The Baseline    
14 May 2021
Five Interesting Stocks Today
  1. UPL: This chemicals company, which has been historically at a low average PE compared to its peers, has been rising steadily through the year and hit a fresh 52 week high today after a strong performance in its Q4 results. The company's year returns have outperformed the Nifty by over 37%. 

  2. Coforge: This tech company's promoter has sold off 1.9 million shares in the company via a market sale, amounting to 3.14% of traded shares. It saw its share price rise sharply over the past week on high volumes following its Q4 results, however analysts see limited upside on the stock owing to its already sky-high valuations.

  3. Vedanta: This metals company has seen its share price gain at a steady clip as metals prices recover globally, and the stock hit a fresh year high in the past week. The company reported a sharp jump in  both YoY and QoQ net profit growth in its Q4 results (see stocks with similar performance).  While mutual funds have been reducing their holdings in the stock, FIIs/FPIs have increased their stake

  4. Persistent Systems: This product engineering company has got analysts across brokerages enthusiastic after its Q4 results, receiving six target price upgrades in the past couple of weeks. Analysts have cited improving deal wins, and strong Q4 growth despite seasonality in some verticals. 

  5. Castrol India: This oil lubricant company's stock has had a tough year, underperforming the Nifty by over 50%, and seeing a profit decline in CY20 due to Covid19 disruptions and the decline in auto demand. The stock is in the Buy Zone compared to both its historical PE and PBV. Analysts are however positive on the stock citing its wide distribution network and brand - but with the second wave, the company is likely to see ups and downs continue in the short term. 

 
6 Comments
16 May 2021, 05:18PM  Like
16 May 2021, 05:18PM  Like
The Baseline    
13 May 2021
Chart of the week - Tata Motors' retail sales rise in FY21

Automobile makers had a tough year. In FY21, 23 lakh passenger vehicles (PVs) were sold at a retail level, a 14% decline YoY. The country's largest carmaker Maruti Suzuki India (48% market share) sold 1.7 lakh fewer cars than the previous year. Mahindra & Mahindra sold 85,000 fewer cars in FY21 than FY20. Tata Motors and Kia Motors were the only PV makers to sell more cars in FY21 than the previous year among the top-10 carmakers in the country.

Do you agree with the RBI Governor that India is on the recovery path?

The Baseline    
11 May 2021
Five Interesting Stocks Today
  1. SBI Life Insurance Company: This life insurance company’s promoter Ca Emerald Investments cut its stake by 4.2% selling 4.2 crore shares. This share sale invited a host of foreign institutional investors (FIIs), domestic institutional investors (DIIs), and sovereign wealth funds. Among the top buyers - Axis Mutual Fund, HDFC Life Insurance Company, the Government of Singapore, Societe Generale, and the Vanguard Fund.

  2. Caplin Point Laboratories: This pharmaceutical company’s stock is up by nearly 30% in one month and is 8% off its 52-week high. Its valuations remain cheap as the company’s trailing 12-month price to earnings ratio is 18.2, below the average historical PE of 27.9 times, putting it in the neutral zone.

  3. Happiest Minds Technologies: This IT services stock is buzzing ahead of its Q4 results. In one week, the share is up by 14%. The Q4 results will be declared on 13 May.

  4. Deepak Nitrite: This commodity chemicals company reported a 39% growth YoY in revenues and a 68% jump in net profits. However, some brokers are not convinced. In a report post the Q4 earnings, HDFC Securities downgraded its rating on the company to ‘Sell’ from ‘Add’ expecting no further growth in phenolic production and declining prices of isopropyl alcohol, a chemical used to produce sanitizers. The brokerage’s target price is at a downside of 14% against the market price.

  5. Indian Energy Exchange: Foreign institutional investors (FIIs) are accumulating this power trading company’s stock, while domestic institutional investors (DIIs) are exiting. At the close of the March 2021 quarter, FIIs held a 37% stake in the company, against 29% in the previous quarter. On the other hand, DIIs sold 1.3 crore shares decreasing their holding in the company by 22% QoQ in Q4.

1 Comment
sona11 Why is then Trendlyne valuation score is in red for Caplin?
12 May 2021  Like
The Baseline    
07 May 2021
Five Interesting Stocks Today
  1. Praj Industries: HDFC Mutual Fund has cut its stake in this engineering company in Q4FY21 by selling over 363,000 shares of the company, amounting to a 0.2% stake.

  2. Aarti Drugs: This pharma company saw its volumes rise to the highest ever. The stock’s traded volumes rose to four times its weekly average of around 19 lakh shares, which ended in the stock rising by over 11% in trade.

  3. Angel Broking:  After this stock broking company announced a tripling of its net profits in Q4FY21, the stock was among the top gainers and hit the upper circuit, and ended up being the most overbought, according to its RSI and MFI technicals

  4. SBI Life Insurance: This life insurance company has seen at least 8 brokerages upgrade their target prices for its stock in the past month. It currently has an average one year target price of Rs 1,093.82.

  5. Vedanta: This mining company has been in the news for its buyback offer, which even after revised terms got a lukewarm reception from investors. Another area of concern is that the company's entire promoter shareholding of 55.11% in the firm remains pledged to lenders as of March 31, 2021.

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The Baseline    
05 May 2021
Chart of the week - Zomato's gigantic IPO
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The Baseline    
04 May 2021
Five Interesting Stocks Today
  1. Cyient: Analysts are bullish on this midcap IT company, with six brokerages giving buy/accumulate ratings on this stock within the past month. The business has seen improving growth outlook in its services segment and strong margin performance. Management guidance is for double digit services growth in FY22, with Utilities, Communication and Transportation verticals powering the way.

  2. Ambuja Cements: LIC has purchased 522,000 shares of this cement company, which posted strong March quarter results, with both sales volumes and revenues rising, driven by strength in infra spending as well as rural housing demand. The stock's share price has outperformed the index over the past year by more than 40%.

  3. BASF India: This chemicals company has been rising steadily in share price ahead of its results on May 11. The company has gained 13.2% over the past week and 6.8% over the past month, and hit a fresh year high today. It is part of the Upcoming Results with Rising Share Price screeener. 

  4. Persistent Systems: Tech is buoyant, thanks to a reviving global market that is coming out of the Covid second wave even as India entered it. This IT stock hit a lifetime high today after its Q4FY21 results indicated resurgent demand, and Persistent has seen a rise in large deals of about $3-5 million in annual revenues over the past three quarters. Its MFI and RSI levels indicate that the company is currently in the overbought range. 

  5. WABCO India: This auto ancillary company, which specializes in braking solutions has hit the accelerator as far as mutual fund buys is concerned. The stock has seen sharp increases in mutual fund purchases QoQ overall, as well as in the month of March. The company's yearly share price performance has been muted, underperforming the Nifty over the past 1 year. 

 
1 Comment
05 May 2021  Like
The Baseline    
30 Apr 2021
Five Interesting Stocks Today
  1. TVS Motor Company: The stock of the third largest two-wheeler maker in the country is rallying after it finished the quarter on a high. In one week, the stock is up by 20%, and it’s off the 52 week high by 2%. The company reported a 53% YoY growth in revenues, with a 3x YoY jump in net profits. While FY21 was a bad year for two-wheelers, the company’s sales in the last quarter of the year grew by 47% YoY.

  2. Mastek: This software company reported strong numbers in Q4FY21, but has seen insider selling. In Q4, its revenues rose 43.5% YoY to Rs 483 crore, with net profits up by 94% YoY to Rs 76 crore. A few days before the results, IDFC Mutual Fund, which holds a 3.5% stake, sold over 18,000 shares via an insider trade. The company also counts Ashish Kacholia (2.8% stake) and Sunil Singhania’s Abakkus Fund (5.7% stake) as investors.

  3. Kotak Mahindra Bank: This private sector bank’s stock is buzzing ahead of its Q4 results. In one week, the stock gained 7%, compared to the Nifty 50’s gain of 4%. The quarterly results will be declared on Monday, May 3.

  4. Steel Authority of India (SAIL): Mutual funds are accumulating this PSU steel maker’s stock. In Q4FY21, mutual funds purchased 18.4 crore shares in the company. This was a stark turnaround, because mutual funds sold 19.5 crore shares and 39 crore shares in Q2 and Q3 respectively.

  5. Symphony: Brokers are optimistic on this consumer electronics company following its Q4 results. Its gross margins were 48% due to price hikes taken to offset the rising input price of steel and copper. Two brokerages - Axis Direct and HDFC Securities gave it a ‘Buy’ rating post its results. The average target price is at an upside of 15% against the market price.

The Baseline    
29 Apr 2021
Remdesivir drives rise of pharma stocks, and an insurer company is back to square one

by Aakash Athawasya

Despite rising cases across the country, the stock market has seen both good and bad news. The Sensex and Nifty have risen in the past week as Q4 results come in, with both up by over 3%. In this week’s Analyticks, we discuss:

  • How is the pharma industry coping with remdesivir demand?

  • A Covid-19 insurer revives, but for how long?

  • Screener: Stocks beating the index

Let’s dive in.

Remdesivir demand causes rally in pharma stocks

On April 4, India recorded over 93,000 new Covid-19 cases, the highest in six months. As infections rise, two factors are leading to a rally in some pharma stocks. First, the demand for drugs to treat those already infected. Second, the rollout of phase 3 of the vaccination drive.

Remdesivir is an antiviral drug used to treat Covid-19 patients. Seven Indian pharmaceutical companies are contract manufacturers of the drug. This includes five listed companies - Cipla, Cadila Healthcare (Cadila), Dr. Reddy’s Laboratories (Dr. Reddy’s), Jubilant Ingrevia (erstwhile Jubilant Life Sciences), and Syngene International.

The seven manufacturing companies recorded a monthly production of 31.6 lakh vials of remdesivir. In April, production was ramped up to 38.8 lakh vials a month. With the cases increasing, the government approved 25 remdesivir manufacturing sites last week. This will increase the production to 90 lakh vials a month.

Remdesivir capacity

The two largest listed remdesivir makers, Cadila and Cipla, have doubled their production capacities. This will provide a fillip to their revenue in Q4FY21 and Q1FY22. However, margins will be affected because every remdesivir maker decreased prices due to orders from the government. Cadila, which was selling remdesivir at Rs 2,400 per vial - the cheapest in the market - implemented the highest price cut of 62% to Rs 900 per vial. 

Remdesivir maker prices

Brokerages expect EBIT margins of these companies to fall because of these price cuts. Of the remdesivir makers, only Cadila and Cipla’s margins have beaten pre-Covid levels.

Cadila, Cipla marginsFor Cadila and Dr. Reddy’s, another boost is their respective vaccines. Cadila expects to receive regulatory approval for its Covid-19 vaccine ZyCoV-D by June. The Sputnik V vaccine to be distributed by Dr. Reddy’s domestically was approved this month. Dr. Reddy’s will receive the first batch of the vaccine from the Russian Direct Investment Fund in May. 

With cases rising remdesivir demand will be high, and as phase 3 of the vaccination drive begins, there will be a greater need for a quick rollout and ramped-up manufacturing. As a result, these companies have outperformed the benchmark Nifty 50 and the Nifty Pharma index. 

Pharma rally

Brokerages are not too excited by this though. ICICI Securities, in a note, expects the March-April rally to be the peak for these companies in the short term. The brokerage has downgraded the two vaccine pharma stocks - Cadila and Dr. Reddy’s. Looking at the valuations of these companies, it looks like any upside is priced in.

Pharma valuationsA second wave brings more of the same for ICICI Lombard

ICICI Lombard General Insurance (ICICI Lombard) was one of the first general insurers to cover Covid-19 under its health insurance policies. While this did boost its health insurance premiums, motor insurance declined. As the second Covid-19 wave takes India by storm, a similar story could pan out in the first half of FY22.

The insurer reported gross premiums of Rs 3,559 crore in Q4FY21, a 6% rise on a YoY basis. But gross premiums fell by 13% QoQ. This was because of a high base in Q3 as high motor insurance premiums rose above pre-Covid levels. On the other hand, claims paid rose 5% QoQ in Q4FY21 to Rs 1,665 crore.

ICICI Lombard Premiums and Claims

In Q4, motor insurance premiums were Rs 1,621 crore, a 2% QoQ growth after a big jump in Q3. This was because of a ramp up in the sales of passenger vehicles and two-wheelers (83% of motor insurance premiums) during the festive season in October and November. Since motor insurance premiums contribute 60% of gross premiums, this led to a 26% QoQ increase in gross premiums in Q3.

Motor insurance premiumsIn April 2020, ICICI Lombard launched a Covid-19 health insurance cover. While the company did not report Covid-19 premiums separately, the company’s CFO Gopal Balachandran said that they have been growing steadily in FY21. In Q1, health insurance premiums were Rs 588 crore, a 6% rise YoY. This growth continued in Q2 and Q3. However, the company’s health insurance premiums declined in Q4. 

ICICI Lombard reported Rs 654 crore in net health insurance premiums in Q4, a 4% fall QoQ. This decline in net premiums was due to the Covid-19 premiums as Balachandran said non-Covid health cases did not reduce in the Q4FY21. 

Health Insurance PremiumsBy the looks of it, FY22 is beginning as FY21 did, with Covid-19 cases increasing and lockdowns. If this continues, the story will be the same for the general insurer. Motor insurance premiums will fall and claims paid will rise. Considering this segment is 60% of its insurance premiums, ICICI Lombard is in for a difficult start to FY22.

But all this depends on how severe the second wave will be, so it is fingers crossed for ICICI Lombard.

Shrugging Covid blues, some stocks outperform the benchmark

As Covid-19 cases rise, the stock markets have turned volatile once again. In this tumultuous market, some stocks are beating the Nifty 50. This screener lists Nifty 500 stocks that have outperformed the benchmark in the past month.

With pharma the flavour of the season once again, it’s no surprise that the sector has 34 companies outperforming the benchmark index. The highest gainers from the sector are Dishman Carbogen Amcis, AstraZeneca Pharma India, Cadila Healthcare and Laurus Labs.

Benchmark outperformersAnother sector back in focus is IT services. Two of the big-4 IT services companies have outperformed the benchmark - Wipro and Tata Consultancy Services. But the best performing IT services stock has been Happiest Minds Technologies, up by 24% in the month and by 75% since listing last September.

A notable sector absent from the list is automobiles. Motherson Sumi Systems is the only one here - the auto-components maker’s demand from the European market (for mirrors and polymers) is holding strong and analysts expect this to continue into FY22. Two-wheeler makers like Bajaj Auto and Hero MotoCorp are facing supply chain issues. Brokerages were already pessimistic about the two-wheeler market, and with the second Covid wave , the outlook is dampened further.

Will these companies continue to outperform the index? We’ll have to wait and see.

 

This is part of Trendlyne's Analyticks newsletter series. To receive these in your email as soon as they're out, sign up here.

The Baseline    
29 Apr 2021
Chart of the week - Insurance Premiums Grow for SBI and Reliance General

The end of FY21 was a mixed bag for general insurance companies. Direct premiums rose significantly for State Bank of India's SBI General Insurance, Bajaj Finserv's Bajaj Allianz, and Reliance Capital's Reliance General Insurance. While premiums for state-owned general insurers - The Oriental Insurance, United India Insurance, and National Insurance - fell.

The Baseline    
28 Apr 2021
Five Interesting Stocks Today
  1. Great Eastern Shipping Company: This shipbuilder’s stock has jumped by 11% in the past two weeks while the benchmark Nifty is down by 1.5%. This has prompted a big domestic institutional investor (DII) to buy its shares. This week, HDFC Mutual Fund acquired 31 lakh shares in the company, taking a 2.1% stake via an insider trade.

  2. Delta Corp: This casino operator's non-executive director has resigned from the company, stating 'personal reasons'. The director is none other than Rakesh Jhunjhunwala, who holds a 4.3% stake in the company. 

  3. Nazara Technologies: This newly listed gaming company’s stock is up by 8% in two weeks. This is because it reported revenues of Rs 454 crore in FY21, an 84% rise on a YoY basis. However, the company has not recorded a profit in two years. Earlier this month, IIFL Asset Management decreased its stake in the company by 2.7%, selling 7.4 lakh shares worth Rs 118 crore.

  4. Gateway Distriparks: This logistics company’s stock has hit a two-year high following its Q4FY21 results. It reported a three-fold increase in net profits to Rs 47 crore on a YoY basis, with revenues up 17%. More importantly, the company reduced its net debt by 36% to Rs 440 crore in FY21.

  5. Cyient: This mid-cap IT services company is the pick of brokers. It reported a 47% YoY growth in net profits to Rs 111 crore, with a steady growth in its services and aerospace verticals in Q4. Following its earnings, four brokerages - ICICI Securities, Motilal Oswal, Prabhudas Lilladher, and Axis Direct gave the stock a ‘Buy’ rating with an average target price at an upside of 15%.