10%), Alembic Pharmaceuticals Ltd. (732.50, 3.43%) and Aurobindo Pharma Ltd. (835.55, 5.84%).

Stocks making new 52 weeks lows included - Rajesh Exports Ltd. (506.60, -1.07%) and Campus Activewear Ltd. (298.55, -1.06%).

9 stocks climbed above their 200 day SMA including Godfrey Phillips India Ltd. (1,908.15, 10.71%) and Granules India Ltd. (321.65, 4.40%). 6 stocks slipped below their 200 SMA including Shree Cements Ltd. (23,900.00, -1.54%) and Deepak Nitrite Ltd. (1,977.60, -1.41%).

 
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The Baseline
26 Jul 2023
Five Finance Stock Picks from Analysts
By Abhiraj Panchal

This week we look at analyst picks from the banking and finance sector with net profit and revenue growth in Q1FY24. 

  1. ICICI Bank: Edelweiss maintains its ‘Tactical Buy’ rating on this bank with a target price of Rs 1,195, indicating an upside of 20.3%. In Q1FY24, the bank’s net profit surged by 39.7% YoY to Rs 9,648.2 crore, while the revenue increased by 36.8% YoY. It beat Trendlyne Forecaster’s net profit estimates by 4.3%. Analyst Raj Jha is positive about the bank’s consistent return ratios and sound asset quality. 

Overall advances and deposits have grown by 18% YoY each. “Growth remains broad-based,” says Jha. Even though net interest margins (NIM) expanded by 77 bps YoY, the analyst expects pressure due to the increased cost of funds in the coming quarters. But he says that despite this pressure, ICICI Bank will sustain its strong performance on most parameters. He concludes that the bank’s focus on a digital push, risk-calibrated operating returns, and a strong balance sheet will result in growth.

  1. CreditAccess Grameen: Motilal Oswal reiterates its ‘Buy’ call on this bank with a target price of Rs 1,660. This indicates an upside of 19%. In Q1FY24, the bank's profit grew 161.2% YoY to Rs 346.3 crore, while revenue increased by 88.4%. It beat Trendlyne Forecaster’s net profit estimates by 20.1%. Analysts Abhijit Tibrewal,  Nitin Aggarwal and Parth Desai note that “margin expansion and opex efficiencies led to a strong quarter.”

The analysts are optimistic about the bank’s focus on new customer acquisitions and the addition of 40 new branches. CreditAccess Grameen also plans to increase the proportion of its long-term borrowings. The analysts expect the firm to dominate on the back of lowest-cost organized financing,  improved operational efficiency through technology, and integrated risk management in every process, leading to superior asset quality and lower credit costs. “With a strong capital position, the bank can navigate any potential future disruptions, and capitalise on the growth opportunity over the medium term,” they say.

  1. Karur Vysya Bank: ICICI Securities maintains a 'Buy' rating on this bank with a target price of Rs 165, indicating a potential upside of 27.6%. In Q1FY24, the bank reported net profit growth of 56.8% YoY to Rs 358.6 crore, while revenue increased by 27.8% YoY.  It beat Trendlyne Forecaster's net profit estimates by 4.8%. The analysts at ICICI Securities are optimistic about the bank's outlook due to its impressive loan book growth, leading to a healthy quarter.

One key reason for the analysts' optimism is the bank's lowest cost of deposits compared to its peers. The analysts project that the bank will achieve superior return ratios, possibly outperforming its competitors. The bank's presence in tier-1 cities, with 16% of its capital employed there, strengthens its position. Another factor adding to their bullish view is the bank's decision to aggressively hire new employees. This move is expected to enhance its franchise strength, which adds to its growth prospects.

  1. IndusInd Bank: BoB Capital Markets maintains its ‘Buy’ rating on this bank and raises the target price to Rs 1,755 from Rs 1,550. This implies an upside of 24.1%. In Q1FY24, the bank’s standalone net profit rose by 32.5% YoY to Rs 2,123.6 crore and revenue increased by 31.1% YoY. It beat Trendlyne Forecaster’s net profit estimates by 0.2%.  

Analyst Ajit Agrawal says the healthy growth in net profit is from rising net interest income and lower provisions. He expects loan growth to continue in FY24 on the back of traction in the vehicle finance and microfinance institution (MFI) segments. Agrawal adds, “Corporate loans did well, led by small businesses (+10% QoQ), and the bank aims to double this book to 20% of the corporate mix in 2-3 years.”

Overall, Agrawal believes that the bank’s strong growth momentum in vehicle finance and MFI loans, along with improving asset quality and a healthy loan mix, bodes well for its future growth. He anticipates the firm’s net profit to grow at a CAGR of 22.4% over FY23-25.  

  1. Can Fin Homes: Axis Direct keeps its ‘Buy’ rating on this housing finance company and raises the target price to Rs 930 from Rs 675, implying an upside of 16.5%. In Q1FY24, the company’s standalone net profit rose 13.1% YoY to Rs 183.5 crore and revenue increased by 34.8% YoY. It beat Trendlyne Forecaster’s net profit estimates by 14.3%.

Analysts Dnyanada Vaidya, Prathamesh Sawant and Bhavya Shah are positive about the housing finance company’s medium-term growth prospects on the back of improving demand trends, helped by a pause in rate hikes and easing supply-side constraints. They also like that the company keeps its assets under management (AUM) growth guidance at 18-20% over the medium term. 

The analysts add, “Despite the sharp run-up in the stock (+ 45% in 3 months), it trades at valuations lower than its peers.” They believe the company shows robust growth while maintaining stable asset quality and improving profitability. The analysts expect the firm’s net profit to grow at a CAGR of 19% over FY23-25. 

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

(You can find all analyst picks here)

 
Trendlyne Marketwatch
Trendlyne Marketwatch
26 Jul 2023
Market closes higher, Yatharth Hospital's Rs 686.5 crore IPO gets bids for 1.08X of shares

Trendlyne Analysis

Nifty 50 closed at 19,778.30 (97.7, 0.5%), BSE Sensex closed at 66,707.20 (351.5, 0.5%) while the broader Nifty 500 closed at 16,975.00 (78.1, 0.5%). Of the 1,945 stocks traded today, 1,020 were in the positive territory and 848 were negative.

Indian indices closed in the green, with the benchmark Nifty 50 index closing above the 19,750 mark. The Indian volatility index, Nifty VIX, rose sharply by 2.2%. Shree Cements rose over 2.3% and closed in the green after its net profit jumped 84% YoY to Rs 581 crore in Q1FY24. Tata Motors share price rose over 3.5% intraday after the company posted a net profit of Rs 3,202.8 crore Q1FY24, as compared to a net loss of Rs 5,006.6 crore in Q1FY23. However, the auto manufacturer's share price fell from its day high and settled 0.26% higher. 

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, following the benchmark index. Nifty Pharma and Nifty Realty closed higher than Tuesday's close. According to Trendlyne's sector dashboard, Telecom Services was the top-performing sector of the day. 

Major Asian indices closed in the red, except for India’s BSE Sensex and Australia’s All Ordinaries index, which closed in the green. European stocks traded in the red, in line with the US index futures, which also traded lower ahead of the expected 25 bps rate hike by the US Fed later today. Brent crude oil futures traded in the red, after rising nearly 4% in the last four trading sessions.

  • Hindustan Petroleum Corp sees a long buildup in its July 27 future series as its open interest rises 47% with a put-call ratio of 0.75.

  • According to CRISIL, operating profit for oil marketing companies (OMCs) could increase to Rs 1 lakh crore in FY24, up from FY23's low of Rs 33,000 crore. The rating agency believes that this healthy profitability would improve the sector's credit metrics.

  • Bajaj Finance is rising as its net profit grows 25.6% YoY to Rs 2,959.1 crore in Q1FY24. Revenue jumps 30.9% YoY, helped by improvements in new loans booked and assets under management. The lender's asset quality improves as its gross NPA declines by 35 bps YoY. It features in a screener of stocks with increasing revenue for the past four consecutive quarters.

  • Yatharth Hospital & Trauma Care Services' Rs 686.5 crore IPO gets bids for 1.08X the available 1.7 crore shares on offer on the first day of bidding. The retail investor quota gets bids for 1.25X of the available 83.1 lakh shares on offer.

  • RBL Bank rises over 5% as reports suggest that a Mahindra Group company has acquired around a 4% stake in the bank through the open market route.

  • Telecom stocks like Vodafone Idea, Indus Towers, Tata Communications, Route Mobile and Bharti Airtel are rising in trade. The broader sectoral index, S&P BSE Telecom, is also trading in the green.

  • The National Company Law Tribunal (NCLT) accepts the corporate insolvency plea for Coffee Day Global, the parent company of Café Coffee Day, following a petition filed by IndusInd Bank. As of the first week of July, the company has disclosed its total debt to be Rs 465.3 crore.

  • Shree Cements is rising as its net profit jumps 84% YoY to Rs 581 crore in Q1FY24. Revenue grows 19% YoY, aided by a rise in sales volumes and an increase in sales of premium products. The company has also approved a capex of Rs 7,000 crore to set up manufacturing plants in Rajasthan, Uttar Pradesh and Karnataka, among others.

  • Axis Direct maintains its ‘Buy’ rating on Relaxo Footwears and raises the target price to Rs 1,050 from Rs 990. This implies an upside of 10.9%. The brokerage remains optimistic about the firm’s growth prospects on the back of stable raw material prices, improving demand, increasing production capacity, market share gains and premiumisation. It expects the company’s net profit to grow at a CAGR of 29.1% over FY24-25.

  • Amit Syngle, MD & CEO of Asian Paints, says, the company has seen strong growth in tier 1-2 and tier 3-4 cities in Q1FY24. He adds that it targets volumes to grow in double-digits in FY24. He expects the home decor segment to pick up from Q2.

  • Delta Corp is rising as its Q1FY24 net profit increases by 6.4% YoY to Rs 51.2 crore and revenue grows by 4.1% YoY led by healthy growth in the casino gaming division. EBITDA margin expands by 10 bps YoY to 35.1%. The stock shows up in a screener for companies with strong annual EPS growth.

  • Mindspace Business Parks REIT rises as its Q1FY24 net profit grows by 7.9% YoY to Rs 127.5 crore due to lower power expenses. Its revenue increases by 22.7% YoY on the back of robust growth in the facility rentals and maintenance services segment. The company appears in a screener of stocks with improving RoCE.

  • Can Fin Homes falls after reporting a case of fraud at its Ambala branch, where three employees were involved in misappropriating funds amounting to around Rs 38.5 crore. Suresh Srinivasan Iyer, MD & CEO of the company says, this incident is isolated to the branch and anticipates an impact of Rs 35-38 crore in Q2FY24 profitability.

  • Amber Enterprises India is rising as its Q1FY24 net profit improves by 8.5% YoY to Rs 45.6 crore due to a decrease in employee expenses and finance costs. Revenue declines by 6.4% YoY. It appears on a screener of stocks that are volume shockers.

  • Cyient’s Q1FY24 net profit rises 3% QoQ to Rs 168.1 crore on the back of a fall in the cost of materials consumed. However, its revenue declines 3.7% QoQ due to weakness in the design-led manufacturing segment. The stock shows up in a screener for companies with declining cash flows from operations over the past two years.

  • Yatharth Hospital raises Rs 206 crore from anchor investors ahead of its IPO by allotting 68.7 lakh shares at Rs 300 each. Investors include ICICI Prudential AMC, HDFC Mutual Fund, Aditya Birla Sun Life Trustee, Bandhan Mutual Fund, HSBC Global Investment Funds, SBI Life Insurance, BNP Paribas Arbitrage and Goldman Sachs.

  • Transformers & Rectifiers (India) is rising as it bags an order worth Rs 134 crore from the central utility for transformers. This order takes the company's total order book to Rs 1,955 crore. The stock is currently trading 214.2% higher than its 52-week low.

  • Tata Motors’ board of directors, through a scheme of arrangement, approves the cancellation of the entire DVR (differential voting rights) shares of the company to simplify the capital structure. The shareholders will receive seven ordinary shares for every 10 DVR shares held in the company.

  • UTI Asset Management Company rises as its Q1FY24 net profit grows by 66% YoY to Rs 164.5 crore. Its revenue increases by 47.2% YoY on the back of robust growth in the cash & arbitrage and income segment. The company appears in a screener of stocks with strong momentum.

  • SBI Life Insurance is falling despite a 45% YoY rise in its net profit to Rs 381 crore in Q1FY24. Revenue surges 6x YoY, aided by improvement in gross premium income. It appears in a screener of stocks where analysts have upgraded recommendations or target prices over the past quarter.

  • Ceat rises as its Q1FY24 net profit increases by 14.6X YoY to Rs 144.6 crore due to lower raw material and inventory expenses. Its revenue also surges by 4.2% YoY and EBITDA margins improve by 7.3 percentage points. The company appears in a screener of stocks with increasing quarterly net profit and margins.

  • The International Monetary Fund (IMF) revises India's GDP growth forecast for 2023 to 6.1%, an increase of 20 bps from its earlier estimate of 5.9% due to higher domestic investment. However, it keeps its April prediction for 2024's growth rate of 6.3% unchanged.

  • Ashish Kacholia cuts stake in Megastar Foods to below 1% in Q1FY24, as against 1.1% stake held in Q4FY23.

  • Larsen & Toubro is rising as its Q1FY24 net profit improves by 46.5% YoY to Rs 2,493 crore and revenue increases by 33.6% YoY. The company’s order inflow surges by 57% YoY to Rs 65,520 crore, with international orders making up 42% of the total inflow. The firm also approves to buy back shares worth Rs 10,000 crore at a maximum price of Rs 3,000 per share through the tender offer route.

  • Dixon Technologies falls despite its Q1FY24 net profit rising by 50.6% YoY to Rs 68.8 crore due to lower raw material and finance expenses. Its revenue increases by 14.7% YoY on the back of robust growth in the mobile & electronics manufacturing services segment. The company appears in a screener of stocks with increasing quarterly revenue.

  • Tata Motors is back in the black in Q1FY24 with a net profit of Rs 3,202.8 crore, as compared to a net loss of Rs 5,006.6 crore in Q1FY23. Profitability improves on the back of robust sales from its Jaguar Land Rover unit and a stronger operating performance in its commercial vehicles business. Revenue rises 42.1% YoY, driven by healthy sales growth across all business segments.

Riding High:

Largecap and midcap gainers today include Tata Motors Limited (DVR) (419.45, 12.03%), Vodafone Idea Ltd. (8.75, 10.76%) and Indus Towers Ltd. (180.70, 5.18%).

Downers:

Largecap and midcap losers today include Gland Pharma Ltd. (1,194.55, -2.66%), Adani Transmission Ltd. (814.95, -2.38%) and Bajaj Finance Ltd. (7,433.15, -2.28%).

Crowd Puller Stocks

29 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Tata Motors Limited (DVR) (419.45, 12.03%), Sobha Ltd. (637.45, 10.08%) and Piramal Enterprises Ltd. (1,084.20, 7.99%).

Top high volume losers on BSE were Can Fin Homes Ltd. (771.20, -9.40%), Deepak Fertilisers & Petrochemicals Corporation Ltd. (552.50, -6.48%) and Aether Industries Ltd. (1,019.25, -5.19%).

TCI Express Ltd. (1,543.95, 5.22%) was trading at 25.7 times of weekly average. Tata Investment Corporation Ltd. (2,452.80, 4.08%) and Amber Enterprises India Ltd. (2,411.50, 6.49%) were trading with volumes 18.1 and 11.0 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

53 stocks made 52-week highs,

Stocks touching their year highs included - Aurobindo Pharma Ltd. (789.45, 0.22%), Bajaj Holdings & Investment Ltd. (7,426.45, -1.03%) and Bharat Heavy Electricals Ltd. (101.20, 3.53%).

13 stocks climbed above their 200 day SMA including Sobha Ltd. (637.45, 10.08%) and Indus Towers Ltd. (180.70, 5.18%). 8 stocks slipped below their 200 SMA including Bayer Cropscience Ltd. (4,406.90, -1.84%) and Adani Power Ltd. (255.50, -1.79%).

 
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The Baseline
26 Jul 2023
TCS, Infosys guidance cuts point to harder days ahead | Tech winners and losers screener
By Shreesh Biradar

The Indian investing community had high hopes for Nifty 50 reaching the 20,000 mark last week, but Infosys' results caused a pullback just before this milestone.

Indian IT 's earnings season began on a cautious note. TCS, a key player in the industry, noted that global macro headwinds "are affecting revenue and margins". Morgan Stanley had previously predicteda modest performance for Indian tech in Q1FY24, with improvement in the second half of FY24.

India’s software services has been a driving force in India's growth, contributing nearly 19% of overall exports and growing by 20% in FY23. However, the Q1FY24 earnings season has been underwhelming - the big four IT firms (TCS, Infosys, Wipro and HCL Technologies) reported tepid earnings and lower revenue guidance. The management is focusing on cost-cutting measures amid the slowdown.

Nifty IT rose by just 3% in the April-June 2023 quarter as investors re-evaluated what used to be a booming sector. The broader Nifty 50 rose by around 11% in the same period, so IT is now a clear laggard, as recessionary pressures, global financial turmoil, spending cuts, and the rise of technologies like AI raise questions about the growth outlook.

In this week’s Analyticks:

  • Losing Momentum?: Global headwinds slow IT sector growth
  • Winners and losers screener: IT stocks which outperformed and underperformed Trendlyne's Forecaster estimates in Q1FY24

Let’s get into it.

IT firms cut down their revenue guidance

The earnings season for the majority of Indian IT firms was not celebratory and was quite a mixed bag, with TCS and HCL recording a moderate performance, while Infosys' and Wipro's weak numbers underlined the slowdown. A major highlight of the season has been the cut in revenue guidance. For instance, Infosys revised its FY24 revenue guidancefrom its eariler estimate of 4-7% constant currency growth to 1-3.5%.  

Commenting on the lower guidance, Infosys CEO Salil Parekh  said, “In the short term, we see some clients reducing or even stopping work on transformational programs and projects. This is especially visible in financial services, mortgages, asset management, investment banking, payments, telecom, high-tech, and parts of retail.”

While Wipro hinted at -2% to 1% revenue guidance, HCL and TCS pegged their numbers at around 5% to 7%.  A key driver for the lower revenue guidance has been the slowdown in the global BFSI (Banking, Financial Services and Insurance) sector. This vertical contributes nearly 30% of IT services revenue, and has seen a spending cut in discretionary tech services. 

Except for HCL, all other firms have seen a drop in revenue from BFSI clients. Indian IT has in the meantime, diversified its exposure to retail, pharma, auto, and other sectors. The BFSI share has significantly decreased from the 40% it had three years ago.

The telecom sector has also seen its share of revenue drop. On the upside, the retail, energy and manufacturing sectors are moving towards technology adoption post-pandemic.

Slower decision-making clogs up deal pipeline for tech companies

As interest rates rose, the collapse of Silicon Valley Bank in the US and Credit Suisse in Europe spread cracks across the US and European banking sector. Banks and finance companies have decided to wait out the storm and delay new IT spending.

While large deals are still coming through, they are taking longer to finalize due to decision-making getting pushed all the way up to the CEOs and CTOs in client companies.

When interest rates were low and money was cheap, a lot of tech moonshot projects were getting funded by customers. Now that has changed. According to CEO of TCS, K Krithivasan, “Macro uncertainties have made clients more cautious. They are taking a month to month approach, and that means low visibility on their future spending. We will prioritize projects that are business-critical and offer faster ROI realization. Long-running discretionary projects are now coming back with reduced scope or pace.”

While the deal pipeline is holding steady, the conversion rate for new deals has decreased. So order inflow will likely slow down going forward.

The new deals already signed might see execution delays. However, regular spending on maintenance projects is expected to continue at the previous pace. It is discretionary spending, which involves smaller budgets and faster turnaround times, that is seeing the biggest cuts. 

Retaining talent becomes key, as hiring slows down

The pressure on the sector's top-line growth has pushed the management to focus on margins. However, the margins of the IT pack have fallen since Q4FY23. The recent salary hikes have offset some of the gains from lower subcontractor costs and higher resource utilisation. According to TCS CFO Samir Seksaria, salary hikes have resulted in a 200 bps impact on the EBIT margins.

Lower attrition has controlled the decline in margins for the IT pack. However, the attrition rate continues to be above pre-pandemic levels of 10 -12%. Companies are responding by trying to retain and promote their new talent pool instead of hiring external replacements. This has led to a higher utilisation of the bench pool and lower net additions of employees. 

If the attrition rate falls by another 300 bps, IT firms could see a margin expansion in the range of 75-100 bps. Currently, the net additions of employees for large IT firms have been negative or marginally positive.

The impact of the AI revolution is still undecided

With the rise of Chat GPT and Google Bard, generative AI has become the buzzword in IT circles.

But there are many uncertainties around AI right now - clients are unsure about how to use it. Client engagements for AI projects have revealed ever-changing requirements, and clarity is lacking on how to integrate AI into business processes. The high error rates, and the 'hallucinations' of chatbots, have made customers cautious about adoption. Indian IT firms are investing into in-house pilot projects to get a better understanding of AI's nuances and possibilities. 

However, Infosys CEO Salil Parekh was clear on the promise, saying, “AI will not replace human jobs but complement them, and Infosys has seen a 10-30% productivity improvement using AI internally and with clients.”

Recognizing the significance of AI, Wipro has committed $1 billion to building AI technology, including acquiring established AI firms. Wipro CEO Thierry Delaporte believes that, “AI is a fast-moving field. Especially with the emergence of generative AI, we expect a  shift in all industries. It’s meant to empower our talent pool and help clients”.

TCS is training 50,000 employees under its AI program, while Wipro has pledged to train its entire workforce of 2,50,000 employees in generative AI. 

Overall, IT firms are focusing on steadying their revenue and margin growth amid the global slowdown. Deals are still happening, and there are no immediate threats from disruptive AI. The Indian IT sector is for now, well-equipped to handle the slowdown, so long as it's temporary.

Tech winners and losers screener: IT stocks which outperformed and underperformed Trendlyne's Forecaster estimates in Q1FY24

As the software & services sector releases its Q1FY24 results, we take a look at how these companies have performed compared to their revenue and net profit estimates.This screenershows tech stocks that have outperformed and underperformed analyst estimates.

Notable stocks in the screener are Infosys, Wipro, HCL Technologies, Tata Consultancy Services (TCS), LTIMindtree, Coforge, Tanla Platforms, IndiaMart InterMeshand One97 Communications.

Tanla Platforms’ net profit grew by 12.6% QoQ to Rs 135.4 crore inQ1FY24, beating Trendlyne’s Forecaster estimates by 16.2%. Its revenue also rose 9.3% YoY to Rs 911.1 crore, surpassing estimates by 7.6%. The company’s revenue grew on the back of the enterprise and platform segments, aided by a recovery in transaction volumes and an international long-distance (ILD) rate hike.

Tata Consultancy Services is the only big four tech giant to beat Forecaster estimates for net profit, despite a 2.8% QoQ fall to Rs 11,047 crore in Q1FY24. However, revenue remains flat at Rs 59,381 crore, in line with estimates. This was caused by muted growth in the BFSI and retail segments, combined with delays in non-critical projects. 

HCL Technologies missed the Forecaster estimates for revenue and net profit by the largest margin among the big four in Q1FY24. Its net profit declined 11.3% QoQ to Rs 3,534 crore, missing Forecaster estimates by 8.3%. Similarly, revenue fell by 1.5% QoQ to Rs 26,640 crore, missing Forecaster estimates by 1.9%. This decline can be attributed to the slowdown in revenue from the technology and telecommunications segments due to a cut in discretionary spending and decision delays.

You can find more screeners here.