- Bajaj Electricals: This household appliances company’s stock has been volatile for the past week. It rose nearly 1.5% on August 12 after it released its Q1FY23 results. But after announcing the permanent closure of its Parwanoo Unit on August 13 (over the Independence Day weekend), the stock fell 2.9% on Tuesday. Following this, the company declared a change in its management structure, triggering a jump of 2.7% on Wednesday.
The stock was up nearly 6% in trade on Thursday and shows up in the screener for companies where brokers have upgraded their target price and rating.
In the post Q1FY23 earnings call, the management said certain disruptions in their operating technology systems led to a loss in sales of 10 days of around Rs 30-50 crore. However, the management expects to recoup this in Q2FY23 and clarified that further phases of the OS implementation will have minimal impact.
The company saw revenues grow 43% YoY to Rs 1,229 crore in Q1FY23 because of price hikes in April. However, brokerages like ICICI Securities and Prabhudas Lilladher have a cautious approach towards the stock. Although ICICI Securities upgraded the stock to ‘Add’ from ‘Hold’ the brokerage feels that risks like an increase in input costs, delay in the launch of new products and increasing competition in the market may result in lower earnings.
- Gujarat Alkalies & Chemicals: This commodity chemical maker’s stock rose over 10% on Tuesday after the company announced the commissioning of a 1,05,000 tonnes per annum (TPA) chloromethanes plant at Dahej, Gujarat. The chloromethane market includes various end-user industries such as textile, automotive, personal care, pharmaceutical, and paints & coating. In addition, Meridian Chem Bond bought 5.3 lakh shares (0.7% stake) in the company for Rs 44.5 crore in a bulk deal on Tuesday. All of these factors led the stock to rise over 17% in three trading sessions until Thursday, and it is now in the overbought zone according to the money flow index or MFI.
This chemical manufacturer is currently in a phase of rapid expansion and the newly commissioned plant for the production of chloromethanes will help expand the company’s footprint in the textile industry. Revenues from the textile segment contributed to over 19% of the total revenue and strong market demand helped the company post 56% revenue growth YoY in Q1FY23. The company’s revenue is rising for the past six quarters YoY. It shows up in a screener that lists companies that saw improvement in net profits, operating profit margin and revenues in the most recent quarter.
- Apollo Tyres: The tyre maker’s stock hit a 52-week high on Thursday and outperformed the Nifty 500 index by over 16% in the past week. The company’s stock received three target price upgrades from brokers in the past month.
Apollo Tyres is the only tyre maker among the top five listed players like MRF and Balkrishna Industries which saw a sequential and YoY rise in its Q1FY23 net profit. This was backed by healthy top-line growth. In fact, Apollo Tyres managed to improve its margins sequentially mainly driven by its India operations. While its industry-leading performance certainly impressed the street, the company’s management gave out mixed signals for the quarter ahead. Notably, the company derives nearly 45% of its revenues from the truck and bus radial segment. However, it is seeing weak demand from the Indian commercial vehicle space due to the monsoon season in Q2FY23. On the other hand, demand trends are strong for the European passenger vehicle sector despite inflationary trends. This is partly due to the extended disruption of premium tyre imports from Russia. The company also expects the prices of key commodities like rubber to stabilize and then decline from Q3FY23 onwards.
- Happiest Minds Technologies: This IT consulting and software firm’s stock rose 15.6% over the past week till Thursday. It has been on an uptrend for five consecutive sessions on the back of its positive business outlook, as it recently launched Identity Vigil 2.0, its identity management services platform. The company’s Q1FY23 net profit rose 8.1% QoQ to Rs 56.3 crore and revenues by 9.4%. Revenue growth was driven by the product engineering services and digital business solutions segments. The company shows up on a screener that lists companies with sequentially rising profits for the past four quarters.
The management said that it aims to reach $1 billion annual revenues in seven years - by FY31, and expects that continued, long-term demand for digital services will help achieve this goal. Brokerage ICICI Securities initiated coverage of the stock on August 12 with an ‘Add’ rating. The brokerage believes that Happiest Minds is well-positioned in the high-growth IT digital market given its robust customer-centric sales engine.
The management guided for revenue growth of 25% in FY23 and an EBITDA margin of 22-24% in the medium to long term. The company is aiming for a revenue CAGR of 25% for the next five financial years. The management believes it can maintain a high level of revenue growth as it derives 97% of its revenue from digital and new technologies, more than any of its listed peers. The company shows up on a screener which lists stocks with strong cash-generating ability from their core business. It is also investing heavily in emerging technologies like the blockchain and metaverse to strengthen its digital capabilities.
- Trent: This retail company’s stock rose 8.6% over the past week till Thursday, mainly due to its good Q1FY23 results. The company is back in the black with a net profit of Rs 130.5 crore as compared to a loss of Rs 126.6 crore in Q1FY22. Revenues rose nearly 3.7X YoY and beat Trendlyne’s Forecaster estimates by 20.3%. The growth in revenues and profit was led by Westside and Zudio, helped by a strong recovery in demand and aggressive store expansion. The company shows up on a screener with stocks that consistently gave high returns over the past five years. This consistent growth over time has led to a Trendlyne Durability score of 70, the highest in the department stores industry.
But the company's margins are still under pressure from high input costs, as its EBITDA margin fell 420 bps to 16.2% as compared to 20.4% in the pre-Covid quarter of Q1FY20. According to reports, margin pressure is expected to persist given the company’s aggressive store expansion strategy. The business added 15 stores in Q1FY23, taking the total to 450 stores. A robust balance sheet, aided by healthy cash flow generation, allows the company to add new stores while keeping its debt low. Over the past few quarters, Trent has ramped up its online presence as it sees immense growth opportunities in the e-commerce space. This helped its revenues from online sales to jump significantly, contributing 6% to Westside’s revenue in Q1FY23. Going forward in FY23, the management aims to improve its cost optimisation to reduce margin pressure and increase the company’s profit.
Trendlyne's analysts identify stocks that are seeing interesting price movement, analyst calls, or new developments. These are not buy recommendations.
