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09 Aug 2024

Five Interesting Stocks Today - August 09, 2024

1. BSE:

This stock market exchange saw an 8.4% surge on Thursday following the announcement of its Q1 results after market hours on Wednesday. The firm posted a revenue growth of 2.5X YoY at Rs 674 crore in Q1FY25, surpassing Trendlyne's Forecaster estimate by 14.5%. Adjusted net profit rose 2.6X YoY to Rs 265 crore, beating estimates by 14%.

In Q1FY25, transaction charges, which make up more than half of the total revenue, soared 5.6X YoY to Rs 366 crore. Revenue from equity derivatives jumped to Rs 242 crore, compared to just Rs 1.6 crore in Q1FY24, thanks to a relaunch in May last year. However, the currency derivatives segment faltered as revenue plunged by 85% YoY, following the RBI mandate requiring traders to demonstrate foreign currency exposure to participate in this segment.

BSE shares had surged 6% on July 31 after SEBI proposed seven key amendments to curb the FnO frenzy. SEBI had observed that most traders lose money on expiry day trading, where premiums are low but risk is high. One of the amendments aims to limit both NSE and BSE to only one weekly expiry contract each.

Analysts anticipate these changes to impact FnO volumes. But they also forecast a significant market share gain for BSE from its current 20% level, since these amendments are expected to impact NSE more severely, as it currently holds 80% market share with four weekly expiry contracts on different days, compared to BSE's two.

MD & CEO Sundararaman Ramamurthy said, “BSE’s foray into single stock derivatives space from July 1, 2024, with a mid-month expiry, has gained considerable traction.” He highlights that performance has exceeded his expectations, with a total turnover of Rs 341 crore in July.

Motilal Oswal reiterates its ‘Neutral’ rating on BSE due to the uncertainty surrounding potential new regulations for FnO. However, they view the relaunch of BSE derivatives products last year as a game-changer and expect the recent launch of stock derivatives to drive further market share gains for BSE.

2. Adani Wilmar:

This edible oils company rose by 10.6% over the past week, after Adani Enterprises approved a scheme of arrangement to demerge its food FMCG business and transfer it to Adani Wilmar, along with investments in Adani Commodities LLP.

Adani Wilmar reported a net profit of Rs 313.2 crore in Q1FY25 compared to a net loss of Rs 78.9 crore in Q1FY24, helped by inventory destocking. Revenue grew 9.6% YoY to Rs 14,168.6 crore, during the quarter. The firm missed Trendlyne’s forecaster estimates for revenue by 1.6%, but beat net profit estimates by 81.9%.

Adani Wilmar got a boost from a notable increase in volumes, with edible oils up 12% YoY and Foods & FMCG up 42% YoY. The company increased its market share by 60 bps to 19% in the edible oil business, with its brand "Fortune" leading the segment. The firm’s market share in edible oil is nearly 1.5 times that of its next competitor, Patanjali Foods, dominating in North and Central India. CFO Shrikant Kanhere said, “We expect 30-40% YoY annual volume growth for the next three years once our Gohana plant is operational, enabling a more efficient in-house supply chain.”

The company has broadened its product range with "Pehli Dhaar," a cold-pressed mustard oil, and is utilizing its established distribution network to boost food product sales and reach more customers. It plans to cover 50,000 rural towns by March 2025 to enhance product distribution. Adani Wilmar also aims to expand its export business, focusing on specialty chemicals and branded food products, to explore new markets.

KRChoksey maintains its “Accumulate” rating with an upgraded target price of Rs 382.4, indicating a potential upside of 6.5%. The brokerage highlights favorable commodity prices, improved margins, and a scaling up of the food portfolio as drivers for future growth.

3. Godrej Consumer Products:

This personal products maker has declined more than 3.9% in the past two days after announcing its Q1FY25 results. Its revenue declined 3% YoY to Rs 3,409 crore in Q1, missing Forecaster estimates by 2.4%. This was largely due to a 25% YoY decline in GAUM ( Godrej Africa, USA, and Middle East). Net profit grew 41.4% YoY to Rs 450.7 crore during the quarter, but missed estimates by 8.2%.

International markets (which make up around 37% of the total revenue), saw Godrej Consumer’s Indonesia business outperform, with a 7% YoY growth in volumes. The growth was led by its hair colour business, and the newly launched Stella Electric Diffuser. However, Africa, US & Middle East business volumes declined due to devaluation of Nigeria’s naira currency, and the Red Sea crisis.

In the domestic business, the homecare segment (which contributes around 38% of revenue) grew 8% YoY led by air fresheners and liquid detergent. However, the household insecticide business was impacted by severe heatwaves. The management highlighted that Goodknight Agarbatti is scaling up and gaining market share from unorganised incense stick players. Meanwhile, the personal care segment (contributing around 58% of the revenue) sales grew by 6% YoY.

Meanwhile, Godrej Consumer Products announced its entry into the pet care industry, by creating a subsidiary, Godrej Pet Care, with an expected cash investment of Rs 500 crore planned over the next five years. The production will begin in Q2FY26, and the company will have a manufacturing agreement with Godrej Agrovet, operating in the animal feed and agribusiness sectors. Aasif Malbari, the CFO acknowledged the jump in pet ownership in India, saying, “Pet foods is a Rs 5,000-crore category with the potential for strong double-digit growth for the next few decades”.

Post results, Motilal Oswal maintains its ‘Buy’ rating with a target price of Rs 1,700. The brokerage believes the implementation of disruptive innovations, the introduction of access packs, expansion into new growth categories, and increased advertising expenditure will contribute to a consistently robust growth trajectory.

4. Carborundum Universal:

This industrial products company fell by over 10.8% over the past week. It announced its results on July 31s – the company’s net profit fell by 0.2% YoY to Rs 112.5 crore in Q1FY25, while its revenue fell by 2.4% YoY, mainly on the back of declines in electro minerals and ceramics segment revenues. The firm missed trendlyne’s forecaster estimates for revenue by 5.4% and for net profit by 14.7%. The stock shows up in a screener for stocks in the PE sell zone.

Electro minerals are the basic raw material used in the manufacturing of abrasives and for surface preparation in tile and paint industries. Carborundum Universal manufactures these, as well as industrial ceramics like Zirconia Ceramic, which is used in the food industry for grinding applications. The company’s consolidated electro-minerals sales struggled in Q1, falling by 9% YoY to Rs 380 crore due to a drop in price realization by 4-6% from Chinese dumping. Consolidated ceramics sales fell by 6% YoY to Rs 270 crore, primarily due to delays in refractory orders.

China has cast a shadow on Carborundum Universal’s numbers. Analysts note that the firm has reported a muted set of results since the last four quarters on account of competition with Chinese abrasives, loss of a customer in engineered ceramics, and the decline of the Russian ruble, which negated the gains of growth in subsidiaries’ revenues.

Sridharan Rangarajan, MD of the firm, commented: “For FY25, in the previous call we said that full-year consolidated sales growth could be 9% to 11% and consolidated sales could be Rs. 5,100 to 5,200 crore. We are confident of delivering the same. We expect growth of 11% to 12% in Abrasives, 12% to 14% in Ceramics as told earlier. We maintain the same stands for Electro Minerals as well, a growth of 5% to 6%. Abrasive India growth would be 9% to 11%. We expect the second half to be better. All the projects that we plan to execute are in line and we are confident of what we guided in the last call.”

Despite management optimism, ICICI Securities has downgraded the stock to a “Sell” rating with a target price of Rs 1,450. The brokerage highlights that due to its well-diversified and large product basket, the firm is a key beneficiary of the increased focus on hi-tech manufacturing in the domestic market. However, with near-term headwinds in mind, the brokerage has maintained Its target price and now values the stock at 36x FY26 EPS.

5. Torrent Power:

This electric utilities company surged 16.5% to its all-time high of Rs 1,908 per share on 31 July, the day after its Q1FY25 results. The company’s net profit grew by 88% YoY to Rs 972.2 crore, beating Forecaster estimates by 50.1% while its operating revenue rose by 22.9% YoY to Rs 9,110 crore, largely driven by higher merchant power sales of 1.7 billion units (vs. 400 million units YoY).

During the quarter, the company reported a sales growth of 65% YoY in the generation segment from Rs 2,229.3 crore in Q1FY24 to Rs 3,677.6 crore in Q1FY25. Its transmission and distribution segment grew 4.7% YoY to Rs 6,934.3 crore while its renewables segment grew 5.5% YoY.

The company also signed a memorandum of understanding (MoU) with AIA Engineering and Torrent Urja 16 to supply renewable energy. This agreement involves developing and setting up hybrid projects with a capacity of up to 33 MW in Gujarat. The power will be supplied to AIA's production units through open access from the TU16 project.

Saurabh Mashruwala, Chief Financial Officer of the company said, “The current electricity market conditions are favorable for generators like us, given sufficient capacity and the lack of recent major investments in thermal power. We expect to reach 5 GW of renewable energy capacity in the next two to three years.” The company is capitalizing on these favorable conditions by investing in the development of two major transmission projects. The first, the Khavda Transmission Project, which has a return on equity of 15% and is expected to cost more than Rs 800 crores. Second is the Solapur transmission project which will involve an investment of Rs 470 crores.

ICICI Securities maintains a ‘Hold’ rating on the stock with a target price of Rs 1,825. The brokerage does not expect contribution to decline in the next three quarters, leading to moderation in quarterly profit, and expects EBITDA margin to be 17.1% in FY25 and 18.7% in FY26.

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

The Baseline

08 Aug 2024

Which stocks did superstar investors buy in Q1FY25?

By Ruchir Sankhla

Investments by superstar investors like RARE Enterprises, Ashish Kacholia, Sunil Singhania, and Vijay Kedia are closely tracked by investors for valuable insights into the market. Their buys and sells help investors identify interesting sectors and stocks. Here we look at the buys made by these superstar investors during Q1FY25.

(You can now also invest in shadow superstar baskets available on Starfolio, which are updated and rebalanced as per Trendlyne's superstar portfolios).

In Q1, superstar investors made fewer additions and more stake sales, with some only making small increases in stakes and no new buys during the quarter. The chart below shows the changes in superstar investors' current portfolio net worth. Note that net worth reflects both changes in current holdings as well as new buys and sells.

Some superstars see a fall in their net worth in Q1FY25

The public portfolio of each superstar investor indicates their investing style and preferred approaches. The following chart gives a breakdown of the dominant sectors in each investor’s portfolio.

Sectors preferred by superstars

Sector preferences vary among superstar investors – RARE Enterprises leans towards the textiles apparels & accessories sector, while Ashish Kacholia and Sunil Singhania favor the general industrials sector. Vijay Kedia’s preferred industry is automobiles & auto components. Dolly Khanna prefers the oil & gas industry, and Porinju Veliyath favors software & services.

RARE Enterprises’ only buy is a minor stake in a healthcare company

Rakesh Jhunjhunwala’s portfolio, currently managed by Rekha Jhunjhunwala and RARE Enterprises, fell by around 10.9% to Rs 46,092.1 crore by the end of Q1FY25. During the first quarter, no new additions were made. RARE Enterprises made just a minor stake increase in healthcare facilities firm Fortis Healthcare by 0.1%. The portfolio now holds a 4.2% stake. Over the past year, the company’s share price has increased by 43.7%.

Ashish Kacholia adds a new listed company to his portfolio

Ashish Kacholia’s net worth declined by 6.9% to Rs 2,718.5 crore after Q1FY25. During the quarter, the marquee investor added recently listed special consumer servicesAwfis Space Solutions to his portfolio, by buying a 4.8% stake.

Awfis Space Solutions debuted on the stock exchanges on May 30, 2024. The company’s share price has increased by 64.3% from its listing price.

During Q1, the ace investor also bought a 0.2% stake in Dhabriya Polywood. He now holds a 6.67% stake in the plastic products company. Kacholia added it to his portfolio in Q2FY24 by purchasing a 6.4% stake. The company’s share price has grown by 70.5% over the past year, outperforming its industry by 27.4 percentage points.

During Q1, Kacholia also bought a minor stake in Brand Concepts. He now holds 1.6% in the specialty retail company. The company’s share price rose by 65.9% in the past year.

Ashish Kacholia adds Awfis Space Solutions to his Portfolio

Sunil Singhania’s Abakkus Fund makes no new buys in Q1

Sunil Singhania’s Abakkus Fund saw its net worth fall by 4.2% to Rs 2,711.3 crore after Q1FY25. The fund didn’t make any buys during the quarter. The fund’s activity in Q4FY24 was also limited, adding just minor stakes to current holdings. Abakkus Fund increased its holdings in household appliances manufacturer, Hindware Home Innovation, to 4.5%. It also added minor stakes in Shriram Pistons & Rings and IIFL Securities.

Vijay Kedia increases stake in an airline company

Vijay Kedia’s net worth increased by 33.6% to Rs 1,659.9 crore after Q1FY25. During the April-June quarter, the ace investor did not add any new stocks to the portfolio and increased his stake in just one company – airlines stock Global Vectra Helicorp, by buying a 1.9% stake. Kedia now owns 4.9% of the company. Over the past year, the company’s share price has increased by 260.4%.

Vijay Kedia buys a 1.9% stake in Global Vectra Helicorp

Dolly Khanna adds five new companies to her portfolio in Q1

Dolly Khanna’s net worth increased by 25.5% after Q1FY25 to Rs 615.7 crore, she publicly holds 21 companies. During Q1, the investor continued to expand her portfolio by adding five new companies and raising stakes in four others. Among her new investments is a 1.6% stake in capital market company Emkay Global Financial Services and a 1% stake in Tinna Rubber and Infrastructure, a specialty chemicals company. She also bought a 1.1% stake each in textile stock Super Sales India, non-ferrous metals company Nile and bank stock Ujjivan Small Finance Bank.

Dolly Khanna adds five stocks to her portfolio

During the first quarter, Khanna bought a 0.53% stake in exploration & production company Selan Exploration Technology, taking her holding to 1.56%. She bought a 0.4% stake in breweries & distilleries company Som Distilleries & Breweries and now holds a 1.5% stake. The ace investor added minor stakes in the sugar stockZuari Industries and the housing finance company Repco Home Finance. She now holds 1.9% and 1.2% stakes respectively, in these companies.

Porinju Veliyath buys a small stake in an IT company

Porinju Veliyath’s net worth increased by 37.3% to Rs 262.3 crore after Q1FY25. During the first quarter, he increased investments in two companies. The investor bought a 0.4% stake in Aurum Proptech and now holds 4.9% in the IT consulting & software company. In the last one year this company has outperformed its industry by 21%.

Porinju adds minor stakes in Aurum Proptech and TAAL Enterprises

The ace investor also increased his stake in airlines industry company TAAL Enterprise by adding 0.2%, taking his holding to 1.3%. The company has a good durability score of 65.

The Baseline

07 Aug 2024

Chart of the Week: Sectors and stocks with the highest dividend yields in the past year

By Satyam Kumar

There are two popular ways to generate returns from stocks: 1) when your capital appreciates with share price growth, and 2) dividends. Investing in dividend-paying stocks gives you a share of a company’s profits through regular cash payments. Such high-dividend stocks serve as reliable sources of income.

The dividend yield, expressed as a percentage, is the annual dividend payment relative to the stock’s current price. The significance of the dividend yield for a company lies in its ability to attract and retain investors for longer. A higher dividend yield boosts the stock’s appeal, especially for investors looking for a steady income.

It's important to note that the dividend yield isn't a static figure; it changes as the stock price fluctuates. A falling stock price can inflate the dividend yield, a factor investors need to consider when analysing this metric.

In this edition of Chart of the Week, we will look into sectors and companies with the highest 1-year dividend yield over the past year. The full high dividend screener is here.

Aster DM Healthcare gives a special dividend after sale of its Gulf business

Healthcare facilities company Aster DM Healthcare announced a special dividend of Rs 118 per share from the proceeds after the sale of its Gulf business. Its share price rallied after the company completed the separation of its India and GCC businesses on April 3. The management said the Indian healthcare market looks promising and, after segregation, the company would focus on increasing its footprint in India.

Through both greenfield and brownfield opportunities, the company aims to take its total bed count in India to more than 6,600 in the next three years. The expansion plan will encompass the upcoming Aster Capital in Trivandrum, and Aster MIMS Kasargod projects, and adding bed capacity to existing hospitals. The healthcare company will also be looking at potential markets such as Maharashtra and Uttar Pradesh – while UP is a demographically younger market compared to South India, it is highly underserved when it comes to health facilities. The capital allocation for this expansion is in the range of Rs 1,000 crore.

Indian Oil & its subsidiary Chennai Petroleum Corp. deliver the highest dividend yield among oil & gas companies

The oil & gas sector had a dividend yield of 1.7% in the past year. Companies in the lead are Indian Oil Corporation, Chennai Petroleum Corporation and Bharat Petroleum with dividend yields of 7.2%, 6.1% and 3.8% respectively. It is important to note here that central public sector enterprises must pay a minimum annual dividend of 30% of profit after tax or 5% of net worth, whichever is higher as per guidelines given in 2020.

In FY24, Indian Oil gave a 4X higher dividend of Rs 12 on a YoY basis, thanks to the cheap Russian crude that boosted gross refining margins over the past year. However, Trendlyne’s Forecaster estimates that the dividend per share will fall to Rs 6.8 in FY25. This is because discounts have almost halved to $3-6/barrel from $8-10/barrel in FY24, mainly due to higher freight and insurance costs because of Ukrainian drone attacks. This is evident in the net profit of oil & gas companies in Q1FY25. Indian Oil saw its net profit decline 75.6% YoY, while Chennai Petroleum’s net profit declined by 35.8% on a YoY basis.

Bharat Petroleum also saw its net profit decline by 73.3% on a YoY basis in Q1FY25. Trendlyne’s Forecaster estimates the company will lower its dividend payout by 35.7% in FY25 compared to that in FY24. However, due to inflationary headwinds and a slowing global economy which might even lead to a recession in the US, crude oil prices are trading below the $80 level. This can be a major tailwind for refining margins and profitability, leading to potentially higher payouts/dividends.

Vedanta’s dividend yield takes a hit, as it aims to deleverage balance sheet

The metals & mining sector on the other hand had a dividend yield of 2.1%. Companies with the highest dividend payout in this sector are Vedanta, Coal India and NMDC with yields of 6.3%, 4.9% and 3.9% respectively. All three companies saw their share price nearly double over the past year.

Contrary to the estimate beating dividend per share payout of Rs 101.5 in FY23, Vedanta missed the FY24 dividend payout estimates by 17.1%. This comes as the debt-heavy mining company works to deleverage its balance sheet via strategic demerger and asset sale. In Q4FY24, the company reduced its debt by 10% on a QoQ basis and improved its net debt to EBITDA ratio to 1.5X from 1.7X.

Meanwhile, the banking & financial services firm had an overall dividend yield of 1% in FY24. The top dividend-paying stocks in this sector are ICICI Securities, UTI Asset Management Company and Ujjivan Small Finance Bank, offering yields of 5.2%, 4.8% and 3.5% respectively.

Among the stocks that made it to the list, only Ujjivan Small Finance Bank’s share price fell over the past year.

It’s worth noting that there are many reasons for companies to pay out dividends. While some aim to distribute profits back to shareholders, others might do so due to a lack of significant expansion plans. Companies that pay dividends are typically considered more stable and financially sound and, historically, dividend stocks have proven to be a safe bet during market downturns.

The Baseline

07 Aug 2024

Five stocks to buy from analysts this week - August 7 2024

By Divyansh Pokharna

1. Tata Consumer Products:

Motilal Oswal reiterates a ‘Buy’ rating on this tea & coffee company with a target price of Rs 1,380, indicating a potential upside of 15%. In Q1FY25, Tata Consumer Products' revenue grew 15.6% YoY to Rs 4,391 crore. EBITDA margins improved 80 bps YoY led by strong performance in the international beverage segment and higher coffee prices within the unbranded business.

Analysts Sumant Kumar and Meet Jain highlight the acquisitions of Capital Foods and Organic India, which contributed nearly 5% to the company’s revenue. They are optimistic about the company's plans to diversify its product portfolio through the ready-to-drink segment, and its entry into the branded dry fruits market. Additionally, the company plans to digitize its supply chain to improve operational efficiency and cost management.

Kumar and Jain are positive about the management's focus on strengthening the core business and expanding its distribution network. They project a revenue and PAT CAGR of 12% and 20% respectively, over FY25-26.

2. Granules India:

ICICI Direct maintains a ‘Buy’ rating on this pharmaceuticals company with an upgraded target price of Rs 765. This indicates an upside of 16.5%. In Q1FY25, Granules India’s revenue grew 20% YoY to Rs 1,176 crore driven by a 45% increase in US sales, which accounts for 74% of total sales.

The company saw a 90% YoY growth in EBITDA, driven by enhanced margins and a favorable product mix. Analysts Siddhant Khandekar and Shubh Mehta are upbeat about the company's plans to produce essential raw materials in-house to secure its supply chain.They are positive about Granules expanding its product portfolio, particularly in formulations, with a targeted launch of 7-8 products annually in the US. The firm’s Genome Valley plant began operations in March, which increased its production capacity to 2 billion units.

ICICI Direct projects a revenue CAGR of 12.9% and a net profit CAGR of 37.9% over FY25-26, driven by the company’s emphasis on increasing sales of its formulation products, especially in the US and Europe.

3. NLC India:

Axis Direct initiates a ‘Buy’ rating on this electric utilities company with a target price of Rs 340, indicating a potential upside of 30.2%. In FY24, the company’s net profit rose 32.8% YoY to Rs 1,854,1 crore, missing Forecaster estimates by 7.4%. However, operating revenue fell 19.6% YoY to Rs 12,999 crore.

Analysts Aditya Welekar and Darsh Solanki notes the company’s plans to increase its mining capacity from 50 MTPA to 102 MTPA, thermal power capacity from 4,640 MW to 10,465 MW, and renewable energy capacity from 1,431 MW to 8,059 MW by 2030. These capacity expansions will require a capital expenditure of Rs 1 lakh crore. These efforts aim to diversify cash flows and mitigate risks during the thermal power expansion.

Welekar and Solanki value the conventional thermal business at 1.8 times the FY33 equity projections. They value the regulated mining business at 1.9 times FY26 equity, the renewable energy business at 9.0 times EV/EBITDA on FY26 EBITDA, and the merchant coal business at 7.0 times EV/EBITDA on FY26 EBITDA.

4. Indraprastha Gas:

Sharekhan has a ‘Buy’ rating on this non-electrical utilities company with a target price of Rs 648, indicating a potential upside of 19.4%. In Q1FY25, the company’s net profit fell 7.8% YoY to Rs 481.2 crore but beat Trendlyne’s Forecaster estimates by 11.5%. Its operating revenue rose 3.3% YoY to Rs 3,520.6 crore driven by a 7.4% increase in the sales volume of piped natural gas (PNG), reaching 198.4 million standard cubic meters (scm) compared to 184.7 million scm in Q1FY24.

Analysts note the company’s capex for FY25 is projected to be Rs 1,700-1,800 crore, with around Rs 300 crores spent in Q1FY25. They also highlight the company’s plans to establish 10 new compressed biogas (CBG) plants in FY25, with an estimated project cost of Rs 300-350 crore, shared equally in a joint venture. The company plans to expand its network by adding 90 new CNG stations.

The analysts expect increased consumption from ongoing infrastructure development and the introduction of CNG-compatible bikes to enhance consumption levels. The growth in LNG sales, which benefits from higher margins, also contributes to this optimistic forecast.

5. ICICI Lombard General Insurance:

Geojit BNP Paribas maintains a ‘Buy’ rating on this general insurance company with a target price of Rs 2,331, indicating an upside of 20.5%. In Q1FY25, the company’s gross direct premium income (GDPI) rose 20.4% YoY to Rs 7,688 crore, beating the industry’s 13.3% YoY growth. It appears in a screener of stocks outperforming their industry during the quarter.

The health segment saw a growth of 28.5% YoY, helped by the launch of a new health insurance solution ‘Elevate’. The analyst remains optimistic about the boost in the retail health business, driven by shifting consumer preferences and improved servicing capabilities. ICICI Lombard has expanded its product offerings with new long-term insurance products for the private car and 2-wheeler segment.

Geojit projects ICICI Lombard’s premium earnings to grow at 16.4% CAGR and net profit CAGR of 25.1% over FY25-26, helped by its strong product mix and demand of its product by customers.

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

(You can find all analyst picks here)

The Baseline

02 Aug 2024

Five Interesting Stocks Today - August 02, 2024

1. Zen Technologies:

This defense company has jumped 11.2% since the declaration of its Q1FY25 results on July 28 and has risen 32.5% over the last month. In Q1FY25, the company’s net profit grew 68.8% YoY to Rs 79.5 crore, and its operating revenue increased 92.2% YoY to Rs 254.6 crore during the quarter. However, its EBITDA margin decreased by 10%. On 26 July, Zen Technologies hit a 5% upper circuit as it launched four AI-powered robots for the global defense market. The IP-owned robot products are Hawkeye, Barbarik-URCWS (Ultralight Remote Control Weapon Station), Prahasta, and Sthir Stab 640.

Ashok Atluri, Chairman and Managing Director of the firm said, “Training and simulation, including virtual simulators and live ranges, are our cornerstone. Recently, the armed forces have recognized the need for tactical training, preparing soldiers for combat. This shift is expected to drive significant growth for our company and we are confident about meeting our guidance of Rs 900 crores of turnover in the current financial year.“ The company has an outstanding order book valued at Rs 1,158.5 crore as of June 30, a 113% YoY growth. This includes orders worth Rs 647.9 crore for training simulators and Rs 510.9 crore for anti-drone systems. Typically, the company receives a higher number of new orders in Q2 and Q3.

Motilal Oswal has given a ‘Buy’ rating on Zen Technologies with a target price of Rs 1,820. The brokerage states that the current valuation of ZEN is still cheaper than that of other comparable companies in the private defense sector and expects a CAGR of 63% in revenue, 57% in EBITDA, and 57% in PAT during FY 25-27.

2. Navin Fluorine International:

This commodity chemicals company fell by over 4.4% after it announced its results on Tuesday. The company’s net profit fell by 16.8% YoY to Rs 51.2 crore in Q1FY25, while its revenue rose by 6.9% YoY. The firm missed Trendlyne’s forecaster estimates for revenue by 9.2% and for net profit by 17.1%. The stock shows up in a screener for stocks with PE higher than the industry PE.

A big driver of the profit decline was the company’s specialty chemical segment revenue falling by 30% YoY. It was affected by poor demand and inventory optimization efforts by global clients. By H1FY24, chemical companies lowered their expectations due to weak global demand from a European recession, U.S. inflation, and a slow recovery in China.

High inventory levels from over-ordering in previous years has resulted in less than 1% YoY growth in chemical output. In response, companies are focusing on cost reduction and improving efficiencies to counter falling production. It was the less profitable High-Performance Product (HPP) segment that was the primary revenue driver for Navin Fluorine, with a 66% YoY growth attributed to stable operations at the Dahej plant and increased utilization and sales of new R32 gas for compressors and refrigerators.

Anish P Ganatra, CFO of the firm, said: “To strengthen the product pipeline in the specialty chemicals vertical we have established an R&D center in Surat and have introduced a new agro molecule in this center for a global major, with an annual peak revenue potential of Rs 40-50 crore over the next three years.” Ganatra also highlighted the signing of a supply agreement for a patented agrochemical product catering to the Japanese market, with an incremental annual revenue potential of Rs 20-30 crore in CY25. The firm’s priority for the coming quarter is to commission the Agro Specialty project, with a capex of Rs 540 crore.

Axis Direct has given a “Sell” rating on Navin Fluorine International, with a target price of Rs 3,135. The brokerage has revised estimates downward due to the slower-than-expected recovery in the Specialty Chemicals. The brokerage believes that long term growth prospects remain strong and the growth is likely to pick up towards the end of FY25 – but this is subject to project stabilization and optimal capacity utilization. It values the stock at 27x FY26E, which implies a downside of 17% from the CMP.

3. Dixon Technologies:

This smartphone manufacturer rose 6.8% in the past week as its Q1 results beat estimates on all fronts. The company reported a revenue growth of 101.2% YoY to Rs 6,588 crore, beating Trendlyne’s Forecaster estimate by 13%. Net profit rose 94.2% YoY to Rs 133.7 crore, beating forecasts by 20.6%.

Dixon’s rise in sales was driven by their mobile and electronic manufacturing services (EMS) division. This division saw revenue growth of 189% YoY to Rs 5,192 crore and contributed 79% to the total revenue in Q1FY25, compared to 55% during the same period last year. The company currently manufactures smartphones and feature phones for brands such as Xiaomi, Motorola, and Samsung. Notable growth was seen in volumes of Motorola smartphones during Q1, driven by rising export orders. In the past four fiscal years, Dixon’s smartphone production capacity has increased at a CAGR of around 100%, thanks to their aim to add capacity of 15 million units on an annual basis.

Dixon’s shares took a hit on Budget day after the Finance Minister proposed to cut import duty on mobile phones and chargers from 20% to 15%. However, Dixon Tech MD, Atul Lall says that the mobile manufacturing ecosystem has matured in India and expects the ‘Made In India’ trend to continue. He also said that India should make all the components going into the smartphones domestically, and expects a package for the component sector soon.

During the earnings call for Q1, Lall said, “We are looking to capture 55-60% of the smartphone market after the Ismartu acquisition, which will add 10-12 million to the current production capacity of 45 million.” He also highlighted that the company plans to deepen its manufacturing capabilities by partnering with HTC for display module technology, with production anticipated to begin in FY26.

BOB Capital Markets maintains a ‘Buy’ rating on Dixon Technologies. The brokerage is upbeat on the company’s outlook because of the strong performance in the mobile & EMS segment. They raised their EPS estimates for FY25/26 by 7% due to the company’s leading position in the electronics manufacturing sector. With a target price of Rs 13,800, the stock has a potential upside of 18.4%.

4. Colgate-Palmolive (India):

This FMCG company has risen by 6.8% over the past week after announcing positive Q1FY25 results on Monday. The company reported net profit growth of 33% YoY to Rs 364 crore, helped by inventory destocking and lower finance costs. Revenue rose 13% YoY to Rs 1,496.7.1 crore, driven by improvements in the toothpaste, toothbrush, and personal care segments. Net profit beat Trendlyne’s Forecaster estimates by 9.6%, while revenue surpassed estimates by 4.5%. EBITDA margins also expanded 238 bps YoY to 34% during the quarter.

During the quarter, the company reported double-digit sales growth in the toothpaste segment, led by a 7-9% volume growth. The personal care brand Palmolive, which consists of body wash and hand wash, continued to experience strong growth but currently lacks a significant presence in rural areas. The company aims to expand its personal care footprint in India, focusing on the high-growth body wash segment.

Over the past month, Colgate-Palmolive has risen by 17.6%, outperforming its sector’s by 11.5%. The company witnessed a pick-up in domestic demand in Q1. According to Prabha Narasimhan, the Managing Director & CEO, “We have seen continued demand pickup in rural markets outpacing growth in urban markets for the second quarter in a row”. The re-launch of the Colgate Strong Teeth toothpaste brand helped drive rural growth. Colgate has continued to add new products, increase investments in advertising, and expand its distribution network. During the quarter, ad spends rose 10% YoY.

The company’s peers like Hindustan Unilever, Dabur, and Emami reported a good first quarter and also highlighted signs of rural recovery. Dabur’s CEO said, “The timely arrival of monsoon coupled with a rural-centric Budget with a focus on rural infrastructure, agriculture, and employment is a key positive for the overall sector”.

Post Colgate’s earnings announcement, Axis Securities has a ‘Hold’ rating with a target price of Rs 3,050. But the brokerage believes the recent sharp rise in share price has capped its upside potential. It anticipates that increasing competitive intensity may further impact long-term growth prospects.

5. Kaynes Technology:

This electrical equipment manufacturer rose by 4.3% over the past week, following the release of its Q1FY25 results. The company’s net profit rose 106.6% to Rs 50.8 crore, surpassing Trendlyne’s Forecaster estimates by 14.7%. The company appears in a screener of stocks with growth in quarterly net profit with increasing profit margin YoY.

Revenue grew 74.3% to Rs 532.3 crore, beating Forecaster estimates by 4.6%. This was led by strong growth in the automotive (up 56% YoY) and industrial & EV (up 2.7x YoY) verticals. The industrial vertical's revenue contribution increased by 19 percentage points YoY, reaching 55% during the quarter.

Kaynes’ order book has grown to Rs 5,040 crore during the quarter, including major orders in aerospace, EV, and medical sectors. It has onboarded a leading medical equipment provider for exports to Europe and the US, anticipating significant revenue growth from this partnership.

The company plans to expand its business into the outsourced semiconductor assembly and test (OSAT) sector, focusing on modern chip packaging. This expansion is expected to boost exports, which currently makes up 15% of the order book. Commenting on this, Director and Chief Financial Officer Jairam Sampath said, “We anticipate exports to climb from 15% to about 20-25% by FY26, driven by chip packaging in the OSAT sector and expansion in aerospace and medical electronics segments.”

Motilal Oswal retains a “Buy” rating on the stock with a target price of Rs 5,000. The brokerage notes that the Telangana facility, starting by the end of August 2024, will boost the company’s EMS capabilities, especially in the smart meter sector. It remains positive on Kaynes’s strong order book growth, projecting a revenue CAGR of 62% and a PAT CAGR of 78% for FY25-26.

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

The Baseline

02 Aug 2024

Superstar investors on a selling spree as markets hit record highs | Screener: Promoters increase pledges in these stocks

By Tejas MD

You know the experience of watching someone blow air into a balloon? They puff and puff and sometimes they keep going even when the balloon looks about to pop. That's what investors have been feeling, with the Indian indices.

We've seen yet another all-time high for the Nifty 50 this week: the benchmark index has hit its all-time high for the eleventh week in a row. The bull run is now a full gallop, and the Nifty is within kissing distance of 25,000 as of this writing.

US markets on the other hand, have recently struggled as the tech-heavy Nasdaq 100 fell 3.6% on Friday, the most since 2022. Tesla and tech stocks took a beating as investors and analysts reconsidered the promise of AI. The S&P 500 and Dow Jones also fell on Friday, down 2.3% and 1.2%. Bloomberg called the sudden drop ‘scary and long overdue’ – the S&P 500 had been on a 17-month streak without a drop of 2%, unseen since 2007.

But Indian markets seem unbothered by US weakness, and managed to hit another all-time high on Monday. This long upward trend has investors biting their nails. This nervousness is also showing up in the portfolios of superstars. Investors like Kacholia and Singhania sold much more than they bought in Q1FY25.

Which sectors are superstar investors worried about? And which are the few stocks that they bought?

In this week’s Analyticks,

Watching the balloon: Superstar investors think twice before adding new companies to their portfolios
Screener: Promoters that increased pledged shares QoQ in Q1FY25

Let’s dive in.

Superstar investors go on a selling spree as markets hit all-time highs

Superstar investors have turned picky with their investments as the market heats up.

Many top superstar investors saw their portfolio net worth fall in Q2FY25 (till July 29) – the trend is visible in the new shareholding data for Q1FY25. This is not because of underperformance but because superstar investors have sold their holdings in many companies. The portfolio net worth of Ashish Kacholia, Sunil Singhania, and Vijay Kishanlal Kedia has fallen at least 7.5% in Q2FY25 till July 29, as they went into selloff mode.

Major superstar investors see net worth fall in Q2 after major sells

Dolly Khanna’s portfolio on the other hand, has risen the highest (9.6%) as this superstar investor increased her stake in many companies, and bought new stakes in five companies. Rakesh Jhunjhunwala’s portfolio, now managed by Rare Enterprises, has remained flat as the team did not make any big changes, but sold small stakes in seven companies.

Ashish Kacholia, who favors small-cap companies, sold his stake to below 1% in seven companies, and made only one new buy. Singhania and Kedia did not buy any new stocks in the past quarter, and each cut stakes to below 1% in two companies.

Singhania and Kedia did not add any new stock to their portfolios in Q1

In all, the superstars in focus bought new stakes in only ninecompanies (Khanna bought in five) and sold their stakes to below 1% in 21 companies.

Superstar investors are selling overvalued and loss-making companies

When it comes to sells, it’s a particular kind of stock that is being dropped: the stock is either in the PE sell zone (trading higher than their historical PEs) or is making losses.

Only two stocks in the sell list are exceptions here, being profitable and trading in the PE buy zone – Shankara Building Products and Route Mobile. Kacholia and Mukul Agarwal sold their stakes in Shankara Building Products to below 1%.

Most stocks sold by superstar investors trade in PE Sell Zone

Superstar investors sell industrials, metals stocks

General Industrials and Metals and Mining sectors dominate the sell list, followed by Consumer Durables and textiles. Interestingly, Goldman Sachs noted that American hedge funds are also selling off industrial stocks, amid concerns around GDP growth for the US and China.

General Industrials sector dominates the superstar sell list

The sells list also includes loss-making companies (negative net profit TTM) – Reliance Infra, Sterlite Technologies, Barbeque-Nation, and Dish TV India.

Expert investors are buying new stakes in financially strong, moderately valued and rising companies

Three themes come to light when looking at the buy list – strong financials, rising share prices and moderate value.

Barring Paytm and Super Sales India, all other companies’ Trendlyne Durability score is in the ‘Good’ category. A high Durability score indicates good and consistent financial performance: stable revenues, profits, cash flows and low debt.

Superstar investors are buying rising stocks with good financial health

Paytm is the only loss-making company that features in the list, bought by Akash Bhanshali. During the same quarter, Softbank, which had an initial investment in Paytm of around $1.55 billion, exited its position at a loss of 12%-14%.

Nile and Dilip Buildcon top the list with a durability score of 80 and 75. These two companies’ momentum and valuation scores are also in the good category, making them ‘Strong Performers’.

Investors look to ride the momentum on moderately valued stocks

Eight out of the nine companies bought recently have PE TTM lower than their sector PE.

In addition, the PEG ratio, which includes the net profit growth component into the PE ratio, is lower than one for all companies except Ujjivan. A PEG ratio of less than one can indicate undervaluation. Paytm (loss-making) and newly listed Awfis Space Solutions, are excluded in this analysis.

Most stocks bought by superstar investors are trading below their sector PE TTM

The final theme among the stocks in the buy list is Momentum - a critical factor in a bull market. All stocks except Ujjivan Small Finance Bank have risen in the past quarter.

Only Ujjivan Small Finance Bank underperforms Nifty 50 in the past quarter and year

Ashish Kacholia’s new bet Awfis Space Solutions, which was listed on May 30, is already up 81.6%. Top performers over the past year include Tinna Rubber, Emkay Global and Nile.

Rakesh Jhunjhunwala’s old bet Titan outshines in long term growth

When we look at long-term bets by these superstars, late Rakesh Jhunjhunwala’s Titan and Mukul Agarwal's Neuland Labs come out on top. Titan and Neuland Labs respectively contribute to 33.7% and 5.7% of their portfolios.

Best performing long-term holdings: Jhunjhunwala's Titan, Mukul Agarwal's Neuland Labs

Bhanshali’s Gujarat Fluorochemicals (27.3% of total holding value) and Kedia’s Atul Auto (24.7% of total holding value) on the other hand, have failed to beat the benchmark index in terms of share price performance since they bought these stocks. However, both these superstar investors’ net worth has almost doubled in the past year, due to high performance in their other holdings and fresh buys in new stocks.

India's superstar investors have become famous for their patience during the ups and downs of the market. The recent, increased selling in their portfolios could be an important signal. Warren Buffett once said, ‘Be fearful when others are greedy’. And right now, valuations of many stocks look greedy indeed.

Screener: Promoters increasing pledged shares QoQ in Q1FY25

Banking and construction stocks see a rise in promoter pledges in Q1FY25

As the latest shareholding data for companies came in, we took a look at stocks that saw a significant rise in promoter-pledged shares (which indicates higher loans taken out against stock). This screener identifies companies where pledged shares by promoters are greater than 20% and have increased QoQ in Q1FY25.

The screener has stocks from the banking, cement & construction and metals & mining sectors. Major stocks that appear in the screener are 360 One Wam, IRB Infrastructure Development, Max Financial Services, Kalpataru Projects, India Cements, Hindustan Zinc, and Lloyds Metals & Energy. Most of the stocks in the screener have seen their promoters also sell stakes over the past quarter.

360 One Wam stands out with the highest rise of 9.2 percentage points QoQ in promoter-pledged shares. This takes the promoter pledge to 40.5% of their total holding in Q1FY25. Yatin Shah holds a 3.7% stake in the company and has pledged 73.6% of his holding, while Kush Family Private Trust and Kyra Family Private Trust have a 1.5% stake each and have pledged 100% of their holding.

IRB Infrastructure Developers’ promoters increased their pledges by 6.4 percentage points in Q1FY25. This takes the company’s promoter pledge to 55.3% of their total holding in the company. IRB Holdings holds a 29.5% stake in the company and has pledged 56.9% of its total holding.

You can find some popular screeners here.

The Baseline

01 Aug 2024

Five stocks to buy from analysts this week - July 31 2024

By Ruchir Sankhla

1. Thyrocare Technologies:

ICICI Securities maintains a ‘Buy’ rating on this healthcare services company with a target price of Rs 825, indicating a potential upside of 6.3%. In Q1FY25 the company’s net profit rose 39.7% YoY to Rs 24.2 crore, beating Trendlyne’s Forecaster estimates by 11.4%. Its operating revenue grew 16.3% to Rs 156.9 crore, driven by the pathology business.

Analysts Abdulkader Puranwala and Nisha Shetty state, "Thyrocare’s management is diversifying its historically high-volume test-focused business model." They note the recent launch of bundled test packages like 'Jaanch,' which grew 25% year-over-year, and the acquisition of Polo Labs and Think Healthcare to expand Thyrocare’s test menu and service offerings.

Puranwala and Shetty expect Thyrocare to achieve a 33% earnings CAGR from FY25 to FY26, with an RoCE of approximately 22.3% by FY26. They project cumulative free cash flow generation of Rs 260 crore over the same period. While the stock has recently hit a fresh year high, it has underperformed the Sensex and Nifty over five years.

2. Jindal Steel & Power:

Motilal Oswal reiterates a ‘Buy’ rating on this iron and steel products company with a target price of Rs 1,200, indicating a potential upside of 22.9%. In Q1FY25 the company’s net profit fell 20.5% YoY to Rs 1,340.2 crore, but beat Trendlyne’s Forecaster estimates by 6.9%. Revenue grew 8% to Rs 13,652.3 crore, driven by healthy volumes.

Analysts Alok Deora and Sonu Upadhyay note that as of June 2024, the company has spent approximately Rs 17,500 crore of the Rs 31,000 crore allocated for its capital expenditure plan and aims to incur the remaining Rs 13,500 crore over the next three years. They also highlight that the management does not anticipate any cost increases due to the delay in the BOF-II plant expansion, which is expected to be completed by the second quarter of FY25.

Analysts say, “While first-quarter results were slightly below our estimate, the outlook remains bright.” They expect ongoing capital expenditures to lead to more value-added products, resulting in better profitability.

3. Pitti Engineering:

KRChoksey retains a ‘Buy’ rating on this electrical equipment manufacturer with a target price of Rs 1,379, indicating a potential upside of 15.1%. In FY24 the company reported a net profit rise of 53.3% to Rs 90.2 crore, beating Forecaster estimates by 21.5%. Operating revenue grew 9.2% to Rs 1,201.6 crore.

Analyst Unnati Jadhav notes that the company has agreed to acquire 100% of Dakshin Foundry’s equity for Rs 153.1 crore. Dakshin Foundry specializes in high-quality castings from materials like ductile iron, grey iron, low carbon steel and alloy steel. In March 2024, the company also acquired Bagadia Chaitra Industries (BCIPL) for Rs 124.9 crore. The analyst believes these acquisitions will boost production capacity and operational capabilities, supporting the company's inorganic growth strategy.

Jadhav expects a CAGR of 26.8% for revenue, 29.7% for EBITDA, and 42.9% for PAT over FY25-26 and anticipates FY26 EPS to be Rs 57.5 due to strong demand across various sectors, and increased capacity from recent acquisitions.

4. Coforge:

Axis Direct maintains a ‘Buy’ rating on this IT consulting and software company with a target price of Rs 6,895. This indicates an upside of 9.2%. In Q1FY25, the company‘s revenue grew 1.8% YoY to Rs 2,400.8 crore, but missed Trendlyne’s Forecaster estimates by 1.1%. Net profit fell by 19.4% YoY to Rs 133.2 crore due to higher operating expenses and acquisition-related costs. The company witnessed increased demand in North America, which contributes 50% of its revenue.

Analyst Omkar Tanksale highlights that the company’s growth is supported by a strong deal pipeline, with significant wins in the banking, financial services and insurance (BFSI) and travel sectors. He expects continued momentum from these deals and anticipates the revival of the BFSI sector, projecting double-digit growth in FY25.

Tanksale notes concerns about cross-currency headwinds affecting margins but remains positive about the company’s growth potential and strong deal pipeline in the long term perspective.He projects a revenue CAGR of 20.9% and an adjusted PAT CAGR of 29.7% over FY25-26.

5. Schaeffler India:

Sharekhan maintains a ‘Buy’ rating on this auto parts and equipment manufacturer with an upgraded target price of Rs 4,764. This indicates an upside of 13.3%. In Q2CY24, Schaeffler’s net profit grew 12.8% YoY to Rs 253 crore. Analysts attribute this growth to increased exports and expansion into new markets in Asia. The analysts state “The improvement in export performance can be attributed to the completion of de-stocking in the European market, and the rise of new markets in the Asia-Pacific region.”

Analysts highlight Schaeffler’s focus on high-value electric vehicle components, domestic demand, and export revenues. They expect continued momentum from its railways business and see potential growth in the non-bearings segment, driven by innovative solutions for hybrid power trains.The management remains positive about the company's order wins, backed by its technological expertise and cost-effective manufacturing.

The analysts project revenue and net profit CAGR of 16.8% and 19.5% respectively, over CY25-26, driven by Schaeffler’s strategic focus on localisation, expanding its product portfolio, and leveraging its brand equity in the aftermarket business.

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

(You can find all analyst picks here)

The Baseline

30 Jul 2024

Chart of the Week: IT, metals and transport stocks lead with aggressive capex growth estimates

By Satyam Kumar

Capital expenditure (capex) is a key number that investors watch. It tells them how forward-looking a company is, and how invested it is in its future. Such spending is essentially, a bet on upcoming growth.

Capex growth forecasts by analysts is thus a useful proxy for future bullishness, and helps justify current valuations. These forecasts tell us which companies are making the biggest bets on expansion and growth. Higher forecasts suggest good financial health, and also indicate the company's confidence and commitment to long-term growth.

In this edition of Chart of the Week, we look at a screener of stocks with high Forecaster capex growth estimates. The bubble chart circles represent the size of capex growth estimates. We also look at the individual sectors poised for high capex growth in the coming year and identify the biggest contributors.

Better-than-expected Q1 results and capex plans for FY25 suggest a turnaround in Software & Services

Happiest Minds and Zensar Tech have the highest capex growth estimates in the software and services sector for FY25

Five of the 25 stocks in our chart belong to the software & services sector. This expansion in the IT sector comes after around two years of slowing growth and disappointing numbers. IT firms reported better-than-expected results in Q1FY25 because of the rise in the number of deal wins. This came after major central banks have already cut or hinted at a probable rate cut i.e. lower borrowing rates starting this year, as inflation comes down in major global economies.

Happiest Minds Technologies leads with an estimated capex growth of 2,751.9% for FY25, the highest forecast among the Nifty500 stocks. The estimated capex for FY25 is Rs 294 crore compared to Rs 10.3 crore in FY24. This aligns with the aspirations of the company’s Chairman, Ashok Soota, who says that FY25 will be their best year in terms of revenue growth since the IPO.

In Q1FY25, the company acquired PureSoftware and Macmillan Learning and added 1,250 employees. These acquisitions strengthen its presence in key verticals like BFSI, Healthcare, and Education. The company also looks forward to ramp-up orders from the Generative AI segment. It expects to achieve $1 billion in revenue by 2031, driven by organic growth initiatives, strategic acquisitions, and new technology capabilities in Gen AI and bioinformatics.

Zensar Technologies follows with a capex growth estimate of 863%, while Mphasis and Birlasoft are expected to incur capex growth of 406% and 250%, respectively. Another software & services firm, Just Dial started this year on a positive note, with net profit growth of 69.3% YoY to Rs 141 crore in Q1FY25. Trendlyne’s Forecaster expects Just Dial to have an estimated capex of Rs 51 crore in FY25, signifying growth of 273% on a YoY basis.

Metals & mining sector companies plan to fulfill capex with internal accruals

Maharashtra Seamless has the highest planned capex growth estimates in the mining sector for FY25

In the metals and mining sector, Maharashtra Seamless stands out with the highest capex growth estimate of 1,395% for FY25. The company had taken debt for a Telangana plant and rig acquisition, but prepaid it in full in October ‘22 and June ‘23 respectively through internal accruals. For FY25-26, the company plans to spend over Rs 800 crore from their cash in hand and internal accruals.

Another major player, Jindal Stainless, is expected to grow its capex by 252% in FY25. The company has announced a total expansion capex of around Rs 5,400 crore. They are also partnering with a Singapore entity to set up a 1.2 million tons per annum stainless steel weld shop in Indonesia, where JSL will hold a 49% stake with an outlay of around Rs 700 crore.

Close behind are Lloyds Metals & Energy and Welspun Corp., with capex growth estimates of 245% and 222%, respectively, in FY25. Lloyds Metals has announced plans to remain debt-free even though the company intends to execute a capex of Rs 33,000 crore. The company has delivered a 55%+ return on employed capital in the past two years.

Transportation sector companies are spending heavily to keep up with India’s growth in the coming years

Three transportation sector firms have high planned capex growth for FY25

Forecaster estimates that InterGlobe Aviation (Indigo) will incur a capex of around Rs 15,000 crore, signifying a growth of 1,253% YoY. CEO Pieter Elbers aims to double Indigo’s fleet size by 2030 from around 350 aircraft at present to 600 aircraft. The company plans to add 10 new destinations and approximately 6,000 employees in FY25. It also aims to add one new aircraft per week to expand its domestic and international operations. For this, Indigo placed an order for 500 aircraft with Airbus in June ‘23, setting a new record for the largest aircraft order in the history of commercial aviation.

Another transportation company, JSW Infrastructure, is expected to incur capex growth of 642% in FY25. The company has planned a capex of Rs 2,500 crore in FY25 to expand its cargo handling capacity. Joint MD and CEO, Arun Maheshwari, said, “By 2027, the company anticipates a 50% increase in capacity to 258 million tonnes with an investment of Rs 14,000 crore.” He also highlighted that the company will fund these expansion plans and new projects with internal accruals, leveraging a strong balance sheet with low debt.

Solar EPC firms to gain from India’s plan to lower carbon footprint by 2030

Solar engineering, procurement and construction (EPC) firm Sterling and Wilson Renewable Energy plans to capitalise on India’s target of 500 GW of non-fossil-based energy, aiming to reduce the carbon footprint by 45% by 2030. Reduced solar prices and overcapacity in the Chinese market have also worked in favour of EPC players in building their captive solar power plants. Forecaster expects Sterling and Wilson’s capex to surge by 1,469% in FY25.

Similarly, battery manufacturer Amara Raja Energy & Mobility is expected to incur capex growth of 284% in FY25. Meanwhile, Forecaster estimates Patanjali Foods and Eris Lifesciences to incur 10x capex costs compared to last year to fund their growth ambitions.

It is evident that companies have become more cautious about debt-driven spending after enduring a prolonged high-interest rate environment. In the past year, many companies have significantly ramped up their debt repayments to reduce their finance costs. Now, they are taking a more conservative approach and are looking to fund their growth aspirations with the cash they have on hand

The Baseline

26 Jul 2024

Five Interesting Stocks Today - July 26, 2024

1. Titan Company:

This jewellery company jumped 6.5% on Budget day, following Finance Minister Nirmala Sitharaman's proposal to lower customs duty on precious metals like gold, silver, and platinum. She proposed cutting the customs duty on gold and silver to 6% from 15%, and reducing the customs duty on platinum to 6.4% from 15.4%.

Analysts expect the recent drop in gold prices to spark demand for gold jewellery in the coming quarter, boosted by the upcoming wedding season. Jewellers have reported a rise in daily demand, with some experiencing a surge of up to 20% since the duty reduction. Titan’s jewellery segment has already seen double-digit growth in the number of buyers in FY24. On a consolidated basis, the company reported revenue growth of 26.3% YoY to Rs 51,617 crore in FY24, with net profit of Rs 3,496 crore, up 7.6% YoY.

In the Q1FY25 business update, the company said that standalone sales grew 9% on a YoY basis. Its jewellery segment, which contributes over 85% to the total revenue, added 34 stores during the quarter, taking the total count to 699. The watches and wearables segment outperformed other segments in terms of sales growth, with a 15% rise on a YoY basis.

Ajoy Chawla, CEO of the jewellery division at Titan, said, “Q1 is likely to be a little bit more stressed because of the absence of wedding dates and the elections, and the elevated gold prices during April to June period”. However, he expects the second half of the year to be much better compared to the first half.

Motilal Oswal maintains a ‘Buy’ rating on Titan given its growth outlook driven by new store additions, attractive designs, and market share gains. With a target price of Rs 4,100, Titan has a potential upside of 17.3%.

2. United Spirits:

This breweries & distilleries company has risen 8.9% in the past week, reaching an all-time high of Rs 1,450 on Thursday. The surge came after the Andhra Pradesh government announced it would resume buying liquor from top brands, boosting shares of major alcohol companies.

In Q1FY25, United Spirits' profit rose 1.7% YoY to Rs 485 crore, while its revenue increased by 7.6% YoY to Rs 6,273 crore, driven by strong performance in the beverage alcohol segment. EBITDA margin grew by 174 bps YoY to 19.5%. The company appears in a screener of stocks outperforming their respective industry over the past year.

During the quarter, the company saw strong consumer demand for its premium offerings, including the successful launch of McDowell's X-series, which are new beverages targeted at mid-to-upper consumer segments. The firm also acquired stakes in specialty beverage firms like V9 Beverages and Indie Brews, expanding into zero alcohol and premium craft segments.

United Spirits projects a volume growth of 4-5% and aims for a price mix improvement in the premium and above segments. The company’s CFO and Executive Director, Pradeep Jain said, “We project volume growth in the range of 4-5% and a price mix improvement of 6-8% on a full-year basis.” He also highlighted that the company aims to maintain its 'Prestige and Above’ (P&A) segment revenue growth rate in double digits.

Post Q1FY25 results, Edelweiss has upgraded the stock to ‘Buy’, with a higher target price of Rs 1,630. The brokerage remains positive on the company's expansion into new premium categories like tequila and craft spirits. However, the firm is in the PE Sell Zone, currently trading above its historical PE.

3. Newgen Software Technologies:

This IT consulting & software company fell 2.2% on July 18 as its net profit plunged 54.8% QoQ to Rs 47.6 crore in Q1FY25 due to higher employee benefits and other expenses. Revenue declined by 16.1% QoQ to Rs 314.7 crore, caused by weakness in key geographies. The company’s revenue missed Trendlyne’s Forecaster estimates by 1.3%. EBITDA margins contracted 17.6 percentage points to 15.1% in the same period.

During the quarter, the company’s India and e EMEA (Europe, Middle East and Africa) markets, both of which separately contribute around one-third of the revenue pie saw revenues fall by 23% and 32% QoQ respectively. In contrast, the APAC (Asia Pacific excluding India) and USA markets grew by 23.5% QoQ and 10.5% QoQ, respectively.

Q1 is typically a weak quarter for IT companies. But this year the bigwigs in the industry reported a decent first quarter, and highlighted green shoots in the banking, financial services, and insurance (BFSI) space. However, for Newgen, the banking segment saw a decline of 17.3% QoQ. The products and platforms business also declined 41.3% QoQ, resulting in weak quarterly performance.

Meanwhile, Newgen continued to seetraction from its existing and new clients in Q1 and added 13 new clients during the quarter. It secured significant orders from banks in Indonesia, Malaysia, and Qatar. In Q1, Newgen also launched a new product, Newgen LumYn, a Gen AI-powered platform designed for the banking sector.

During FY24, revenue was up 27.7% YoY to Rs 1,243.8 crore, while net profit grew by 42.7% YoY. Speaking on the outlook, Virender Jeet, the CEO said, “We would like to keep the historical momentum of over 25% annual topline growth going forward, led by deal wins. We expect around 20% PAT growth and 23-24% EBITDA margins in FY25.”

Over the past week, Newgen Software rose by 5%, outperforming its industry by 3%. However, it has surged by 158.6% in the past year. The company is in the PE Strong Sell Zone, and is currently trading above its historical PE.

Post Newgen’s results, ICICI Securities maintains its ‘Hold’ rating with a target price of Rs 1,010. The brokerage notes the strong traction in lending, trade finance, and supply chain financing solutions. It believes 25% plus growth could sustain in the near term.

4. Gravita India:

This lead & aluminium metals company rose by 21.7% over the past week and announced its results on Monday. For Q1FY25, the company’s net profit increased by 29.3% YoY to Rs 67.3 crore, while its revenue rose by 25.9% YoY due to a rise of 42.6% YoY in lead segment revenue. The firm beat Trendlyne’s Forecaster estimates for revenue by 7.5% and for net profit by 11.3%. The stock shows up in a screener for stocks with strong momentum.

The company’s lead and plastics segment were the revenue drivers in Q1FY25. Lead volumes rose by 43% YoY to 41.9kt, while plastics volumes rose by 18% YoY to 3.2kt. EBITDA per tonne for lead stood at Rs 19,321 and for aluminum it stood at Rs 19,414. The management has upped its lead EBITDA/kg guidance, from Rs 17-18/kg to Rs 18-19/kg for FY25.

Yogesh Malhotra, CEO of the firm, said that the company is expecting the launch of the aluminum alloy commodity derivative on MCX shortly. He notes that this development would play a crucial role in managing price volatility risks. He added, “We are setting up a pilot project for lithium-ion recycling and our first Indian tire recycling plant at Mundra, both of which are expected to be operational in H1FY26. The paper recycling plant and steel recycling plants are anticipated to be operational by FY27.” On MCX, aluminum prices are seeing a decline amid concerns over China’s lack of new stimulus. Lead prices have also remained flat. However, analysts predict that global lead production is expected to grow by 4.3% to more than 4.7 million tonnes in 2024. The increase will mainly be fuelled by rising output from key producers such as Australia, the US, and Russia.

The company under its “Vision 2028” has placed targets of revenue CAGR of >25% and PAT CAGR of >35%, and aims to increase the proportion of value added products (VAP) to 50% by entering new verticals. Gravita expects earnings to reach Rs 750-800 crore by 2028.

According to a report by Avendus Capital, the domestic battery recycling market is expected to grow to Rs 8,371.8 crore by FY30. The company has plans to invest Rs 70-100 crore in the Li-ion vertical, over the next 3 years to grab the opportunity.

Emkay has given a “Buy” rating on Gravita India, with a target price of Rs 1,650. The brokerage has raised its target multiple to 25x, from 23x earlier, thanks to implementation of regulatory norms and a strong outlook from diversification into new verticals.

5. Indian Hotels Company:

This hotels company rose by 11.1% in the past week after announcing positive Q1FY25 results on Friday. The company reported net profit growth of 11.7% YoY to Rs 248.4 crore, while its revenue improved by 5.3% YoY to Rs 1,596.3 crore. However, it missed Trendlyne Forecaster’s net profit estimate by 4.4%. The company also appears in the screener for stocks outperforming their respective industry over the past quarter.

Revenue growth was slower compared to growth in Q4FY24 (18% YoY) as extreme heat waves and elections impacted occupancy. However, its EBITDA margin expanded by 103 bps YoY to 29% due to better operating efficiencies. The firm’s revenue per available room for Q1FY25 stood at Rs 6,900, outperforming its industry and competition with a premium of 60%.

Indian Hotels has opened six hotels in Q1FY25 and one new hotel in July 2024, and it has guided to open 25 new hotels in FY25. At present, the company's portfolio of hotels stands at 224 operational hotels with 102 new hotels in the pipeline. Speaking about growth, Managing Director Puneet Chhatwal said, “We expect a 20% plus revenue growth with sustained margins in FY25. We remain confident that we will deliver on our guidance, backed by diversified revenue growth and tailwinds for the industry.” The management expects the new businesses (Ginger, Qmin, amã Stays & Trails) to accelerate growth to 30%, and a focus on asset management should drive profitability.

Axis Securities maintains a ‘Buy’ call on Indian Hotels Company as it expects the hospitality industry upcycle to be long and sustained. Additionally, it believes upcoming events such as the Women's World Cup hockey and kabaddi championships could improve occupancies.

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

The Baseline

24 Jul 2024

Chart of the Week: Capital goods, consumer services and telecom see highest inflows from FPIs

By Satyam Kumar

The FY25 Budget marked a volatile day for Indian equity markets. All major indices nosedived after Finance Minister Nirmala Sitharaman, in her Budget speech, proposed increasing taxes on stock market gains. Long-term capital gains will now attract a tax of 12.5% compared to 10% earlier, while short-term capital gains tax was raised from 15% to 20%. Taxes were also hiked on F&O transactions.

Meanwhile, Sitharaman proposed reducing the corporate tax rate on foreign companies from 40% to 35% to become the top alternative in the “China plus one” strategy, and attract foreign capital.

Post-elections, the Indian equity markets in June and the first fortnight of July witnessed a total inflow of Rs 47,284 crore in equities. Before that, Foreign Portfolio Investors (FPIs) had withdrawn Rs 34,286 crore in April and May due to poll jitters and concerns over sticky inflation. Since then, a better-than-expected earnings season has helped build investor confidence and attract FPIs back to Indian equity markets.

In this week’s Chart of the Week, we take a look at sectors with the highest FPI activity over the past year. FPIs consistently poured money into capital goods companies, with a total inflow of Rs 47,422 crore. The consumer services sector was the second favourite among FPIs, attracting a net investment of Rs 36,570 crore.

The financial services sector, on the other hand, witnessed the highest FPI outflow of Rs 35,066 crore in the past year. The sector has recently underperformed due to high borrowing rates, resulting in lower net interest margins as advance growth outpaced deposit growth over the past year.

Capital goods, consumer services and telecom emerge as FPI favourites

More than half of the total investment of around Rs 2 lakh crore by FPIs went into capital goods, consumer services and telecom sectors. Capital goods companies have benefited from a robust order backlog and a steady inflow of fresh orders. This growth was supported by stable commodity prices and increased government infrastructure spending, as well as production-linked incentive (PLI) schemes. The “China plus one” strategy has also helped the order surge.

The consumer services sector ranked second in FPI interest, with net positive inflows even during highly volatile months leading up to the election. Higher discretionary spending over the past year has boosted investor confidence in the sector. The telecom sector caught the attention of FPIs, attracting investments worth Rs 28,461 crore, with over 90% of the total investment coming in the last five months. The recent tariff hike by telecom companies is expected to drive growth in average revenue per user and expand their net profit margins in the coming quarters.

IT sector is gaining traction post surprise outperformance in Q1 results

The information technology sector also saw a notable shift, with FPIs turning net buyers and investing Rs 2,765 crore from July 1 to 15. This was a reversal from the net selling of Rs 981 crore observed in June. The IT sector showed early signs of recovery in their Q1FY25 results, driven by opportunities in the GenAI segment and potential rate cuts in the US in September. This recovery could boost orders from the BFSI segment, which constitutes around 50% of revenue for IT companies.

Similarly, the auto sector has also seen net FPI inflows post-elections. With expectations of a good monsoon this year, analysts are predicting a volume uptick in the sales of two-wheelers and three-wheelers. The EV sector, however, received no direct subsidies or announcements in the Union Budget for FY25.

Healthcare and FMCG sectors witness turnaround post elections

The healthcare sector, comprising the pharma and hospital industries, witnessed an inflow of Rs 14,822 crore over the past year. Analysts expect the pharma industry to deliver earnings growth driven by better product mix, and improved margins. Over the past year, hospitals saw growth in average revenue per occupied bed, alongside steady capacity additions, leading to higher net income and revenue visibility.

The FMCG sector, on the other hand, has seen net outflows of over Rs 20,000 crore in the past year. However, during the first July fortnight (i.e. first half of the month), the sector saw a net inflow of Rs 1,809 crore. This turnaround for FMCG came as reports surfaced of a recovery in rural demand in recent months. Tobacco company ITC rallied after the government, in the 2024 Budget, decided to maintain the current tax rates on cigarette and tobacco products, which contributed around 75% to its profit before taxes as of Q4FY24.

Stocks that have seen the highest increase in FII holdings in the past quarter

Banks & telecom sector stocks witness a sharp rise in FII holdings

The above chart represents the top eight Nifty500 stocks that saw the highest jump in FII holdings in terms of percentage points on a QoQ basis. You can take a look at all the stocks where FIIs have increased their shareholding in the past quarter in the “FII/FPI increasing their shareholding” screener.

Telecom company Vodafone Idea (VI) has seen its share price surge from Rs 13 at the time of FPO to Rs 19 in the past month, following a fundraise of Rs 18,000 crore through the FPO. The company plans to use the proceeds for 5G expansion and to clear dues of around Rs 10,000 crore to the tower company Indus Towers. FPIs have significantly increased their shareholding in both companies in the past quarter.

Meanwhile, FPIs have also increased their stake in Ujjivan Small Finance Bank and CSB Bank by 21.2 and 7.4 percentage points respectively. Both banks are currently trading at fair valuations as they have a Trendlyne valuation score of around 70.

These FPI trends in different sectors reflect both global economic trends, changing investor preferences and sector-specific challenges/policies in India. Right now, the overall sentiment surrounding India is increasingly positive, and this has shown up in the return of foreign funds in recent months.