Trendlyne Marketwatch    
27 May 2022, 03:50PM
Market closes higher, Motherson Sumi Systems’ Q4 profit falls 82.9% YoY to Rs 121.6 crore

Trendlyne Analysis

Nifty 50 closed in the green with the Indian volatility index, India VIX falling by more than 6.5%. Asian shares closed higher, following the US indices which also closed sharply higher on Thursday. US equities rose as minutes from Federal Reserve's May meeting indicated the central bank would remain flexible and might pause rate hikes later in the year. Strong retail earnings outlook from top retail companies also boosted the market sentiment. S&P 500 closed 2% higher while Dow Jones closed over 1.66% higher than Thursday’s levels. Crude oil edge lower after touching a two-month high on Thursday amid fears of supply disruption as a result of the proposed European ban on Russian oil. European indices follow the global trend and trade higher than Thursday's levels.

Nifty Next 50 and Nifty Smallcap 100 closed in the green, following the benchmark index. Nifty Auto and Nifty FMCG closed higher than Thursday’s levels. Nifty IT closed over 2.5% higher, tracking the tech-focused NASDAQ 100, which closed in the green on Thursday.

Nifty 50closed at 16,352.45 (182.3, 1.1%), BSE Sensexclosed at 54,884.66 (632.1, 1.2%) while the broader Nifty 500closed at 13,873.15 (150.6, 1.1%)

Market breadth is overwhelmingly positive. Of the 1,875 stocks traded today, 1,301 were in the positive territory and 538 were negative.

  • Easy Trip Planners, Krishna Institute of Medical Sciences, Kansai Nerolac Paints, and Zydus Wellness are trading with higher volumesas compared to Thursday.

  • Hindalco Industries sees a long build-up in its Jun 30 futures series as its open interest rises 6.1% with put to call ratio at 0.44

  • Stocks like Reliance IndustriesHDFC BankInfosysAdani Total Gasand Maruti Suzuki India, among others, are outperformingtheir respective sectors in the past week.

  • Allcargo Logistics' Q4FY22 profit rises 359.6% YoY to Rs 246.8 crore. The profit rises as EBITDA margins rise 171 bps to 7.5% on the back of a 72.2% rise in revenues to Rs 5,786.6 crore.

  • Axis Securities maintains a ‘Buy’ rating on HG Infra Engineering with a target price of Rs 850, indicating an upside of 62%. The brokerage believes the company is well-placed to benefit from the ongoing growth in the infrastructure space, given its healthy balance sheet, robust order book and proven execution prowess. The brokerage expects the company’s profit to grow at a 21.3% CAGR over FY22-24.

  • Motherson Sumi Systems’ Q4FY22 net profit falls 82.9% YoY to Rs 121.6 crore and revenue rises by 1.2% YoY to Rs 17,184.8 crore. EBITDA margin falls by 290 bps YoY to 7.6% on higher input costs and lower revenue.

  • Ipca Laboratories and Sundaram Finance touch 52-week low of Rs 902.7 and Rs 1,611.6 respectively. Both stocks are falling for three sessions.

  • All bank stocks are trading in green, with stocks like IndusInd Bank, Bandhan Bank, IDFC First Bank and Federal Bank, among others, rising above 2%. The broader sectoral index Nifty Bank is also rising in trade.

  • India Cements reports a loss of Rs 10.6 crore in Q4FY22 against profit of Rs 50.2 crore in Q4FY21. Revenue for the quarter falls 3.7% YoY to Rs 1417.6 crore. The company suffers a loss due to an increase in the cost of raw materials and an increase in expenses on power and fuel.

  • Piramal Enterprises hits a 52-week low despite it posting a net profit of Rs 109.5 crore in Q4FY22 as opposed to a loss of Rs 571.2 crore in Q4FY21. Revenue rises 23.4% YoY to Rs 4,401 crore on the back of the Financial Services segment rising 36.9% YoY to Rs 2,023.8 crore. However, the operating margin falls by 24 percentage points YoY to 28.3% on rising employee costs and finance costs.

  • Hindalco Industries is rising as its Q4FY22 net profit rises 99.7% YoY to Rs 3,851 crore and revenue rises 37.6% YoY to Rs 55,764 crore. The growth is driven by revenue from Novelis rising 37% YoY to Rs 36,411 crore and the aluminium segment rising 65% YoY to Rs 9,847 crore. The operating margin slightly dips by 86 bps YoY to 13.1% as the cost of materials consumed rises 44.1% YoY to Rs 36,121 crore.

  • Reserve Bank of India's annual income rises 20% YoY to Rs 1.6 lakh crore in FY22. However, expenses jump 3.8X YoY to Rs 1.3 lakh crore. Out of the expenditure, RBI transferred Rs 1.15 lakh crore in the contingency fund to maintain the risk buffer at minimum required level. The apex bank also paid a surplus of Rs 30,307 crore to the government of India in FY22.

  • Godrej Industriesis trading with more than 38 times its weekly average trading volume. AstraZeneca Pharma India, Muthoot Finance, Cholamandalam Financial Holdings, and Piramal Enterprisesare trading at more than four times their weekly averagetrading volumes.

  • Sun Pharmaceutical Industries' arm S.C. Terapia S.A., Romania acquires Uractiv portfolio from Fiterman Pharma. The Uractiv portfolio comprises food supplements including minerals, vitamins, and adjuvants, and cosmetics and medical devices used for maintaining urinary tract health. The portfolio has annualised revenue of approximately $ 8.7 million.

  • Page Industries is rising as its Q4FY22 net profit rises 64.8% YoY to Rs 190.5 crore and revenue rises 26.1% YoY to Rs 1,111.1 crore, driven by retail expansion and new product launches. Operating margin rises by 476 bps YoY to 24% led by higher revenue.

  • NMDC is falling as its Q4FY22 net profit falls 36% YoY to Rs 1,813 crore due to employee benefits costs rising 60.4% YoY to Rs 465.4 crore and royalty and other levies rising by 74.7% YoY to Rs 2,701.5 crore. Revenue marginally falls 2.1% YoY to Rs 6,702.2 crore as revenue from the iron ore segment falls 2% YoY to Rs 6,672.1 crore.

  • Ruchi Soya Industries' Q4FY22 profit falls 24.9% YoY to Rs 234.4 crore despite a 37.1% YoY increase in the revenue to Rs 6,663.7 crore. The profit falls due to the increasing cost of raw materials and purchases of stock-in-trade expenses. The board of directors has announced a maiden dividend of Rs 5 per equity share for FY22.

  • Zee Entertainment Enterprises, Saregama India, Inox Leisure, PVR, TV18 Broadcast and Sun TV Network, among others, are rising in trade. The broader sectoral index Nifty Media is also trading in green.

  • Oil And Natural Gas Corporation, Oil India, and Vedanta fall on reports that the Centre may consider a windfall tax on oil and gas producers to offset the shortfall in revenues. This could help fund public expenditure on fuel, food, and fertilizer subsidies.

  • Paradeep Phosphates’ shares list at a 4.7% premium to the issue price of Rs 42 on its debut on the bourses. The Rs 1,501.7-crore IPO was subscribed for 1.7 times the total shares on offer.

  • Zee Entertainment Enterprises is rising despite its Q4FY22 net profit falling 34% YoY to Rs 181.9 crore due to operational costs rising 49% YoY to Rs 1,257.9 crore. Revenue rises 18.2% YoY to Rs 2,322.9 crore on revenue from other sales and services surging 8.8X YoY to Rs 348.2 crore. The operating margin fell by 6.7 percentage points YoY to 21.8% on high input costs.

  • Berger Paints (India's) Q4FY22 net profit rises 5.6% YoY to Rs 220.3 crore with revenue increasing 8% to Rs 2,187.5 crore. EBITDA rises 3.2% to Rs 346.4 crore. Total expenses for the company are up 9% YoY to Rs 1,915.4. The company recommends a dividend of Rs 3.1 per equity share for FY22.

Riding High:

Largecap and midcap gainers today include Godrej Industries Ltd. (484.70, 10.38%), Dr. Lal Pathlabs Ltd. (2,204.50, 9.67%) and Whirlpool of India Ltd. (1,622.40, 7.86%).

Downers:

Largecap and midcap losers today include Piramal Enterprises Ltd. (1,645.30, -11.61%), GAIL (India) Ltd. (142.80, -5.56%) and Oil And Natural Gas Corporation Ltd. (143.80, -5.33%).

Volume Rockets

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

Top high volume gainers on BSE included AstraZeneca Pharma India Ltd. (2,955.40, 11.99%), Godrej Industries Ltd. (484.70, 10.38%) and IndiaMART InterMESH Ltd. (4,515.30, 8.16%).

Top high volume losers on BSE were Piramal Enterprises Ltd. (1,645.30, -11.61%), Oil And Natural Gas Corporation Ltd. (143.80, -5.33%) and Muthoot Finance Ltd. (1,096.15, -3.61%).

Akzo Nobel India Ltd. (1,720.00, -0.59%) was trading at 11.8 times of weekly average. Cholamandalam Financial Holdings Ltd. (621.90, -1.25%) and GlaxoSmithKline Pharmaceuticals Ltd. (1,520.00, 0.60%) were trading with volumes 5.7 and 5.5 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

1 stock made 52-week highs, while 7 stocks hit their 52-week lows.

Stock touching their year highs included - Blue Dart Express Ltd. (7,403.10, 1.20%).

Stocks making new 52 weeks lows included - 3M India Ltd. (17,563.45, 0.61%) and Ipca Laboratories Ltd. (901.15, -1.65%).

24 stocks climbed above their 200 day SMA including AstraZeneca Pharma India Ltd. (2,955.40, 11.99%) and Balrampur Chini Mills Ltd. (399.50, 6.41%). 9 stocks slipped below their 200 SMA including GAIL (India) Ltd. (142.80, -5.56%) and Triveni Turbine Ltd. (175.65, -5.26%).

The Baseline    
27 May 2022, 02:00PM
Five Interesting Stocks Today
  1. InterGlobe Aviation (Indigo): This airline stock surged more than 7% even after it posted a loss in Q4FY22. IndiGo’s net loss rose  47% YoY to Rs 1,681 crore because of a 68% YoY surge in fuel costs to Rs 3,220.5 crore. The positive stock movement after the results was because of CEO Ronojoy Dutta’s positive outlook for the company. He said that profitability is a top priority, and also hinted at a hike in ticket prices. The CEO believes the key to profitability is managing the business well on the revenue side. It’s important to note that IndiGo has over 50% market share in India’s commercial aviation market, ending Q4 with a market share of nearly 59%.

The company’s revenue rose in Q4FY22 by 28.9% to Rs 8,020.7 crore. But due to high aviation turbine fuel (ATF) costs the EBITDA margin fell 8.3 percentage points to 2.1%. The increase in ATF costs was much higher than the rebound in demand for air travel.

However, it will be interesting to see how IndiGo fights to maintain its market share as Air India and SpiceJet expand flight operations. IndiGo also faces threats from new entrants like Akasa, and Jet Airways. With a volatile and bearish market, brokerage JM Financial expects the stock to remain under pressure because of increasing competition, margin pressure due to the rise in ATF prices, and Rakesh Gangwal’s decision to reduce his 36.6% stake in the company.

  1. ICICI Lombard General Insurance: This general insurance company’s stock fell over the past week after reports came in early in the week that the insurance regulator is considering a move to allow life insurers to sell health insurance products. The stock rebounded back and outperformed its industry over the past three months. This outperformance was probably due to another regulatory action that would lead to higher motor insurance premium for general and health insurers. The Ministry of Road Transport and Highways issued a notification on that will lead to an increase in third-party motor insurance premium for various categories of vehicles. The underwriting and claims head of the company considers this a positive step as premiums will rise as motor insurance premium rates were stagnant for the last two years.

The company’s net profit in Q4FY22 fell 9.2% YoY to Rs 313 crore even though its gross direct premium income (GDPI) rose 34.2% YoY to Rs 4,666 crore. The management attributes the fall in profit to a rise in claims and underwriting losses due to the pandemic. Underwriting losses rose 128% to Rs 308.9 crore. Maximum underwriting loss was in the health segment with the retail health insurance segment’s losses growing 4.8X to Rs 50.7 crore.

While the company faced underwriting losses in the health insurance segment, the product mix for health insurance stands unchanged at 22%, the same as FY21. Motor insurance share in the total product mix decreased to 46% in FY22 since the auto sector was on a slowdown the entire FY22.

  1. Torrent Pharmaceuticals: This pharmaceutical company’s stock rose by 10.2%, despite posting a loss of Rs 118 crore in Q4FY22 as opposed to a profit of Rs 324 crore in Q4FY21. The stock rose significantly after the company declared a final dividend of Rs 23 per share, with the total payout amounting to Rs 389.2 crore. The company’s board also recommended issuing bonus shares in the ratio of 1:1 or one share for each fully paid-up share held. The company declared a dividend despite its net profit falling 37.9% YoY to Rs 777 crore in FY22. Its cash flow from operations and trade receivables marginally increased compared to FY21. 

The stock is also currently in the PE ‘Sell Zone, according to Trendlyne’s Check Buy or Sell feature.. This means the stock is trading at higher PE levels than normal. The stock has remained below its current PE levels 90.7% of the time.

The company’s revenue rose 10% YoY, driven by strong growth momentum in branded generic markets in India and Brazil. Going forward, the management guided for a 100-150bps EBITDA margin improvement in FY23 compared to 28.6% in FY22. It expects the improvement to be driven by the closure of its liquid business, cost optimization measures, and favourable pricing in the branded generics segment.

  1. National Aluminium Company (Nalco): This aluminium company’s stock closed 0.7% lower on Thursday, even though its Q4FY22 net profit rose 9.6% YoY to Rs 1,025.5 crore. The company’s profit marginally missed Trendlyne’s Forecaster estimates. The company’s revenue rose 53.8% YoY to Rs 4,340.8 crore in Q4FY22, driven by high LME (London Metal Exchange) prices, and effective raw material procurement according to the management. In FY22 the company produced 4.6 lakh tonnes of aluminium and 75.1 lakh tonnes of bauxite, its highest ever since its inception, according to the management.

Interestingly, this stock showed on a screener which tracks big changes in FII (foreign institutional investors) holding in companies on a quarterly basis. FII holding in the company increased by 4.7 percentage points QoQ to 18%. By far, Nalco saw the biggest jump in FII holding compared to other key aluminium players such as Hindalco (+2.8 percentage points QoQ) and Vedanta (+0.7 percentage points QoQ).

Even as aluminium prices have corrected nearly 30% from record highs during Q4FY22, the Managing Director of Nalco expects to keep up the growth momentum by increasing production and reducing raw material costs. As the company has been allocated two coal mines namely Utkal D and E, the management expects the cost of procuring coal to gradually reduce from FY24. For the coming quarters, the management expects aluminium to stabilise as it sees the gap between global production of aluminium and consumption narrowing down.

  1. Aster DM Healthcare: This healthcare service provider’s stock rose over 13% intraday after it announced its Q4FY22 results on Wednesday. Its net profit jumped 2.2X YoY to Rs 226.3 crore and revenues increased by 14.1% to Rs 2,727.8 crore. Revenue rose on the back of a 26.2% YoY growth in its India businesses. EBITDA margin rose 360 basis points YoY to 17% mainly due to a decrease in its laboratory outsourcing costs, which fell 61% YoY to Rs 54.8 crore. This stock shows up on a screener that lists companies that announced results in the last two weeks, with rising operating profit margin and YoY profit growth.

Aster DM gets a majority (77%) of its revenues from Gulf Cooperation Council (GCC) countries and the remaining 23% from India. However, the company is focusing more on expanding its network in India as its India business is growing faster. Revenue from GCC rose 11% YoY to Rs 2,121 crore while revenue from India increased by 26.2% to Rs 607 crore in Q4FY22. This is reflected in the average occupancy rate (AOR) as well. AOR of hospitals in GCC fell 100 bps YoY to 51% in FY22 while ARR of hospitals in India rose 10 percentage points to 66%. The company plans to add up to 1,000 beds in India in FY23, indicating a 25.6% increase.

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

Polycab India Ltd.    
25 May 2022
2399.25
-0.40%
Polycab powers up against the competition

By Ketan Sonalkar

Polycab India, the market leader in wires and cables, has been establishing a significant presence in the FMEG (fast-moving electrical goods) space over the past few years, after starting FMEG sales in 2014. Its Q4FY22 results were above Trendlyne's Forecaster estimates and it ended FY22 on a high note with its highest ever annual revenues at Rs 12,293 crore.

FY22 was the first year of its five-year project titled ‘Leap’, where the company targets a revenue of Rs 20,000 crore in FY26. The project goals include growth of 1.5x in retail wires and 2x growth in the FMEG segment, and a contribution from exports of more than 10% of revenues.  The FY22 results showed progress - including growth in wires, FMEG and exports. The management highlighted that from the second year of project Leap, the company will explore opportunities to get into new product categories and/or inorganic expansions, which might increase the capex.

Quick Takes

  • Revenues at Rs 3,986 crore rose by 35% YoY in Q4FY22 with 39% growth from the wires segment
  • EBITDA at Rs 476 crore rose by 18% YoY in Q4FY22 despite raw material pricing challenges
  • Revenues for FY22 at Rs 12,203.8 crore rose 39% on a YoY basis, the highest in the history of the company
  • Launched economy brand Etira wires for semi-urban and rural markets to cater to price-sensitive markets
  • With the project leap objective of 2x growth in the FMEG segment, recruited senior industry professionals from competitors to expand business

Recovery in construction and infrastructure boosts revenue

In Q4FY22, January was impacted by the Omicron variant. However as the impact of the third pandemic wave waned, housing and infrastructure projects resumed. The momentum in housing and infrastructure is expected to continue in the next few quarters despite rising costs and inflation. The housing wires segment posted strong growth led by continued momentum in real estate and renovation activities.

Revenues grew 35% in Q4FY22 to Rs 3,986.8 crore and net profits grew 17% YoY to Rs 322.2 crore. Exports business was twice of FY21 led by strong demand from sectors like oil & gas, renewables and infrastructure globally. Margins from different verticals continued to improve sequentially led by price increases and improved operating efficiency.

Polycab launched a new economy segment wire brand Etira in Q4FY22, covering market segments where it is not present currently. With this brand, Polycab hopes to deepen its presence in semi-urban and rural areas, where demand is relatively price-sensitive. It has already launched housing wires under this brand and plans to expand the product portfolio further. 

Annual revenue crossed the Rs 10,000 crore mark at Rs 12,293.7 crore in FY22, a YoY growth of 39%. In comparison, net profit grew YoY only by 3% to Rs 908.6 crore. This is attributed to the rising metal prices, which was a challenge for all cable and FMEG players in FY22.

Most wire and cable manufacturers were able to grow annual revenues above 25% in FY22. The market leader Havells saw maximum YoY revenue growth at 36.6%. Following close behind was Polycab, with YoY revenue growth of 35.8%. However, Polycab’s annual net profit growth was way below peers at 3% in FY22. With rising inflation affecting the entire industry, Polycab lags other wire and cable players in protecting margins in FY22.

Existing distribution network aids the growth of FMEG vertical

Polycab was only a wire and cable manufacturer for more than three decades. It forayed into the FMEG segment in FY14 and it now contributes 10% of total revenues as of FY22. The company is focusing aggressively on this vertical and expects its revenue contribution to improve over the next few years.

The FMEG vertical grew 9% YoY to Rs 379.2 crore in Q4FY22 from Rs. 346.8 crore in Q4FY21. 

The revenues from the FMEG vertical rose 20% YoY to Rs Rs 1,254.4 in FY22. This was aided by the expansion of its dealer and retail network to 4,600 and 2,05,000, respectively in FY22. A strong distribution strategy has helped Polycab build leadership in the wires and cables business. The revenue contribution from each of the regions it operates in is almost equal. Another factor at play here is that many existing dealers in the wires and business also became dealers for FMEG products leading to broad penetration of its FMEG products.

The fans, lights, and switchgear business posted healthy growth while conduit pipes saw momentum. Switches saw a decline due to supply challenges. The solar business achieved over 50% YoY growth in FY22. The rising metal prices were a challenge for Polycab in FY22. The company says that it reviews the change in commodity prices and the change in rupee against the US dollar. Based on this,  pricing actions are taken on a monthly basis. In Q4FY22, there was some correction in aluminum and copper prices after months of consistent rise.

Polycab’s capital expenditure guidance is Rs 300-350 crore for FY23. The funds will go towards increasing exports, backward integration in manufacturing, setting up switch manufacturing capabilities, and maintenance. In addition, the company is also incurring a one-time capex of Rs 200 crore for the new head office in Mumbai.

Experienced new hires join the team for FMEG expansion plan

One of Polycab’s targets from project leap is to double the growth of the FMEG vertical to a revenue of more than Rs 2,000 crore annually by FY26. To penetrate the highly competitive FMEG segment, Polycab has poached about 20 senior management professionals from the spectrum of FMEG competition. These include Vivek Sharma from Panasonic, who is the new Deputy Managing Director of the FMEG vertical. Tapas Roy Chowdhury from Havells is now the president for the fans division at Polycab. Deepak Mitra was hired from Crompton to lead sales in rural markets. Vipul Aggarwal from Havells is now vice president for supply chain at Polycab.

Polycab ended FY22 on a strong note and is working towards meeting the goals laid out in project ‘Leap’. Though the company delivered highest annual revenues in FY22, its profit growth was way below peers in wires and cables like Havells, KEI Industries and V-Guard Industries. In the FMEG vertical competition is intense with Havells, V-Guard Industries, Finolex Cables and a host of unorganised players as well. How it holds out against the competition in both these verticals, as well as its profitability vis-a-vis its peers in the next few quarters, will define whether Polycab is a suitable stock for a long term play in the wires and FMEG space.

ICICI Direct released a Buy report for Polycab India Ltd. with a price target of 2850.0 on 12 May, 2022.
The Baseline    
25 May 2022
Big Misses: Many companies miss analyst profit estimates in Q4

Stock markets are volatile amid signs that all is not well in the corporate world. Q4FY22 results confirmed that many businesses are struggling with rising inflation, supply pressures and worried consumers. Trendlyne’s Forecaster estimates show quite a few companies from the Nifty 500 missing Q4 net profit estimates by a large margin.

Over 150 Nifty companies missed their adjusted net profit estimates. Trendlyne’s Forecaster shows that many companies in thepharmaceutical sector saw their actual adjusted net profit miss consensus estimates by more than 100%. Among these,Lupin’s Q4FY22 net profit missedTrendlyne’s Forecaster estimates by the widest gap of 310.7%.

Lupin’s miss was because of a deferred taxexpense of Rs 341.9 crore.GSK Pharma is another pharma company that missed its profit estimates due to a one-time tax adjustment of Rs 202 crore.

Most pharma companies struggled because of muted growth in US markets and an increase in costs because of freight charges, marketing expenses, and input costs. Cost pressures also led to companies in sectors likeautomobile,retailing,cement,banks, andconsumer services, to miss Trendlyne’s Forecaster profit estimates. The companies that missed Trendlyne Forecaster’s estimates by more than 100% includeTata Motors (156.9%),Trent (151.7%),Nuvoco Vistas Corporation (135.6%), andGMR Infrastructure (123.3%).

With inflation hitting nearly 8% in April 2022, the Reserve Bank of India is hiking its rates to reduce excess liquidity in the market. This will affect the earnings of corporates in H1FY23 as demand is likely to take a hit.

On the bright side, areport by ICICI Securities suggests that the earnings base will continue to expand over FY22-24 with more beats than misses. The brokerage expects demand and earnings to show significant improvement in sectors like real estate, banks, energy, and consumer services. As we head into the next quarter, let’s hope that the analysts' optimism turns out true in Q1FY23.

The Baseline    
23 May 2022
Five analyst stock picks this week
  1. State Bank of India: LKP Securities maintains a ‘Buy’ rating on this public sector bank’s stock with a target price of Rs 565, indicating an upside of 22.7%. Analyst Ajit Kumar Kabi believes the bank delivered stable results led by a rise in operational revenue and improved asset quality. Kabi believes that profit growth in Q4FY22 was led by a 15.3% YoY growth in NII (net interest income), along with steady operating expenses. Kabi says “the bank witnessed better than expected advance growth (11.6% YoY & 6% QoQ) led by wholesale credit growth, and stable deposit growth (10% YoY & 5.3% QoQ) sequentially.”

The bank’s asset quality will continue to improve in the coming quarters on the back of higher upgrades and recoveries, Kabi said Furthermore, he expects the bank’s profitability to improve in the coming quarters on the back of credit growth, normalisation of credit costs, and improving operational performance.

  1. Kajaria Ceramics: HDFC Securities maintains a ‘Buy’ call on this tile maker’s stock but reduced its target price by Rs 30 to Rs 1,420, indicating an upside of 35.6%. “We continue to like Kajaria Ceramics for its market share gain and superior margin in the tiles segment (function of its robust distribution and cost controls) and its fast expansion in the bath ware and ply businesses,” say analysts Rajesh Ravi and Keshav Lahoti. In Q4FY22, the company’s consolidated revenue grew 15.7% YoY to Rs 1,101.8 crore but profit and EBITDA fell by 24.7% YoY and 13% YoY to Rs 95.8 crore and Rs 165.9 crore, respectively. The analysts believe that the fall in EBITDA was due to higher gas prices.

According to the analysts, the company expects volume and revenue to increase by 15-20% and 20-25% YoY respectively for FY23. The analysts also expect India’s tiles export to increase by 35% YoY as sharp spikes in gas and electricity prices in European countries have increased the competitiveness of Indian tile makers. The company “has expanded its tiles capacity by 17% in April-May 2022, bolstering its volume growth and market share gain,” the analysts said.

  1. Vinati Organics: Edelweiss reaffirmed its ‘Buy’ rating on this specialty chemical maker’s stock and increased its target price to Rs 2,300 from Rs 2,250. This indicates an upside of 11.6%. “Vinati Organics’ Q4FY22 earnings beat our expectation, with strong growth in top line primarily on account of increased volume in key products aided by market share gains for some products,” says analyst Anshul Verdia. In Q4FY22, the company’s profit grew 43% YoY to Rs 101 crore and revenue grew 74% YoY to Rs 486 crore. 

Verdia believes that “a strong capex pipeline over the next two years indicates significant revenue generation opportunity for Vinati Organics, underpinning its aim to achieve Rs 3,000 crore in top line over the next two to three years.” He expects the company to achieve a 26% CAGR in revenue over FY22–24 on the back of increased penetration of the butyl-phenol market, robust volume growth in Acrylamide tertiary-butyl sulfonic acid and the Isobutyl Benzene business, and strong demand.

  1. Abbott India: Axis Securities maintains a ‘Buy’ call on this pharmaceutical company’s stock with a target price of Rs 20,000. This indicates an upside of 12.6%. “Abbott India reported revenue growth of 14.9% (YoY) in Q4FY22, outpacing the IPM (Indian pharma market) growth of 3.9%,” says analyst Ankush Mahajan. He adds that the revenue growth, “was majorly driven by sales improvement in key therapies such as gastrointestinal (+18.3% YoY) and hormones(+5.0% YoY).” 

The company reported a profit of Rs 212 crore, up 38.7% YoY, and EBITDA margins improved by 465 bps YoY to 23.4%. Mahajan expects stable sales of the Duphaston brand and an increase in volume in the Thyronorm brand to help deliver revenue and profit CAGR of 11.1% and 1.3% over FY21-24. The analyst believes that revenue growth in the branded business will improve overall profitability.

  1. Century Plyboards (India): BOB Capital Markets upgrades its rating on this plywood manufacturer’s stock to ‘Buy’ from ‘Hold’ with a target price of Rs 735, indicating an upside of 37.8%. Analyst Ruchitaa Maheshwari says the company’s “long-term growth story remains intact given its strong fundamentals, impressive return ratios and healthy balance sheet”. She upgraded her rating to an attractive valuation after a 30% correction.

The company’s growth momentum will sustain over the near-to-medium term, supported by the plywood and laminates segments, Maheshwari said she expects these segments to grow due to a pick-up in the housing sector alongside a gradual demand shift from unorganised to organised players. Maheshwari also expects better margins in the medium-density fibreboard (MDF) segment amid buoyant demand for ready-made furniture and exports. Overall, she believes the company’s EBITDA margin will expand backed by a higher MDF contribution, superior product mix, operating leverage and cost rationalisation. 

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

Cipla Ltd.    
20 May 2022
966.35
0.19%
Indian market boosts Cipla in Q4 despite inventory write-off, new product launches will be key 

By Tejas MD

Pharma company Cipla continued its topline growth momentum in both the Indian and US markets in Q4FY22. However, Cipla turned out to be far too bullish about Covid sales, and one-time write-offs here played spoilsport.

As a result, revenue growth failed to drive up the bottom line. The drug maker’s revenue rose 14.1% YoY to Rs 5,324.4 crore. 

Revenue growth was mainly driven by a 21% YoY growth in the Indian market (One India business) to Rs 2,183 crore on the back of traction in its branded prescription business. The company’s revenue from the US business, which is highly competitive, also rose 17% YoY to Rs 1,209 crore mainly due to strong demand in its respiratory product portfolio. 

Key product launches expected in FY23 in the US market will play a major part in the drug maker’s profitability.

Quick takes

  • Strong revenue growth in the Indian market drives topline growth
  • One-time Covid inventory costs, high R&D, and raw material costs drag net profit down
  • Consumer health segment reaches EBITDA breakeven in FY22, to contribute 10% to overall revenues in FY23
  • US revenues rise 17% YoY to $ 160 million driven by respiratory product portfolio
  • Three products to be launched in FY23 with a total market size of about $ 15 bn
  • Management expects US revenues to increase by $300-500 million by FY25

With the pandemic in the rear view (for now) Covid inventory losses hit Cipla’s margins 

The company incurred a one-time expense of Rs 160 crore for Covid-related inventory write-offs on account of Covid product portfolio still in its inventory. This expense led to a fall in net profit, which declined 12.4% YoY to Rs 361 crore. The EBITDA margin also fell 279 bps YoY to 14.5% in Q4FY22. 

Apart from the one-time expenses, high R&D expenses of Rs 322 crore also impacted the margins. When asked about this, the Global CFO of Cipla, Dinesh Jain said “higher R&D investment was driven by the initiation of the clinical trials of a respiratory asset”. The management expects the R&D expense to stay at a higher range of 6% to 7% in FY23. 

However, adjusting for one-time expenses, the EBITDA margin stands at 18.1%, up 70 bps YoY as price hikes in Indian markets offset the prevailing pricing pressure in the US market. 

Prescription business drives One India growth, crosses $ 1 billion revenues in FY22

Cipla’s India business revenues rose 21% YoY to Rs 2,183 crore on the back of sustained traction across prescription and generic business. One India business, which contributes 43% of the total revenues, mainly consists of branded prescription, trade generics, and consumer health segments. Its branded prescription business achieved a milestone, crossing $1 billion in revenues in FY22.

Cipla’s core branded prescription portfolio therapy mix (acute and chronic) continued its growth momentum and enjoys healthy market share across therapies. In the generics business, Cipla is the largest in the country with more than 155 brands. The company launched about 19 brands in Q4FY22 and witnessed strong demand across its flagship brands and key therapeutic categories.

When asked about the growth in the sub-segments, Umang Vohra, Managing Director and Global CEO of Cipla said that the consumer health business saw the highest revenue growth followed by branded prescription business and finally the pain therapy segment. The objective of the management is to beat the Indian pharma market’s growth rate, which is expected to grow by 11% in FY23.

US revenue rises despite the pricing pressure, respiratory drugs gain market share

Most pharma companies are facing pricing pressures amid intense competition in the US market. This directly impacts revenue and profitability. Cipla’s US revenue, which contributes 23% of total revenue, rose 17% YoY to Rs 1,209 crore, its highest ever quarterly revenue from the US market. Sustained traction in its respiratory and peptide segment aided topline growth. 

Cipla faced relatively lower price erosion in the US business compared to its competitors thanks to its focus mainly on complex drugs that have lesser competition in the US market. Indian pharma companies are now resorting to this strategy as generic drugs are seeing intense competition leading to price erosion.

The drug maker is focusing on its respiratory portfolio in the US as it currently accounts for over 27% of its US business revenue. Albuterol and Brovana are the major products in the respiratory portfolio, and they continue to gain market share in the US. Albuterol inhaler is used to prevent and treat wheezing and shortness of breath. Brovana is a medication used for the treatment of chronic obstructive pulmonary disease. The company’s market share in the albuterol market increased 130 bps QoQ to 17.2% in Q4FY22. 

Cipla launched its peptide asset Lanreotide injectable in the US markets in Q4FY22. This drug has a US market size of $ 867 million and the management is optimistic of a 10% market share in Lanreotide market. The company also plans to launch another peptide injectable in FY23. The management expects the US revenue to increase in the range of $300-500 million by FY25 driven by growth through existing drugs.

Another region the drug maker is focusing on for revenue growth is SAGA (South Africa, Sub-Saharan Africa, and global access). Revenues from SAGA rose 7.7% YoY to $ 126 million in Q4FY22 driven by strong growth in its prescription and over-the-counter (OTC) drugs. Cipla launched 32 brands in the South African private market in FY22. The management is also focusing on identifying more brands with high consumer potential in South Africa to build a strong global wellness franchise. 

Over the last few quarters, revenue from the SAGA region is on the rise as it continues to post market-beating growth in the South African private market segment. High contribution from SAGA region helps Cipla diversify its revenue mix without concentrating only on the Indian and the US markets. 

Key product launches to determine Cipla’s profitability in FY23

Key product launches in the US are important for Cipla as its revenue growth and profitability from US businesses depend on this. Its current pipeline includes major products such as Advair, Revlimid, Abraxane, Spiriva, and Breo. Advair, Revlimid, and Abraxane (planned to be launched in FY23) together have a market size of over $15 billion.

When asked about the outlook on India business, Vohra answered, “We are quite clear, I think we would like to see very high growth, better than the Indian pharma market for the non-COVID portfolio. And I think our business momentum is very strong across all the 3 businesses (prescription, generics, and consumer health). 

With a promising outlook on Indian business, Cipla’s US business growth will mainly depend on key product launches after USFDA’s facility inspection and approval. Any delay in the launch timeline can affect the profitability of the product. This is especially critical in the current high inflation environment - rising raw material expenses and high R&D costs are expected to stay elevated throughout FY23, putting pressure on margins. Cipla will have to stay on its toes.

Cipla Ltd. is trading above it's 200 day SMA of 942.0
The Baseline    
20 May 2022
Five Interesting Stocks Today
  1. Chennai Petroleum Corporation:This refinery companyoutperformed the Nifty 50 index by a whopping 88% in the past month, and by 22% in the past week. Moreover, last month, Superstar investor Dolly Khanna bought 10 lakh shares or 0.7% stake in this company worth Rs 26.3 crore. Even FIIs steadily increased their holdings in the company to 3.37% in Q4FY22 from 1.33% in Q2FY22. So, what exactly fueled the recent rally for this oil refining company?

Chennai Petroleum Corp saw a 4.3X jump in its Q4 net profits at Rs 994.4 crore driven by an 88% YoY rise in its revenues at Rs 16,427 crore. This company is a pure-play crude oil refining company and is not involved in marketing of downstream petroleum products. While its refining throughput rose by 10% YoY to 2.91 million metric tonne in Q4FY22, a 2.2X jump in gross refining margins (GRMs) played the real magic. Average GRMs rose to $14.18/bbl from $6.4/bbl in Q4FY21. Notably, Singapore GRMs were trading at $7.8/bbl levels in Q4FY22. In fact, it rose to $17/bbl levels in April backed by robust demand for refined petroleum products and supply constraints. According to Moody’s, global sanctions on Russia led to higher offtake of Asian fuels as European countries sought other alternatives. Additionally, supply fell owing to lower exports from China and due to significant refinery closures. According to the International Energy Agency, crude oil throughput in April 2022 fell by 1.4 metric barrels/day to 78 metric barrels/day, lowest since May 2021.

Interestingly, every dollar of GRM expansion can potentially add Rs 700-800 crore to the topline of an oil refining company. Hence, amid a tight supply situation, GRMs will stay buoyant and lead to oil refineries earning windfall gains at least in Q1FY23.

  1. Lupin: This pharmaceutical company’s stock fell over 7% on Thursday after it announced its Q4FY22 results. Lupin posted a loss of Rs 518 crore in Q4FY22 against a profit of Rs 460 crore in the same quarter previous year. However, revenues increased 2.8% YoY to Rs 3,864.5 crore in Q4FY22.

As the company is not consistent in posting profits, it shows up in the screener that lists stocks that are seeing big swings between profit and loss in quarterly results.

The drug-maker posted losses in Q4FY22 as its EBITDA margin fell by 13.1 percentage points YoY to 7.3% mainly due to an increase in raw material costs and manufacturing expenses. Raw material costs rose 23.9% YoY to Rs 1,317.6 crore and manufacturing expenses increased by 18.2% to Rs 1,117.8 crore. Also, an impairment expense on its acquisition of Gavis IP of Rs 130 crore and a rise in deferred taxes contributed to losses in Q4FY22.

High raw material and manufacturing costs come at a time when the US markets are already under pricing pressure amid intense competition. This is putting further pressure on margins. Lupin was affected more by this as it derives a majority (over 37%) of its revenues from the US markets. The company’s revenue from US markets fell 5.3% YoY to Rs 14,162. However, its revenue from India increased 5% YoY to Rs 13,511. But this seems lower when compared to its peers. Cipla’s and Dr Reddy’s revenue from the Indian market grew 25% and 15% YoY respectively in Q4FY22. In fact, Cipla outperforms Lupin in YoY and QoQ profit growth, price to earnings ratio, and foreign institutional investors or FII holding.

  1. Kotak Mahindra Bank: This bank’s stock outperformed the Nifty 500 index this week after it announced its Q4FY22 results. According to reports, Kotak Mahindra Bank recently made it to the top 10 most valuable companies, replacing Adani Green Energy at the tenth position. It is the fourth bank to enter the elite club after HDFC Bank, ICICI Bank, and State Bank of India. However, thanks to the bearish market, the stock fell more than 3% on the bourses on Thursday. The bank posted robust growth in net profit and maintained stable asset quality.

Net profit was up 64.5% YoY to Rs 2,767 crore with net interest income rising by 17.7% YoY to Rs 4,521 crore. Total advances for the bank also grew 21% YoY to Rs 2.7 lakh crore as businesses picked up pace after the third wave of Covid. Among the loan segments, the corporate loan demand is expected to increase. The management also plans to increase capex in this segment to meet rising demand. Also, the management thinks that an increase in repo rates by the Reserve Bank of India will not hamper credit growth.

Operating expenses increased 26.1% YoY to Rs 3,007.8 crore keeping the operating profit growth flat at 1.2% YoY to Rs 3,340 crore. The increase in expenses is because of the rise in spending on digital and promotional expenses. The management plans to  continue its growth plans even if costs run high in the near term.

  1. Aditya Birla Capital: This Aditya Birla Group’s holding company’s stock tanked 5% on Monday because of reports of a whistleblower accusing the former CEO of the Aditya Birla Group Ajay Srinivasan of insider trading. This shook investors confidence as it is similar to allegations made for fund managers who were sacked at Axis Mutual Fund. The company, however, denied the allegations against Srinivasan of insider trading and frontrunning in stocks at Aditya Birla Sun Life AMC (mutual fund arm of Aditya Birla). The management asked Srinivasan to step down as the CEO, according to the BSE filing dated April 23, 2022, as the company says that it is looking to settle him into a new role. The management explicitly maintains its stance that this is in no way related to the allegations made against him, according to reports. Vishakha Muley will replace him as the CEO of Aditya Birla Capital starting from June 1, 2022.

According to reports, the Securities and Exchange Board of India (SEBI) is investigating both Aditya Birla Capital and Aditya Birla Sun Life AMC for the alleged wrongdoings.

  1. Indraprastha Gas: This city gas distributor’s stock plunged 6% in trade on Thursday, despite its Q4FY22 net profit rising 14.9% YoY to Rs 430.9 crore to beat Trendlyne’s Forecaster estimates by 8.4%. The company also showed up on this screener which lists companies that saw their net profit rising QoQ and YoY in Q4FY22. However, it looks like the company’s robust performance led by rise in sales volume and price hikes were not enough to escape the bearish sentiment in the market.

In the last 6 months the price of CNG for automobiles has been hiked 40.6% to Rs 73.61 per kg in the Delhi-NCR region, with the latest price hike coming in on Monday. The Managing Director of Indraprastha Gas expects gas prices to remain high for the coming quarters due to geopolitical tensions and supply constraints.

Furthermore, the government’s amendment to its gas allocation policy to city gas distributors (CGD), which makes GAIL (Gas Authority of India) responsible for providing gas to CGDs and gas prices will be uniform for all CGDs. With the amendment in place, domestic gas supply to CGDs will increase every quarter instead of every six months. The management expects this amendment to improve domestic gas supply and decrease raw material costs for the company. It will also lead to a reduction in sourcing of gas from the international spot market. This amendment took effect from May 16, 2022.

The management expects the volumes of CNG to rise 20%, driven by robust demand for CNG vehicles in FY23. It also expects to keep its margins stable through price hikes in the coming quarters.

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

Reliance Industries Ltd.    
19 May 2022
2575.10
-0.46%
Reliance is generating rich cash flows, but its ambitions mean it will have to spend, spend, spend

By Vivek Ananth

Reliance Industries’ consumer businesses, Mukesh Ambani’s ambitious expansion, contributed a whopping Rs 3 lakh crore to the company’s total revenue from operations in FY22 of Rs 7.2 lakh crore. That …

PremiumThis is a premium article. Click here to read.

Reliance Industries Ltd. is trading below it's 30 day SMA of 2615.2
Mutual Funds News    
TREND | 18 May 2022
Where’s the smart money moving in April 2022?

By Ketan Sonalkar

April marks the beginning of the new financial year. Tracking investments at this point gives us an insight into which sectors and stocks may be outperformers over the rest of the year. This year, April saw the Nifty 50 index begin the month with levels of 18,000, falling over the next few weeks to end the month with a loss of more than 1,200 points.

This fall did not spare any sector or industry, and stocks right from blue chips to small caps dropped drastically on the exchanges. Even during the fall in April however, fund managers have made their bets on some stocks, including banks, pharmaceuticals, healthcare, and even a major two-wheeler manufacturer.

HDFC Bank - Merger announcement spurs interest in this stock

HDFC Bank has the highest market capitalisation currently among banks in India. The recent announcement of the merger with its parent company HDFC created a buzz in the market. This merger hinges upon how well regulatory issues will be addressed during the merger process. Most market participants view the merger as positive for the bank, as the merged entity will be one of the biggest financial institutions in the country.

The Q4FY22 results for HDFC Bank saw the highest revenues in the last 10 quarters at Rs 43,960 crore and net profit at Rs 10,443 crore, a YoY increase of 24%.

Fund Managers who bought shares of HDFC Bank

Shares were added to their respective schemes by Hiten Shah forKotak Equity Arbitrage Fund Growth, Kinjal Desai and Anand Gupta forNippon India Arbitrage Fund Growth, Gaurav Misra and Gaurav Khandelwal forMirae Asset Large Cap Fund Regular Growth and Krishan Kumar Daga, Arun Agarwal and Sankalp Baid forHDFC Arbitrage Fund Wholesale Plan Growth.

Hindalco - Forging ahead with expansion plans

Hindalco is the world’s largest aluminum company by revenue, and part of the Aditya Birla Group. Over the years, Hindalco transformed its business model to reduce dependence on volatile LME (London metal exchange) price movement, and is focusing on a portfolio of value added products.

During the analyst call for Q3FY22 results, it unveiled a capex plan of approx US$8 billion over the next five years. Of the total capex, $4.5-$4.8 billion would be incurred by its  subsidiary Novelis, while around $3.37 billion would be spent on the India business. This capex would be spent on upstream and downstream aluminum processes and on the copper business.

Fund Managers who bought shares of Hindalco

Fund managers who bought shares of Hindalco were Hiten Shah forKotak Equity Arbitrage Fund Growth, Rama Iyer Srinivasan and Mohit Jain forSBI Multicap Fund Regular Growth, Priyanka Khandelwal, Sankaran Naren and Dharmesh Kakkad forICICI Prudential Value Discovery Fund Growth and Kayzad Eghlim, Priyanka Khandelwal and Nikhil Kabra for ICICI Prudential Equity Arbitrage Fund Regular Growth

Bandhan Bank - Improved operating metrics in one of the banks best quarters

Bandhan Bank commenced operations in 2015, beginning as a micro finance institution(MFIs) a few years ago before getting the banking license. Hence MFIs loans are its forte.The bank has a strong presence in eastern and northeastern India.

Bandhan Bank’s Q4FY22 results delivered its highest ever quarterly revenues at Rs 4,836 crore, a 28% YoY growth and net profits of Rs 1.902 crore, a 1,746% YoY growth. This quarter also saw improved NIMs, improved asset quality with sizable recoveries, and healthy balance sheet growth. 

Fund Managers who bought shares of Bandhan Bank

Shares for their schemes were added by Rama Iyer Srinivasan and Mohit Jain to SBI Multicap Fund Regular Growth, Mahesh Patil to Aditya Birla Sun Life Frontline Equity Fund Growth, Mohit Jain and Dinesh Balachandran toSBI Contra Fund Regular Payout Inc Dist cum Cap Wdrl and Mahesh Patil and Kunal Sangoi toAditya Birla Sun Life Focused Equity Fund Growthschemes respectively.

SBI Cards and Payments Services - Profitability grows as the economy opens up

SBI Cards and Payment Services is the largest issuer of credit cards in India. It operates in more than 130 cities and is a subsidiary of State Bank of India with 69.2% stake in the company.

In Q4FY22, revenues grew 22% YoY to Rs 3,016 crore and profits grew 230% YoY to Rs 580.9 crore. In Q4 FY22, the company added one million new accounts with 27%+ YoY growth. New accounts registered 16% YoY growth in FY22, as the company added over 3.5 million new accounts. 

Spending in the month of January was affected by the Omicron wave in India, but subsequent recovery in February and March saw higher spending and one of the highest monthly spends on credit cards.

Fund Managers who bought shares of SBI Cards and Payments

Fund managers who bought shares include Priyanka Khandelwal, Sankaran Naren and Dharmesh Kakkad forICICI Prudential Value Discovery Fund Growth, Gaurav Misra forMirae Asset Focused Fund Regular Growth, Milind Agrawal forSBI Banking & Financial Services Regular Growth and Hiten Shah forKotak Equity Arbitrage Fund Growthschemes.

TVS Motor Company - Widening its presence in the electric mobility space

TVS Motor Company is the third-largest two-wheeler manufacturer in India, and it sells motorcycles, scooters, mopeds and three-wheelers in India.

The electric scooter, TVS iQube got a strong customer response and continues to grow with more than 12,000 units sold in FY22. The electric scooter is currently present in 33 cities and aims for pan India presence by end of Q1FY23 along with some international markets. Recent tie up with Jio-BP, a Reliance Industries joint venture with BP, Tata Power and CSL network for charging infrastructure will enhance the customer experience. 

On exports, TVS is performing well and gaining market share in the African and Latin American markets. TVS has invested around Rs 700 crore in new e-mobility companies namely SEMG and Norton, both of which are profitable companies. SEMG will focus on the European market which is the fastest-growing market for electric two-wheelers.

Fund Managers who bought shares of TVS Motor Company

Shares were purchased by Rama Iyer Srinivasan and Mohit Jain forSBI Multicap Fund Regular Growth,Edelweiss Arbitrage Fund Regular Growth, Bhavesh Jain and Dhaval Dalal forEdelweiss Balanced Advantage Fund Regular Plan Growth and Aniruddha Naha and Vivek Sharma forPGIM India Midcap Opportunities Fund Regular Growthschemes respectively.

Aster DM Healthcare - Expansion plans underway in India with asset light business model

Aster DM Healthcare operates hospitals, clinics, retail pharmacies and provides healthcare services to patients across economic segments in India and several GCC (Gulf Cooperation Council) countries.

Aster is looking to expand its network following an asset light model in India. It has increased focus on asset light retail models like diagnostics, pharmacy distribution, homecare along with push towards integrated virtual platforms. It is pursuing aggressive expansion in both GCC and India but remains on firm footing due to cash generation from existing GCC operations.

Aster’s plan includes the addition of hospitals at Areekode, Begaluru, Chennai and Kannur to be completed over the next two to three years.

Fund Managers who bought shares of Aster DM Healthcare

Shares were added to their respective schemes by Priyanka Khandelwal, Sankaran Naren and Dharmesh Kakkad forICICI Prudential Value Discovery Fund Growth, Mohit Jain and Dinesh Balachandran forSBI Contra Fund Regular Payout Inc Dist cum Cap Wdrl, Priyanka Khandelwal and Harish Bihani for ICICI Prudential Smallcap Fund Growth and Chirag Setalvad and Sankalp Baid forHDFC Small Cap Fund Growth.

Gland Pharma - Opportunity in the US market with drugs in short supply

Gland Pharma is a pharmaceutical company which manufactures injectable products. It has 11 injectable products in the USFDA shortage list, which have a combined sales of $400 million over the past year. Among the Indian players present in the US, it appears to be the largest beneficiary from drugs under shortages due to consistent compliance and manufacturing capacity/capabilities.

There are certain drugs where more than five of its peers have ANDA approvals. Despite that, the drugs are under shortage due to increased demand or reduced supply or manufacturing constraints/discontinuation by existing companies.

Fund Managers who bought shares of Gland Pharma

Fund managers who added to respectives schemes include Gaurav Misra and Gaurav Khandelwal for Mirae Asset Large Cap Fund Regular Growth, Mahesh Patil forAditya Birla Sun Life Frontline Equity Fund Growth, Neelesh Surana and Ankit Jain for Mirae Asset Emerging Bluechip Fund Growth and Mahesh Patil and Kunal Sangoi for Aditya Birla Sun Life Focused Equity Fund Growth

Shriram Transport Finance - Revival of the economy drives demand for transportation

Shriram Transport Finance, part of the Shriram Group is India's largest player in commercial vehicle finance. The company is a leader in organized financing of pre-owned trucks with presence in 5-10 year old trucks.

Shriram Transport Finance delivered a strong result in Q4FY22. It recorded its highest ever quarterly revenues at Rs 5,087.6 crore and highest ever quarterly net profit at Rs 1091.2 crore. The operating profit margin in Q4FY22 at 74.4% was the highest in the last ten quarters. 

In Q4FY22, the economic recovery after months of the pandemic pushed up demand for trucks, which led to higher demand for commercial vehicle finance.

Fund Managers who bought shares of Shriram Transport Finance

Shares were added to respective schemes by Neelesh Surana and Ankit Jain toMirae Asset Emerging Bluechip Fund Growth, Neelesh Surana toMirae Asset Tax Saver Fund -Regular Plan-Growth, Hiten Shah toKotak Equity Arbitrage Fund Growth and Ankit Jain toMirae Asset Midcap Fund Regular Growth

Minda Corporation - Rising component share across electric two wheelers

Minda Corporation serves auto original equipment manufacturers (OEMs) across two main verticals, mechatronics and aftermarket products. Its products include safety & security, die-casting, starter motors etc. as well as information & connected systems.

Minda Corporation is stepping up its game in the EV space with development of new products. The potential kit value in electric 2-wheeler is at Rs 16,000-20,000/unit. An increase in kit value is envisaged through content increase in existing products as well as new product offerings. Its key clients include leading EV 2-wheeler OEMs like Ola Electric, Hero Electric, Ampere among others.

Fund Managers who bought shares of Minda Corporation

Additions to their portfolios were made by Aniruddha Naha and Ravi Adukia toPGIM India Flexi Cap Fund Regular Growth, Anupam Tiwari and Hitesh Das toAxis Small Cap Fund Regular Growth, Anupam Tiwari and Sachin Jain toAxis Multicap Fund Regular Growth and Aniruddha Naha and Ravi Adukia to PGIM India Small Cap Fund Regular Growth schemes respectively.

Godrej Agrovet - Strong performance across verticals in Q4FY22

Godrej Agrovet is a major player in the animal feed business in India, producing animal feed and nutrition products for dairy cattle, broiler chicken, layer chicken and aquaculture sectors.

In Q4FY22, it reported a strong operating performance, with YoY revenue growth of 48.4% at Rs 2,133 crore and net profit YoY growth of 116% at Rs 122.3 crore. EBIT grew 6x and 55% YoY in palm oil and crop protection segments respectively. EBIT margin expanded across segments with the highest for palm oil vertical at 25.2%. Animal feed, which was affected by higher input costs, was the only underperforming segment.

Fund Managers who bought shares of Godrej Agrovet

Buying interest was shown by fund managers, Samir Rachh and Kinjal Desai forNippon India Small Cap Fund - Growth, and Nippon India Multi Cap Fund - Growth, Yogesh Patil forLIC MF Large & Mid Cap Regular Growth and Aniruddha Naha and Ravi Adukia for PGIM India Small Cap Fund Regular Growth

1 Comment
19 May 2022
IDBI Capital released a Economy Update report for Mutual Funds News on 16 May, 2022.
The Baseline    
18 May 2022
Warning in key indicator as India's equity market cap soars past GDP

In Shakespeare's Romeo and Juliet, a character warns the hero, "These violent delights have violent ends." Go slow, he tells Romeo.

Like Romeo, the stock market may have moved too fast, especially when we compare it to India's real GDP growth. For the first time, India's total stock market capitalization (BSE) is at a record 165% of India's estimated real GDP for FY22. Pre-Covid, it was 108% of real GDP.

This value (total market cap to GDP) is commonly known as the Buffett indicator - Warren Buffett once said that it is “probably the best single measure of where valuations stand at any given moment.” This helps us compare stock market sentiment against actual economic output - telling us when there is a mismatch in investor expectation and reality. 

The high level of this indicator right now is a signal to investors to be very cautious about adding more money to equities, especially in the riskier smallcap and midcap stocks, and overvalued stocks. Especially with CEOs across industries talking about rising costs impacting their margins in earnings calls. Achal Bakeri of Symphony puts this well:

"We cannot keep on repeating price increases over and over again. We have not been able to keep passing this. Even in the month of April, there were cost increases - commodity cost increases or basic raw material increases. You cannot just keep on changing your prices frequently in business like ours which is a consumer business. So we have absorbed quite a bit of cost increases."

As the RBI raises interest rates and liquidity shrinks, companies will have to battle both costs as well as the rising price of debt. This is likely to impact valuations further. 


Plenty of Nifty500 stocks in the PE Sell Zone

Investors can check which stocks are in the PE Sell Zone (stocks that usually trade below their current PE most of the time). Even after the recent correction, 115 stocks in the Nifty500 are still in the PE Sell Zone, including Infosys, Adani Enterprises, Asian Paints and Bandhan Bank. 


Results show some sectors turning wobbly

The Results Dashboard tracks results as they come in, and the Q4 results are illuminating. Some sectors beaten down by the pandemic are finally delivering strong results - Hotels are seeing profit margins jump by double digits, Specialty Retail including PVR and Inox are seeing net profit recovery.

Agrochemicals has so far also delivered a good quarter, although rising costs have put margins under pressure - this sector has limited capability of passing on costs to farmers, especially in India's price-sensitive rural market. 

But over 50% of results declared so far have shown negative profit growth. 

Sectors that have been weak include auto as well as the tyre industry, which are reeling under both demand and cost pressures. 


Interesting reads

HDFC Life, despite the challenges of FY22 has closed the year on a high, showing rising premiums and improving metrics.

UPL delivered a strong set of results. But price hikes played a big part in this, as the company deals with rising costs.   

FMCG bellweather HUL managed a difficult quarter well. But like others it has been hit by cost pressures. Does this threaten margins?