Trendlyne Blog: The Baseline, Latest on stock market and finance in India and the world.

10 Apr 2023

Chart of the week: India’s Manufacturing PMI on the rise as other economies slow down

The Manufacturing Purchasing Managers' Index (PMI) is a key economic indicator, which measures the health of the country’s manufacturing sector. PMI readings above 50 signal expansion (growth), while those below 50 indicate contraction. In this edition of chart of the week, we will compare the Manufacturing PMI for India to that of other industrially prominent countries around the world.

India's manufacturing PMI was strong a year ago in March 2022 with a reading of 54, and remained steady for Q1FY23, clocking in at 53.9 in June 2022. More recently, the PMI has been rising and reached a three-month high of 56.4 in March 2023. The increase was fueled by a capex push from the government in the FY24 budget, as well as the need to achieve the FY23 budget capex goal.

In the past two months, China's manufacturing PMI has been around the 50 mark, scoring 51.6 and 50 in February and March 2023, respectively. This indicates a marginal expansion in the sector after the easing of lockdown measures. China’s index had a steep rise at the beginning of FY23 but started a downward slope from July 2022 as lockdown restrictions hit the manufacturing sector.

The US PMI was the highest among the five countries a year ago, at 57.1 in March 2022, indicating strong manufacturing activity. However, the index has been on a steady decline since then as the US Fed raised interest rates, and fell below the 50 mark to 46.3 in March 2023. A survey conducted by the Institute for Supply Management (ISM) revealed that all the components of the US PMI were below the 50 mark for the first time since 2008. Analysts suggest that the PMI will continue to fall due to the ever-rising repo rates.

The United Kingdom's manufacturing PMI was recorded at 55.2 in March 2022 but dropped to 52.8 in June 2022. Although the index rose for two consecutive months at the beginning of 2023, it declined to 47.9 in March 2023 on the back of reduced demand and manufacturers’ tendency to maintain lower inventory levels.

Finally, Germany's manufacturing PMI was strong in March 2022 with a reading of 56.9, but it slightly dipped to 54.6 in April. However, the index has continued to fall and hit its lowest level of 44.7 in March 2023.

The PMI is a crucial instrument to assess the health of the manufacturing sector, and India's manufacturing PMI has been steadily rising in recent months. China's manufacturing PMI also expanded after the lifting of lockdown restrictions, while the US and UK saw declines. Germany's PMI has continued its worrying decline, indicating a sharp slowdown in the country's manufacturing sector. Overall, PMI readings for these countries are a useful recession signal and offer valuable insights into the condition of their economies.

It remains to be seen how these trends will unfold over the coming months. For now, India is in a relatively strong position.

The Baseline

06 Apr 2023

Five Interesting Stocks Today

Mahindra & Mahindra Financial Services: This NBFC has risen 5.7% over the past week after posting strong numbers in its business update for Q4FY23 and FY23. This helped the company show up in a screener of stocks with high volume and high gain.

In Q4FY23, the company’s loan disbursements rose by 50% YoY to Rs 13,750 crore, while FY23 overall saw a jump of 80% YoY Trendlyne’s forecaster estimates the company’s revenue and EPS to grow by 9.6% and 46.5% respectively in FY23.

The firm’s continued momentum in loan disbursements, improving asset quality and strong collection efficiency are the key drivers for its growth. According to Motilal Oswal, various strategic initiatives like changes in top-level management and improving loan recollection processes have the potential to yield a strong operational performance if executed well. The brokerage maintains its ‘Buy’ rating on the stock, with a target price of Rs 285 per share, indicating a potential upside of 22.8%. It also estimates the lender’s assets under management (AUM) to grow at a CAGR of 18% over FY23-25.

Recently, the company reached a 52-week high of Rs 272 on February 10, putting it in a screener of stocks with high momentum scores. The stock is currently trading 49.1% higher than its 52-week low of Rs 160.6 per share.

Bajaj Auto: This auto stock's two-wheeler domestic wholesales have risen 42% YoY to 1.5 lakh units in March, while commercial vehicles (CV) saw a surge in domestic wholesales by 74%. However, exports in both segments fell by more than 30%, resulting in a 2% YoY decline in total wholesales (both two-wheeler and CV).
Recently Bajaj Auto also announced production cuts due to a weak export market, with expectations of a recovery only by Q2FY24. Despite this, the stock has gone up by nearly 12% in the past three months.

According to ICRA, the commercial vehicles segment is likely to see a growth of 7-10% in FY24. The demand in segments like passenger vehicles, commercial vehicles and tractors will remain healthy and intact, which bodes well for Bajaj Auto, despite a decline in exports.

On a positive note, Bajaj Auto is set to enter the electric vehicles segment in both the cargo and passenger vehicle markets. In fact, the company is preparing to launch its three-wheeler electric vehicle in April. With a 76% market share in three-wheelers, Bajaj Auto would compete with Mahindra & Mahindra, which currently leads the market in the three-wheeler electric segment.

In the past week, the stock has risen 5.6% and is currently trading near its 52-week high. It shows up in a screener of stocks with high momentum scores. According to Trendlyne’s Forecaster, the consensus for the stock from 23 analysts is ‘Buy’. The company is set to announce its Q4FY23 results on April 25.

Maruti Suzuki: This automobile manufacturer rose 2.5% on Monday despite reporting a marginal decline of 0.2% YoY in its total domestic sales to 1.7 lakh units in March. The rise in share price is possibly due to the company hiking prices for all its models for a second time in 2023, to partially offset the impact of inflationary pressures and regulatory requirements.

Although Maruti Suzuki saw a fall in domestic sales, its exports increased 14% YoY in March. The company has shipped over 25 lakh units overseas since it started exports. The automaker exports to nearly 100 countries, including Africa, the Middle East, Latin America and Asia. However, the company’s management has pointed out that a shortage of electronic components affected production volumes in FY23, and expects the problem to persist in FY24. Despite this, the auto giant reported its highest-ever wholesales of 19.7 lakh units, up by 19% YoY, in FY23.

Analysts have a positive outlook on the company as they believe it is focused on expanding its presence in the SUV segment to drive revenue growth. According to Trendlyne’s Forecaster, the consensus recommendation for the stock from 41 analysts is ‘Buy’. The company features in a screener of stocks where brokers have upgraded their recommendations or target prices in the past three months.

Godrej Consumer Products: This FMCG company released its Q4FY23 business update on Wednesday, forecasting healthy double-digit volume growth in its India business. The firm’s volume growth in Q3 in comparison, was only 3% YoY. Domestic business contributes over 55% of the company’s consolidated revenue. The management expects broad-based growth in Q4, led by the home care and personal care segments.

The company introduced value products at lower price points across its product portfolios like household insecticides and personal care, amid a sluggish environment in the FMCG sector due to muted rural demand. This has aided higher market penetration in India, improving the company's volumes. According to reports, the company has gained market share in the hair colour segment after introducing products starting from Rs 15.

The stock has grown 5.8% over the past 90 days till Wednesday, outperforming the FMCG sector by 8.3 percentage points. The stock shows up in a screener for companies with improving cash flows and high durability scores.

Motilal Oswal expects the company to benefit significantly from the recent decline in palm oil prices, which could result in improved profitability in the coming quarters. The management also echoes this sentiment, as it believes that the decrease in input costs will allow it to raise marketing investments in the near to midterm.

HDFC Bank: This bank rose 2.6% in trade on Wednesday following the release of its business update on Monday after market hours. The company reported that its advances grew 17% YoY to 16 lakh crore in Q4FY23. The growth was led by retail, commercial & rural loans, which rose by more than 20%. Corporate and other wholesale loans grew by 12.5% in Q4.

The bank’s deposits also rose 21% YoY to Rs 18.8 lakh crore, led by a 23.5% increase in retail deposits. This is higher than the industry growth rate of 10%, according to reports. Analysts suggest that HDFC Bank’s market share in deposits at the end of FY23 would stand at 20%, up from 19% as of 9MFY23, which is positive news for the bank.

The bank also purchased loans worth Rs 9,340 crore in Q4, through a direct assignment route under the home loan arrangement with HDFC. This is a lower-cost route of obtaining funds for the bank. It remains to be seen how the bank’s low cost of funds and high advances growth will impact its margins.

The stock is up 5.5% in the past week, ahead of its Q4FY23 results on April 15. It has also outperformed its sector by 9.8% in the past 90 days. However, Trendlyne’s Forecaster estimates a 0.9% fall in net profit estimates in Q4FY23.

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

The Baseline

06 Apr 2023

Screener of the week: Finance sector stocks with high momentum and positive forecaster estimates for Q4FY23

By Abdullah Shah

While brokerages are getting squeezed, the overall finance sector is a different story - with multiple stocks analysts are bullish on.

This screener shows stocks from the banking and finance sector with momentum scores greater than 50, and a strong Q4FY23 result outlook - where estimates for quarterly YoY revenue growth are higher than 10%, and estimates for quarterly net profit growth are more than the previous quarter.

The screener is dominated by stocks from the banking industry with 12 bank stocks. Major stocks in the screener are Shriram Finance, Karur Vysya Bank, Federal Bank, IDFC First Bank, ICICI Bank and Bank of Baroda.

Shriram Finance has the highest YoY revenue growth estimates of 71.3% for Q4FY23, according to Trendlyne’s forecaster. The NBFC has a Trendlyne momentum score of 52.7. Over the past quarter, the lender has fallen 4.7%, but has outperformed its industry by 320 bps.

ICICI Bank has a revenue growth estimate of 29.5% YoY from forecaster for Q4FY23. The bank has a Trendlyne momentum score of 53.4 and has outperformed the banking industry by 5.8 percentage points.

You can find more screeners here.

The Baseline

05 Apr 2023

Analysts' choice: 5 stocks analysts are bullish on

By Abhiraj Panchal

Rainbow Childrens Medicare: ICICI Direct initiates a ‘Buy’ call on this healthcare facilities company with a target price of Rs 840. This indicates an upside of 13.6%. Analysts Siddhant Khandekar, Kushal Shah and Utkarsh Jain say that the company has expertise in the most case-sensitive healthcare group of pediatric and perinatal care. They believe that it makes the company “a standout player”. The healthcare company has planned to expand its presence by adding 850 beds across cities in the next four to five years.

Khandekar, Shah and Jain say, “The company’s hub and spoke model will aid growth and accessibility for patients.” Rainbow Childrens Medicare also follows a doctor engagement model where most of its core specialists work at the hospitals on a full-time retainer basis, which the analysts believe has led to a high degree of full-time doctor retention. They expect revenues to touch Rs 1,098 crore, showing an improvement of 13% YoY in FY23.

Embassy Office Parks REIT: ICICI Securities maintains a ‘Buy’ call on this REIT with a target price of Rs 425, indicating an upside of 35.3%. The company's board has approved the acquisition of Embassy Business Hub, a property under development, for an enterprise value of Rs 330 crore. The acquisition will be funded through debt at an interest cost of 8.1% per annum. Analyst Adhidev Chattopadhyay expects that the rent from phase 1 will commence in Q1FY25 and phase 2 in Q1FY28, and it will derive an enterprise value of Rs 310 crore at an 8% cap rate for the acquisition, which he believes is value-neutral.

The analyst remains cautious as the FY23 Union Budget carried a proposal to make the debt repayment/capital return portion of listed REITs taxable from FY24 and currently, 40% of the NDCF distribution profile for Embassy REIT comes from debt repayment which will become taxable from FY24. He concludes, “there may be some relaxation in the final version of the Budget proposal, with debt repayment not being taxed upfront,” for which we await final clarity.

HG Infra Engineering: IDBI Cap maintains a ‘Buy’ call on this construction and engineering company with a target price of Rs 1,067. This indicates an upside of 34.8%. Analysts Vishal Periwal and Prachi Kadam visited HG Infra’s Ganga expressway project site and interacted with the execution team and management. HG Infra was awarded the Ganga expressway project in Q1FY23, with a project cost of Rs 4,400 crore. The company scheduled the completion by January 2025 but the analysts say, “it is planning on early completion in 24 months, post which they will be eligible for an early completion bonus of Rs 50 crore.”

HG Infra has maintained its revenue target of growing 25% and 22% YoY in FY23 and FY24, respectively. The analysts expect margins to be in the range of 15%-16%. According to them, it is also eyeing order inflows of Rs 8,000-10,000 crore in FY24.

InterGlobe Aviation: Prabhudas Lilladher maintains its ‘Buy’ rating on this airliner with a target price of Rs 2,347. This implies an upside of 23.5%. Analysts Jinesh Joshi and Stuti Beria believe that the company is well-placed to capitalise on India’s rapidly growing aviation market as it has a 56% market share in India. They are also positive about the management’s plans to increase the fleet size to 350, expand the network to 115 destinations and increase carrying capacity by FY24.

Joshi and Beria believe that the company is “well placed to strongly benefit from higher capacity deployment, network expansion in domestic as well as international markets, lower crude prices and superior industry cost structure in the current environment.” The analysts add that the management’s plan to increase international destinations will drive market share expansion. They expect the company’s revenue to grow at a CAGR of 40% over FY22-25.

Dalmia Bharat: Axis Direct keeps its ‘Buy’ rating on this cement manufacturer and raises its target price to Rs 2,260 from Rs 2,120. This indicates an upside of 14.6%. Analysts Uttam Kumar Srimal and Shikha Doshi believe that the company’s strategy to continue exiting from its non-core businesses augurs well, as it can focus solely on its cement business. They are also positive about the firm’s capacity expansion plans, and expect its overall cement capacity to touch 49 metric tonnes per annum in FY24.

Srimal and Doshi expect demand for cement to grow at a CAGR of 7-8% over FY22-25 on the back of the increased government capex on infrastructure and housing. They believe “with the commissioning of new capacity and cost optimization measures'', the company will be a major beneficiary of the Centre’s infrastructure push. The analysts estimate the cement manufacturer’s net profit to grow at a CAGR of 12% over FY22-25.

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

(You can find all analyst picks here)

The Baseline

31 Mar 2023

Five Interesting Stocks Today

Bharat Electronics: This public sector defence company has bagged multiple orders worth nearly Rs 16,300 crore in March for the supply of indigenously developed equipment and electronic warfare systems to the Indian Army, Navy and Air Force. These order wins come after the company’s order inflow fell to a two-year low of Rs 3,500 crore during the first nine months of FY23 due to approval delays.

The company is expected to be a major beneficiary of the Centre’s push for reducing defence imports, as it commands a market share of 37% in the Indian defence sector. According to Geojit BNP Paribas, the company’s order book backlog of Rs 50,116 crore provides strong revenue visibility over the next three years. The company shows up in a screener for stocks with consistently high returns over the past five years. According to Trendlyne’s Forecaster, the consensus recommendation from 20 analysts is ‘Buy’.

While the management is optimistic about growth in orders from the defence sector, it plans to diversify into non-defence sectors like healthcare, airports, infrastructure and smart city projects. The firm’s long-term plan is to increase the contribution of its non-defence segment to 25% from 10% of total revenue.

With the rise in demand for locally manufactured defence systems, the company expects these orders to increase in the coming years. To be able to meet the upcoming requirements, it aims to make five new facilities operational in the next two-three years. It has budgeted a capex of Rs 600 and Rs 600-800 crore for FY23 and FY24 respectively. The management expects revenue to grow in the range of 15-20% in FY24, led by large orders and commissioning of new facilities.

Zydus Lifesciences: This pharmaceutical company reached its 52-week high of Rs 493.2 per share on Wednesday after receiving two US FDA approvals on the same day. The company shows up in a screener of stocks with strong momentum.

Zydus Lifesciences received final approval from the US FDA for its loperamide hydrochloride capsules, used for the treatment of inflammatory bowel disease, on Tuesday. According to IQVIA, the capsule has had an estimated annual sales of $34.7 million in the year ended January 2023 in the US.

The company received final approval from the US FDA for its levothyroxine sodium injection as well on Tuesday. The capsules, used for the treatment of myxedema coma, will be manufactured at its facility in Jarod, Gujarat.

However, it’s not all good news for the company. Earlier in the week (on Sunday), the drug manufacturer announced that it had recalled 55,000 bottles of colchicine tablets after it received an out-of-specification (OOS) result during release testing.

According to Sharekhan, the drug manufacturer stands to gain from strong product launches and volume growth in the US market, as its revenue of Rs 1,925 crore in Q3FY23 contributed to 44% of the total revenues. The brokerage estimates the company’s revenue to grow at a CAGR of 7.5% during FY22-25 and maintains its ‘buy’ rating on the stock with a target price of Rs 572. Trendlyne’s forecaster estimates its revenue to rise by 9.9% in FY23.

Allcargo Logistics: This logistics company rose over 2.4% on Tuesday after announcing its plan to acquire a 30% stake in Gati-Kintetsu Express for Rs 406.7 crore. Allcargo will buy shares from KWE Singapore (26% stake) and KWE India (4% stake). Gati-Kintetsu Express is a JV of Allcargo’s group company Gati and Kintetsu World Express. Gati deals in overseas courier services, while KWE is a Japanese freight forwarding company.

Allcargo has been on an acquisition spree over the past few months. The company had also bought the remaining 38.9% stake from its partner, ACCI, in the contract logistics business at an enterprise value of Rs 373 crore earlier this month.

In January, it bought a 75% stake in German cargo consolidator Fair Trade for 12 million euros, according to reports. Speaking to the media about the company’s recent acquisitions, Ravi Jakhar, the Chief Strategy Officer said the acquisitions were in line with the company’s strategy to simplify the organisational structure, enhance its growth in the domestic supply chain, and strengthen its position in key strategic markets.

Apart from the acquisitions, the company sold 90% of its logistics parks business to private equity firm Blackstone in February. Allcargo will also sell its non-core customs business.

However, despite a recent rise in its share price, the company is still down 27.3% from its 52-week high of Rs 495 in November 2022. But, it ranks high on Trendlyne’s checklist with a score of 73.9% and shows up in a screener for stocks with high Piotroski scores.

Jindal Stainless: This metals & mining stock rose 4% in early trade on Wednesday after it announced an acquisition of a 49% stake in Indonesia-based Nickel Pig Iron Co. However, it pared the gains and closed 0.2% lower. Jindal Stainless (JSL) plans to invest $157 million (Rs 1,290 crore) over the next two years to build a facility with a production capacity of 2 lakh metric tonnes. The company’s Managing Director Abhyuday Jindal says that not having backward integration for nickel is a big risk for the nation as we face a deficiency in nickel reserves.

This acquisition will help the company secure the supply of nickel, a critical raw material used in making alloys. Jindal Stainless has a series of other projects lined up. The company has announced an investment of Rs 120 crore to set up rooftop solar projects in Jajpur and Hisar facilities.

Sector growth looks decent for JSL as Bank of America Securities has given a positive stance for the near term. It expects steel demand to bounce back, resulting in higher prices. It also expects export opportunities to improve as export duty on steel has been scrapped.

Although the stock has fallen 5% in the past week, it gained 23.4% in the past three months and outperformed its sector by 3.7% in the past month. Jindal Stainless was a multi-bagger stock last year (gaining nearly 199%) but gained only 43.5% this year. Trendlyne’s Forecaster estimates a 5.7% increase in its annual revenue in FY23.

Sun Pharmaceuticals Industries: Thispharmaceutical giant expects its revenue to take a hit after reporting a ransomware attack on its system in early March. It reported a breach of some files and theft of company and personal data, impacting operations. The firm has isolated its network and started the recovery process. It is also evaluating the expenses for litigation and insurance. The stockfell nearly 3% the following week.

The firm did a series of acquisitions in Q4FY23, including a 60% stake in Vivaldis Health and Foods for Rs 143 crore in March, US-based Concert Pharmaceuticals for USD 576 million and a minority stake in Agasta Software and Remidio Innovative Solutions.

Lately, Sun Pharma has been focusing on the domestic market to increase its market share. The US and India each contribute 31% of revenue to the company, while emerging markets contribute 19%. It has nearly 9% share of the pharma market in India. Market share growth coupled with new launches for India formulations have led top-line growth in Q3FY23. Focusing on the global specialty portfolio also led to an increase in the margins. The specialty portfolio contributes nearly 13% of its revenue. The stock shows up in a screener for top Indian exporters among listed companies.

According to the management, its US portfolio is expected to grow 4.6%, while the India division should rise 7%. Its chronic portfolio is also expected to see strong growth led by new launches.

ICICI Securities says Sun Pharmaceuticals’ India business will outperform the industry, and global specialty sales will help margin expansion. Meanwhile, profitability will be slightly offset by rising R&D spend.

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

The Baseline

31 Mar 2023

Number of multibagger stocks fell sharply over the past one year

The Baseline

30 Mar 2023

Screener of the week: Best and worst performing sectors in Q4FY23, and their top companies

By Abdullah Shah

The first few months of 2023 have been anything but positive as the Nifty 500 fell by nearly 8% in the past 90 days. This week, we take a look at the outperforming and underperforming sectors over the past quarter and their best and worst-performing companies.

Sectors like food, beverages & tobacco, healthcare equipment and consumer durables have surpassed the Nifty 500, despite a weak quarter for markets. These are defensive sectors which remain stable regardless of the economy, as consumer spending here stays steady. The general industrials sector returned 2.9% in this period, backed by the capex push of the central government.

The outperforming screener shows stocks from the top-performing sectors. These are high-growth stocks which outperformed Nifty 500 by over 20% in the past year and by over 10% in the past quarter. Notable stocks in the screener are ITC, Siemens, Varun Beverages, Polycab India and KEI Industries.

Sectors like commercial services, utilities, media and retailing were underperformers and fell by over 15% in the past quarter. The utilities sector was dragged down by Adani group stocks, which plunged after Hindenburg’s explosive report on the group’s corporate governance issues.

The underperforming screener has stocks from the worst-performing sectors. Companies in this screener are Adani Total Gas and Adani Transmission, which underperformed Nifty 500 by over 50 percentage points. It also includes players like Aditya Birla Fashion, Concor and Sun TV Network.

You can find some popular screenershere.

The Baseline

29 Mar 2023

Chart of the week: Facing high cost of funds, NBFCs are passing on rate hikes to their customers

By Abdullah Shah

Interest rate hikes by central banks across the world have put banks under pressure, and the collapse of Silicon Valley Bank (SVB) and Credit Suisse signal the dangers ahead.

SVB bought billions of dollars worth of treasury bonds using customers’ deposits when the interest rate was low. However, as the US Fed increased interest rates aggressively over the past year, the value of these bonds plummeted, causing the bank to sell the bonds at high losses and eventually collapse.

This raises the question of how Indian lenders are operating in an environment of rising repo rates.

In this edition of chart of the week, we take a look at the cost of funds (COF) of Indian non-banking financial companies (NBFC). COF is the interest rate at which a bank borrows money from the central bank and other financial institutions to lend to its customers. The general trend is that the higher the repo rate, the higher the cost of funds for banks.

Most NBFCs which witnessed a rise in COF in the past two quarters have been able to maintain their net interest margin (NIM) by increasing customers’ effective interest rates.

Even though Bajaj Finance’s COF has risen for the past two quarters (a QoQ increase of 30 bps in Q3FY23), the lender managed to keep its NIM at Q2 levels. The company’s assets under management (AUM) improved by 27% YoY to Rs 2.3 lakh crore in the same quarter, while its net interest income (NII) grew by 24% YoY.

Cholamandalam Investment & Finance’s COF has also increased by 40 bps QoQ to 6.4% in Q3, for the second consecutive quarter since Q1FY23. However, the lender was able to offset this rise by increasing customers’ effective lending rates and a staggered hike in interest rates across its segments. Its loan disbursements increased by 68% YoY to Rs 17,559 crore in Q3FY23.

Poonawala Fincorp also managed to improve its NIM by 33 bps QoQ in Q3FY23 and loan book by 34.2% YoY to Rs 17,682 crore despite its COF rising 30 bps QoQ to 7.5%.

Piramal Enterprises and Muthoot Finance were the only exceptions to this trend as their COF fell 40 bps and 20 bps QoQ respectively in Q3FY23. This is despite the Reserve Bank of India (RBI) hiking policy repo rates by 40 bps. Muthoot Finance managed to improve its COF by reducing borrowings from bonds while increasing them from banks and financial institutions.

The Baseline

28 Mar 2023

Five analyst picks this week

By Suhas Reddy

Krishna Institute of Medical Sciences: Prabhudas Lilladher maintains its ‘Buy’ rating on this healthcare facilities company with a target price of Rs 1,660. This implies an upside of 22.6%. Analysts Param Desai and Sanketa Kohale are optimistic about the company as they expect its occupancy rates, profitability and scalability to rise in the coming quarters. They also see the firm’s plans to expand its operations in Karnataka and Maharashtra as key positives.

The analysts expect an operational turnaround and a rise in occupancy rate in KIMS’ Kingsway unit in Nagpur as it plans to add more clinical talent and fill in therapeutic gaps like oncology radiation. They also anticipate the occupancy rate to increase in the firm’s new Sunshine unit in Secunderabad, Telangana.. “The new Sunshine unit will be moved to a new state-of-the-art facility in a prime location by the end of Q1FY24. This would attract clinical talent across other therapies,” they added. Desai and Kohale estimate the hospital chain’s revenue to grow at a CAGR of 21.9% over FY22-25.

Shree Cements: ICICI Securities maintains its ‘Buy’ rating on this cement manufacturer and increases its target price to Rs 29,130 from Rs 27,550. This implies an upside of 15.6%. Analyst Harsh Mittal is positive about the company’s prospects on the back of strong capacity additions and increased demand due to the upcoming general elections. He sees the firm’s plan to increase the share of premium cement sales to 15% from 7% in 12-15 months, as a key positive.

He also believes that the company will be able to improve its realisations with the help of cost-saving initiatives such as increased use of alternative fuels. “Consumption cost for alternate fuels is around Rs 1.3-1.5 per kilocalorie (kcal). Shree Cements’ current fuel consumption cost is Rs 2.3 per kcal at its current thermal substitution rate of 4.5%, and the company aims to increase it to 15% in the next 12 months,” he added.

Mittal expects sales volumes to rise, and the firm’s expansion plans are on track. He expects the cement company’s net profit to grow at a CAGR of 18.3% over FY22-25.

State Bank of India: Motilal Oswal gives a ‘Buy’ call to this bank with a target price of Rs 725, indicating an upside of 43.1%. Following an interactive session with State Bank of India’s Chairman Dinesh Kumar Kharato to discuss the bank’s growth and margin outlook, analysts Nitin Aggarwal and Yash Agarwal say, “The bank’s robust performance has been aided by strong loan growth, margin expansion and lower provisions.”

They believe that a high mix of floating loans will continue to aid net interest income and earnings, even though the cost of deposits may increase. According to the analysts, manufacturing, export, renewables, batteries and EV segments are likely to be the key growth drivers for the bank. Aggarwal and Agarwal say, “Asset quality performance remains strong, with consistent improvements in headline asset quality ratios while the restructured book is under control at 0.9%.’

Zydus Lifesciences: Sharekhan maintains its ‘Buy’ rating on this pharmaceutical company with a target price of Rs 572, implying an upside of 18.8%. Analysts at the brokerage believe the company’s growth will be driven by new product launches and volume growth in the US and India. They also expect input and freight costs to stabilise, leading to better profitability.

The analysts believe the firm will outperform the Indian pharma market in the long term by penetrating newer geographies, launching new products and improving institutional sales. “The company has one of the largest pipelines of biosimilar products among Indian players, as it has so far launched 14 products in India,” they add.

Sharekhan’s analysts anticipate strong demand in the US market on the back of robust product approvals in the recent past. The management is optimistic about maintaining the sales growth momentum in the US, driven by new launches, as well as volume expansion of existing products. The analysts expect the company’s net profit to grow at a CAGR of 12% over FY22-25.

Jyothy Labs: Hem Securities initiates a ‘Buy’ call on this personal products company with a target price of Rs 225. This indicates an upside of 20.9%. In Q3FY23, the company’s profit and revenue have grown 75.4% YoY to Rs 67.4 crore and 15.7% YoY to Rs 627.9 crore respectively. Analyst Chinmay Bhandari says that the company has posted good results in the past few quarters despite input price inflation and slowdown in volume growth.

According to Bhandari, brands such as Ujala and Henko continue to register strong growth, while Exo Bar and Pril increase their market share. The analyst believes that falling crude prices will help the company post better margins and points out that the management is trying to increase its distribution network of key brands in newer markets to improve its topline.

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

(You can find all analyst picks here)

The Baseline

24 Mar 2023

Five Interesting Stocks Today

UltraTech Cement: With a capacity of 121.35 metric tonnes per annum (mtpa), thiscement and construction company has plans to increase its capacity to 153.85 mtpa by FY25/FY26.

UltraTech Cements reported revenue growth of 19.5% YoY in Q3FY23, but its EBITDA margins declined 33bps YoY. The rise in revenue was led by an increase in volumes, while margins contracted due to the higher cost of raw materials. The price hike undertaken by UltraTech lagged cost increases, and the increase in energy costs adversely impacted the margins of the firm.

Energy costs (petcoke/coal) have decreased by 30% in CY23. The benefit of this will start to reflect in Q4FY23. FY24 being an election year, government spending on infra projects is expected to be high. UltraTech might see a jump in volumes due to this. However, in the near term, the company is more focused on volumes and will restrict its price hikes. The stock hasgained 4.27% in the past three trading sessions and shows up in a screener for growth in net profit with an increasing profit margin.

Geojit BNP Paribas says demand for cement remains strong despite inflationary headwinds led by infrastructure and housing sector initiatives. Furthermore, a drop in raw material costs will enhance the company’s margins. Ultratech’s premium brand positioning, pan-India presence and efficient capacity utilization will aid bottom-line growth.

One97 Communications (Paytm): This internet & software services stock rose 6.9% on Wednesday after Macquarie upgraded its rating to ‘Outperform’ from ‘Underperform’ and revised the target price to Rs 800 from Rs 450 per share. This implies a potential share price upside of 28.4%. During previous broker downgrades, Macquarie was one of the first brokerages to slash Paytm’s target price to Rs 450 and recommendation to ‘Underperform’. However, Macquarie appears to have changed its mind and turned bullish on the stock. The recent upward target price revision has helped Paytm to show up in a screener of stocks with upgraded recommendation or target price in the past three months. The stock is currently trading 245.1% below its issue price of Rs 2,150 per share.

According to the brokerage, the company has outperformed on the distribution of financial services revenue by a huge margin, while also controlling the overall expenses and charges. This can be observed in its strong operating performance in January-February. The company’s loan disbursement increased by 286% YoY to Rs 8,086 crore, while its gross merchandise value (GMV) witnessed a growth of 41% YoY. Its average monthly transacting users (MTU) also rose 28% YoY in January-February.

Owing to this strong operational performance, Trendlyne’s forecaster estimates the company’s annual revenue to grow by 37.6% to Rs 7,969 crore and its losses to contract by 21.7% to Rs 1,966.9 crore. However, one thing to keep an eye on is Paytm’s NPA levels on loans, as interest rates continue to increase.

Phoenix Mills: This realty company has risen 5.8% over the past week on the back of the street’s positive outlook on its prospects. Post the second Covid wave, the company has witnessed a gradual recovery in demand and footfall across its retail, office and commercial spaces. The firm’s mall portfolio is expected to increase to 14 million square feet (msf) by FY27, from 9 msf in March 2023. The realty company aims to add at least one million square feet of retail space every year. By June this year, the company will be adding three more malls to its portfolio of 11 now. According to reports, the management claims leasing occupancy rates across its malls have improved to 94%-99% as retail consumption improves. The stock shows up in a screener for companies with improving cash flow and high durability.

Motilal Oswal recently re-initiated its coverage on Phoenix Mills with a ‘Buy’ rating. The brokerage believes that healthy pre-leasing trends across its upcoming malls provide strong near-term visibility on rental growth. It is also especially positive about the firm’s mixed-use strategy, where the company plans to add office spaces on top of or adjacent to its existing and upcoming malls, to improve the blended yield of the assets.

The company expects a consumption boom in India over the coming quarters and plans to expand into newer urban markets across the country. However, medium-term risks like a slowdown in consumption recovery and lower-than-expected leasing demand can impact the company’s expansion plans.

Anupam Rasayan India: This agrochemicals company rose over 2.5% in trade on Thursday after it signed a letter of intent (LoI) worth $120 million (Rs 984 crore) with a Japanese chemical company. The LoI is for the supply of new-age advance intermediates for life science ingredients over six years. Commenting on the same, Managing Director Anand Desai says, "This LoI demonstrates the company’s ability to work on a niche molecule with Japanese customers, and strengthens the revenue growth visibility in the coming years.” Trendlyne’s forecaster estimates Anupam’s revenue to grow by 28.2% in FY23.

The company has been on an uptrend recently, rising around 33% in the past month on the back of a strong outlook. As a result of the uptick in share price, the company features in a screener of stocks with strong momentum. It has also risen around 56% from its 52-week low of Rs 546.7. Anupam Rasayan has focused on expanding its product portfolio in fluorination chemistry, and plans to launch 14 molecules in the next 12-18 months, and five molecules in Q4FY23. The company also has a robust pipeline of contracts worth Rs 2,620 crore, says KRChoksey.

In addition, Anupam Rasayan has signed a Memorandum of Understanding (MoU) worth Rs 670 crore with the Government of Gujarat to set up three chemical plants, according to media reports. These plants will focus on manufacturing fluorochemicals.

Indian Oil Corporation (IOC): This oil marketing & distribution stock has fallen 1.13% in the past week despite announcing new ventures and improving refining capabilities. On Monday, IOC inked a pact with NTPC’s arm to form a joint venture for setting up a renewable energy power plant to meet IOC’s power requirements. Reports suggest that the transition of energy production from fossil-based systems to renewable energy is a good move, given that demand for petrol and diesel will slowly fall as companies shift to renewable energy sources. This is also in line with IOC’s target to increase its green energy share to 12% by 2030 from the current 9%.

On Tuesday, IOC’s board gave in-principle approval to prepare a feasibility report to set up a petrochemical complex at Paradip, Odisha. The estimated cost of the project is Rs 61,077 crore. The project in Paradip will help IOC improve its petrochemical intensity (% of crude oil converted to chemicals) and also reduce import dependency.

IOC’s Chairman Shrikant Madhav Vaida says that the company’s petrochemical intensity is currently at 5%-6%, and it plans to increase it to 10%-12%. He adds that refineries at locations like Panipat and Odisha will see the intensity go as high as 25%. Despite the announcement, the stock fell 1.3% in trade on Tuesday.

However, it has gained 8.2% in the past three months, thanks to a steady fall in crude prices. ICICI Direct maintains its ‘Buy’ call on the company with a target price of Rs 79.9. It recommends keeping the stop loss at Rs 77.7. Geojit BNP Paribas maintains a ‘Hold’ on the stock and expects effective cost optimization and enhanced utilization to aid earnings in the near term. Trendlyne’s consensus recommendation has 16 analysts recommending a ‘Buy’, 8 suggesting ‘Hold’ and 4 ‘Sell’.

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