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    The Baseline

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    The Baseline
    22 Dec 2022
    Portfolio X-Ray: Ashish Kacholia has an eye for smallcap and midcap winners

    Portfolio X-Ray: Ashish Kacholia has an eye for smallcap and midcap winners

    By Abhiraj Panchal

    Ashish Kacholia is known in the industry for his skill in picking small and midcap winners. He started his career in Prime Securities, and later moved to Edelweiss. He co-founded Hungama Digital with Rakesh Jhunjhunwala and now serves as a board member. He started his own company Lucky Securities in 2003. Kacholia holds a Bachelor's degree in Production Engineering and a Master's in Management Studies. 

    Kacholia primarily invests in small-cap and a few mid-cap companies, and has an uncanny eye for finding potential multibagger stocks.  His net worth in Q2FY23 was Rs 1,772 crore, and he publicly holds stakes in 40 stocks, of which 37 are small-cap companies.

    Best-performing companies in Kacholia’s portfolio are Beta Drugs, Safari Industries (India) and Carysil. The price of Beta Drugs has increased 573.4% since he added it to his portfolio in Q4FY19. He currently owns a 5.7% stake in the pharma company. 

    Kacholia bought stakes in  Safari Industries (India) and Carysil in Q4FY20 and Q3FY16 respectively. Their stock prices have also risen by 328.4% and 276.3%respectively since the purchase. The investor booked profits on Mastek (bought in Q2FY19), Vishnu Chemicals (bought in Q3FY16) and Mold-Tek Packaging (bought in Q1FY18) before cutting his stake to below 1% in Q2FY23, as they started to hurt the portfolio holding value. The prices of these companies rose by 271.6%, 353.4% and 191.9% respectively till Q2FY23, since the time of purchase.

    The worst-performing stocks in Kacholia’s portfolio are IOL Chemicals and Pharmaceuticals and  United Drilling Tools. Their prices have fallen by 52.7% and 41.5%respectively since added to the portfolio in Q3FY21 and Q3FY22. He also cut his stake in Kwality Pharmaceuticals to below 1% in Q2FY23 as its price fell 50.8% by the end of the quarter of purchase. 

    Chemicals, consumer durables, textiles among Kacholia’s favourite sectors

    Kacholia’s diversified portfolio has 16.4% investment in the chemicals and petrochemicals sector, aggregating to Rs 300.7 crore. He has invested 14.9% of his portfolio in consumer durables, 13.9% in textiles, apparel and accessories, and 9.4% in general industrials. While commercial services and supplies and pharmaceuticals and biotechnology amounts to 8.3% each, software and services has 7.8%, and diversified consumer services 5% of his portfolio. The least invested sectors are food, beverages and tobacco, banking and finance, FMCG, realty, and hardware technology and equipment with less than 2% each.

    The marquee investor went on a buying spree and added nine new stocks to his portfolio in Q2FY23. He also increased his holdings in 12 companies during the same period. He reduced his holdings in ten companies, of which five were cut to below 1%. In new additions, he bought 5% of Dudigital Global, 3.3% of D-Link (India) and 2.6% of Agarwal Industrial Corp. He also increased his stakes in Hindware Home Innovation and Ador Welding by 1.3% and 1% respectively. Kacholia cut a 0.3% stake in Genesys International Corp and 0.2% in Safari Industries (India) and reduced holdings in Mastek, Mold-Tek Packaging, Vishnu Chemicals, VRL Logistics and Kwality Pharmaceuticals to below 1%. 

    During the recent quarter, Kacholia bought a 2.1% stake in Raghav Productivity Enhancers on November 4, a 1% stake in Likhitha Infrastructure on November 30 and a 0.8% stake in Aditya Vision on December 9. On December 21, he sold a 0.6% stake in D-Link (India) in a bulk deal.

    Kacholia prefers companies with good fundamentals

    Of the 40 companies that Kacholia holds, only one reported a net loss in Q2FY23. Sastasundar Ventures reported a consolidated net loss of Rs 4.9 crore despite a 60.3% rise in consolidated revenue, while the rest had net profit. 

    During Q2FY23, Best Agrolife reported a net profit of Rs 129.8 crore, indicating an increase of 415.4% YoY, while its revenue rose by 115.9% YoY. Agarwal Industrial Corp, Safari Industries (India) and Barbeque-Nation Hospitality reported a YoY rise in net profit by 257.1%, 144.2% and 142.6% respectively, while their revenue increased by 40.4%, 67% and 40.6%. Kacholia cut his stake in Vishnu Chemicals to below 1%, while its profit grew by 111.2% in Q2FY23. Eleven companies in the portfolio reported a YoY fall in net profit, while three reported a YoY fall in revenue. United Drilling Tools, IOL Chemicals and Pharmaceuticals, Carysil and Vaibhav Global are among the companies that reported a fall in net profit.

    From the portfolio, 22 companies outperformed their respective industries over a year and quarter, and 17 companies outperformed over a month. PCBL, Arvind Fashions and La Opala RG are among the companies that outperformed their industries.  

    Sastasundar Ventures announced the highest basic annual EPS of Rs 222.7, followed by Bharat Bijlee (Rs 98.3), Garware Hi-Tech Films (Rs 72), Agarwal Industrial Corp (Rs 51.1) and Best Agrolife (Rs 46).

    While 21% of the stocks in Kacholia’s holdings, like Barbeque-Nation Hospitality, Best Agrolife, Shaily Engineering Plastics and Safari Industries (India) are currently trading in the PE Buy Zone, 27% are trading in the PE Sell Zone. Companies in the Sell Zone include HLE Glasscoat, Vaibhav Global and Fineotex Chemical. Meanwhile, the PE of seven stocks is above their respective sectors, like HLE Glasscoat, Arvind Fashions, Genesys International Corp, Megastar Foods and Shankara Building Products.

    How volatile is Kacholia’s portfolio?

    Over a year, the beta for 20 stocks in Kacholia’s portfolio is below 1 and 16 are greater than 1. However, 29 stocks have a beta lesser than 1 for a quarter. The average beta of the portfolio for a year is 0.94, whereas it is 0.8 for a quarter. 

    The Beta of Ashish Kacholia’s portfolio is lesser than that of the Nifty 50. Even though the volatility is marginally in line with the benchmark index for a year, it is lower over the quarter. We can conclude that Kacholia, despite his preference for smaller companies, may make safer bets while buying stocks. On the valuation side, he currently holds stocks in both the PE Buy and Sell Zones.  

    Overall, the marquee investor looks for companies with strong fundamentals and have the potential to turn into multibagger stocks. He then tends to hold them for a longer period to book higher profits, and rarely panics during downturns.

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    The Baseline
    22 Dec 2022
    Screener of the week: FII favourites among high scoring DVM stocks

    Screener of the week: FII favourites among high scoring DVM stocks

    By Abdullah Shah

    As 2022 comes to a close, we take a look at high scoring DVM stocks that have seen more than a 0.5% rise in their FII holdings in Q2FY23. This screener lists stocks that FIIs bought in significant numbers, which have high durability and momentum scores along with a decent valuation score. 

    It features 24 stocks from Nifty 500 and two stocks from the Nifty 50 index. Industries like banks, construction & engineering, paper & paper products, utilities: non-electrical and defence dominate the screener. Major stocks featured in the screener are Hindustan Aeronautics, City Union Bank, IIFL Finance, JK Paper and Great Eastern Shipping. 

    City Union Bank saw the highest rise of 3.2% QoQ in its FII holdings. Major contributors to this rise were Kotak Funds India Mid Cap Fund and Bank Muscat India Fund. The largest foreign investor of the company is Smallcap World Fund as it holds 4.9% stake. The stock has a high Trendlyne durability score of 65.

    Great Eastern Shipping’s foreign investor holding increased by 1.9% over the past quarter. City of New York Group Trust bought 1.2% stake in the company. Other major foreign institutional investors of the company are Nalanda India Fund and Abu Dhabi Investment Authority with 7.4% and 2.2% stakes respectively. The stock also has a high Trendlyne durability score of 65.

    You can find some popular screeners here.

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    The Baseline
    20 Dec 2022
    Five analyst picks this week

    Five analyst picks this week

    By Abhiraj Panchal
    1. Rites: Axis Direct maintains its ‘Buy’ rating on this construction & engineering company with a target price of Rs 405. This implies an upside of 21.9%. The analysts at the brokerage remain positive about the company due to its strong order book, execution capability, clean balance sheet and attractive valuations. 

    The analysts also expect the firm to be a key beneficiary of the Centre’s push towards increasing infrastructure spending. “Being a leading player in the transport consultancy, Rites is expected to be a significant beneficiary of the Indian Railways’ infrastructure push,” they added. Given the higher capex for railways, the company is aggressively trying to bag new consultancy tenders from the metro and high-speed rail projects. 

    The analysts believe the company’s well-diversified order book of Rs 5,950 crore gives revenue visibility for the next two years. They expect Rites’ net profit to grow at a CAGR of 11.7% over FY22-24.  

    1. Bharat Forge: Prabhudas Lilladher maintains its ‘Buy’ rating on this manufacturer of industrial products with a target price of Rs 1,005. This indicates an upside of 14.2%. Analyst Mansi Lall remains optimistic about the firm’s prospects given its diversification into multiple segments such as defence, aerospace, e-mobility and other industrial verticals. 

    She expects the automotive segment in particular to drive growth as there are “multiple growth levers in the domestic & export automotive segment with the cyclical turnaround in the commercial vehicle industry”. Chip shortages are also expected to ease. 

    Lall sees double-digit growth in high-margin non-auto segments such as aerospace and defence. The company has already bagged export orders for its artillery systems and is expected to win huge orders from the Indian Armed Forces, she added. The analyst sees the firm’s defence revenue rising to Rs 1,000 crore in a few years from the current Rs 300-500 crore. She anticipates Bharat Forge’s net profit to grow at a CAGR of 18.7% over FY22-25. 

    1. SBI Cards and Payment Services: Motilal Oswal reiterates its ‘Buy’ call on this credit card and payment solutions provider with a target price of Rs 1,000. This indicates an upside of 26.4%. Analysts Nitin Aggarwal and Yash Agarwal arranged an interactive session with Rama Mohan Rao Amara, Managing Director and Chief Executive Officer of SBI Cards. From this discussion, the analysts understood that the mix of EMI loans has increased and the revolver mix has moderated, while it has been increasing on an absolute basis.

    The analysts said, “SBI Cards has been reporting a modest performance with healthy spends momentum, while higher credit cost and lower margins are dragging earnings.” They expect the revolver mix to increase gradually as spends mature, while near-term margins may continue to remain under pressure as borrowing cost increases further. Aggarwal and Agarwal believe that growth in spends is likely to stay healthy, aiding overall loan growth. They expect a profit CAGR of 41% for FY22-24.

    1. Dalmia Bharat: ICICI Securities maintains its ‘Buy’ call on this cement manufacturer with a target price of Rs 1,906, indicating an upside of 19.7%. Dalmia Bharat’s arm, Dalmia Cement (Bharat), recently acquired clinker, cement and power plants from Jaiprakash Associates at a capital cost of $73 per tonne (replacement cost of the cement asset is currently at $115-120 per tonne). Analyst Harsh Mittal remains optimistic about the company due to the asset acquisition at a competitive price. 

    Mittal believes that this acquisition will help the cement manufacturer strengthen its presence in Central India. He adds that Dalmia Bharat aims to be a pan-India cement company with a capacity of 75 metric tonnes per annum by FY27 and 110?130 metric tonnes per annum by FY31. The analyst said, “We await the completion of the deal before factoring in the acquired capacity. However, we increase our realisation growth assumption for FY23/FY24, given the healthy price hikes in East and South India during Q3FY23.” 

    1. Carysil: Edelweiss initiates coverage on this small-cap sink and kitchen appliances manufacturer and gives it a ‘Buy’ call with a target price of Rs 784. This indicates an upside of 56.8%. According to the analysts at Edelweiss, Carysil doubled its quartz and steel sink capacity to meet increasing demand. “We believe strategic partnerships with large-scale retailers would sustain the revenue growth momentum in exports,” they added.

    The analysts believe that strong industry tailwinds, high home-improvement spending and demand for aesthetically appealing products globally would continue to drive growth. They expect Carysil’s earnings per share to record a 20% CAGR over FY22-25, led by capacity addition, improved utilisation in quartz/steel sinks and increased penetration in domestic and international markets.  

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

    (You can find all analyst picks here)

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    The Baseline
    16 Dec 2022
    Five Interesting Stocks Today

    Five Interesting Stocks Today

    1. Siemens: This heavy electrical equipment stock is trading near its 52-week high after rising for four consecutive sessions since December 7. The uptick came after the company announced that it was the lowest bidder for the 9,000 HP (horsepower) Electric Locomotives project in Dahod, Gujarat. The bid was made for an Indian Railways project estimated at Rs 20,000 crore. Winning this project is expected to improve the company’s revenue. Trendlyne’s Forecaster estimates a 22.9% YoY increase in revenue for the company in FY23.

    Indian Railways expects the delivery of its first locomotive by the end of 2024. This will be  a decade-long project for Siemens, and the number of deliveries will increase in the coming years. With an increase in capex from the Centre in railways and infrastructure (upcoming ‘Vande Bharat’ trains, building data centres and e-charging stations, among others), Siemens stands to benefit the most, according to reports.

    This has especially enthused brokerages like Prabhudas Lilladher and ICICI Securities who have raised their target price for the stock by 10.9% and 5.7% respectively. Analysts expect that increased government spending in green infrastructure, automation and electrification space will also boost the company’s growth. According to Trendlyne’s Forecaster consensus recommendation, 12 analysts recommend a ‘Buy’ while 6 recommend a ‘Hold’ on the stock.

    In its analyst call on December 9, the management of Siemens talks about the growth in their order book in all segments including energy, infrastructure and mobility – which grew 136% YoY in FY22. Total order inflow rose 43% YoY. MD & CEO Sunil Mathur says that the infrastructure space is seeing a boom as global companies are setting up their data centres in India. Automotive, chemicals and even pharma businesses are expected to do well. However, semiconductor shortages, delay in deliveries, high inflation and increase in import costs could still be challenging.

    1. V-Guard Industries: This consumer durable stock rose over 6% in the past week and hit its 52-week high of Rs 273 on Thursday. V-Guard’s share price started to rise after the company announced the acquisition of Sun flame Enterprises Private (SEPL) for Rs 660 crore on December 9. With the recent rise in share price, the company features in a screener of stocks with prices above short, medium and long-term moving averages.

    With the acquisition of SEPL, V-Guard is on its way to becoming a significant player in the domestic kitchen appliances segment. SEPL offers a wide product portfolio, including cooktops, chimneys, pressure cookers, mixer grinders and small kitchen appliances, that cater to a wide consumer segment. In FY22, SEPL recorded a revenue of Rs 349.8 crore. V Ramachandran, COO of V-Guard, said, "SEPL acquisition offers multiple levers for unlocking significant synergies in areas like geography, product portfolio and channels.” The management said the acquisition is expected to close by mid-January 2023 and will be funded through a mix of internal accruals and debt.

    The acquisition comes at a time when the operating profit margin of V-guard has been on a downtrend since Q3FY21. Gross margin of the company fell 210 bps YoY to 28.6% in Q2FY23 despite a correction in commodity costs due to high cost-inventory. ICICI Securities believes the margins were affected mainly in the cables and wires segment. However, the company’s revenue has risen in the past seven quarters (YoY) and the SEPL acquisition is expected to aid revenue growth going forward.

    1. KEC International: This heavy electrical equipment company rose 10.4% over the past week due to its improving business outlook on the back of rising order intakes and the easing of inflationary pressures. The company’s year-to-date order intake grew 20% YoY to over Rs 13,000 crore. The management aims to increase the value of contracts won by 16.3% YoY to Rs 20,000 crore in FY23. Given the improvement in order intake, its order book, which used to be close to Rs 20,000 crore a year ago, has grown to nearly Rs 29,000 crore. The stock also received seven broker target price upgrades and one recommendation upgrade over the past three months.

    Amid this optimism, the company announced new order wins worth Rs 1,349 crore on Monday. These contracts include projects in India and international markets, ranging across various segments like transmission & distribution, infrastructure and cables. This uptrend in price also helped the company show up in a screener for stocks with strong momentum.

    In Q2FY23, the company’s net profit fell 31.2% YoY to Rs 55.2 crore despite its revenue rising 13.3% YoY. Its profit fell due to high input costs, logistics costs and subcontracting charges. However, the management expects its margins and profitability to improve due to falling commodity prices and growing order intake. It also plans to lower its interest charges by focusing on debt reduction. According to Nirmal Bang, the company’s margins will improve from Q3FY23 due to falling commodity prices and improving execution of projects. The management has guided a 20% YoY growth in revenue for FY23.

    1. Sapphire Foods India: This quick-service restaurant gained more than 5% in intraday trade on Thursday after it announced that its promoter groups and investors were planning to offload a part of their stakes. The offloading comes after the firm’s pre-IPO lock-in period expired on November 15, thus allowing 43.4% of the total shareholding to be sold. As of September, the promoter groups held a 51.3% stake in the company.

    The largest stakeholder, Sapphire Foods Mauritius sold a 6.14% stake (39 lakh shares) for Rs 525.5 crore. Private equity fund Wwd Ruby sold a 4.5% stake for Rs 385.1 crore, effectively paring its stake to 5.3% from 9.8%. Another promoter, Sagista Realty Advisors, which owns a 4.5% stake (28.6 lakh shares) plans to offload 1.5 lakh shares.

    In Q2FY23, the company was back in the black on a YoY basis after it posted a profit of Rs 26.9 crore. Its revenue also grew 35.9% YoY to Rs 562.8 crore, the highest-ever. The company shows up in a screener for stocks in the PE Buy zone with a good durability score and rising momentum. The stock also has a consensus recommendation of ‘Buy’, according to Trendlyne’s Forecaster.

    However, gross margins fell 310 bps YoY due to high inflation and lower price increases. Although its India business saw its EBITDA grow 40 bps YoY, its Sri Lankan business was adversely impacted by high inflation, which brought down the overall EBITDA margin by 50 bps YoY. Despite high input costs, the company has been focusing on expanding its network; it opened 42 new restaurants in India and Sri Lanka in Q2. The company aims to double its footprint in the next 3-4 years.

    1. Colgate-Palmolive: This personal products company held an investor meet on Tuesday, outlining its growth strategy. During the meet, the management highlighted the four pillars of its growth strategy: toothpaste volume growth, science-led premiumisation, category growth in toothbrushes and devices, and building personal care portfolio. But this did not excite investors as the company’s share price fell over 4% on Wednesday. As a result, it comes up in a screener that lists stocks with RSI indicating price weakness.

    The company’s focus areas in its premiumisation plan are powered toothbrushes and teeth whitening products. It plans to set up an exclusive professional eB2B platform for dentists and build a new segment dedicated to kids.

    Post this conference, brokerages have mixed views about the company. Foreign brokerage Citi maintains its ‘Sell’ rating on the stock with a target price of Rs 1,650. It believes that driving change in consumer habits will require sustained investments, and the results of the same would be likely delayed.

    Prabhudas Lilladher maintains its ‘Hold’ rating on the stock with a target price of Rs 1,639. The brokerage believes Colgate-Palmolive needs to be more aggressive in the personal care segment to boost growth.

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

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    The Baseline
    15 Dec 2022
    Screener of the Week: Rising durable stocks in the PE buy zone, with low volatility 

    Screener of the Week: Rising durable stocks in the PE buy zone, with low volatility 

    By Tejas MD

    This stock screener looks at PE Buy Zone stocks with high Trendlyne durability scores, which outperformed both the benchmark index and their industry in the past month.

    These stocks also have a beta lower than 1, meaning their stock prices are less volatile than the overall market. Beta is a measure of the volatility (or systematic risk) of a company compared to the market as a whole. It is important to note that this doesn't necessarily mean the company has fewer risks. It implies that its systematic market risk is lower compared to the benchmark index. It is possible for a firm to have low systematic risk but high firm-specific risks. 

    Just twenty five companies from the Nifty 500 made it to the list. Companies from the pharma and agrochemical industries are well represented. The top two companies that rose the highest, outperforming both the industry and the benchmark, were Bank of Maharashtra and  Sharda Cropchem.

    Bank of Maharashtra's share price rose over 50% in the past month. PSU banks have been in the news lately as the industry posted promising Q2FY23 results. Bank of Maharastra's revenue has been increasing for the past eight quarters. In addition, this PSU Bank's asset quality improving with rising net interest margins also excited investors.

    Sharda Cropchem rose over 25% in the past month on the back of good Q2FY23 results. However, the company still trades in the PE Buy Zone, which means that its TTM PE ratio is lower than its historical PE ratio. According to Trendlyne's DVM classification, the stock comes under "strong performer, under radar stocks". 

    You can find more screeners here.

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    The Baseline
    13 Dec 2022
    Five Analyst Picks with High Durability Scores

    Five Analyst Picks with High Durability Scores

    By Suhas Reddy

    This week we take a look at five analyst picks with high Trendlyne Durability scores. A high durability score (>60) indicates a company with strong financial health and management quality.

    1. Greenpanel Industries: BOB Capital maintains a ‘Buy’ call on this forest products manufacturer with a target price of Rs 595. This indicates an upside of 72%. Greenpanel Industries has a Trendlyne Durability score of 90. 

    After an interaction with Greenpanel’s CFO Venkatramani, analyst Ruchitaa Maheshwari said, “Greenpanel Industries has strong growth prospects due to its leadership position in India’s fast-growing, medium-density fibreboard (MDF) market, coupled with an improving balance sheet and return ratios.” The forest products manufacturer's management is optimistic about demand recovery in Q4 despite MDF and plywood businesses slowing down due to the festival season in Q3.

    The company has plans to incur capex to the tune of Rs 600 crore for new MDF brownfield capacity and add 400 dealers to the MDF business, as well as 40-50 dealers to plywood by the end of FY23. Maheshwari models revenue and profit CAGR of 13% and 15% over FY22-24, aided by better capacity utilisation at the MDF facility and EBITDA margins from operating leverage.

    1. Central Bank of India: LKP Securities recommends a ‘Buy’ on this bank with a target price of Rs 37, indicating an upside of 9%. The bank has a Trendlyne Durability score of 75. 

    Analyst Ajit Kumar Kabi is optimistic about the bank as it returned to profitability in FY22, after incurring losses in FY16. It also reported consistent growth in net profit over the past six quarters. He said the bank has been reporting stable credit growth with an improving cash deposit ratio, and its recovery is in line with the guidance. 

    On the back of the digital lending platform, Kabi expects the bank’s loan book to fatten cautiously. “We believe that the asset quality hurdles are behind it and the bank will witness gradual improvement in profitability,” he concluded.

    1. Solar Industries India: ICICI Securities upgrades its rating on this explosives manufacturer to ‘Buy’ from ‘Hold’ and raises its target price to Rs 4,760 from Rs 4,225. This indicates an upside of 16.3%. Solar Industries has a Trendlyne Durability score of 70.

    Analysts Amit Dixit, Mohit Lohia and Pritish Urumkar believe that the company is well-placed to capitalise on the expected ramp-up in orders from the defence sector. They are positive about the firm’s prospects, given its strong technological capabilities, growing order book and focus on the high-margin defence explosives segment. They added, “The company has sufficient capacity, expertise and land bank to increase revenue contribution from the high-margin defence business.”

    The analysts also expect Solar Industries’ export book to surge from its current level of Rs 300 crore in the coming years. This is due to its product expertise on missiles and rockets fitting well into the Centre’s push towards indigenisation and increasing defence exports. They expect the company’s net profit to grow at a CAGR of 47.2% over FY22-24.

    1. ICICI Bank: IDBI Capital maintains its ‘Buy’ rating on this large-cap bank with a target price of Rs 1,260. This indicates an upside of 35.4%. In Q2FY23, the company’s standalone net profit grew 37.1% YoY to Rs 7,557.8 crore and revenue rose 22.6% YoY. ICICI Bank has a Trendlyne Durability score of 65. 

    Analysts at IDBI Capital believe that the bank’s focus on improving digitalisation and technological capabilities will aid this leg of growth. It also aims to improve customer experience and simplify all processes from boarding to servicing through digitalisation. “The bank has created a position of Chief Data Officer for the same and increased its technology spend as a percentage of operating expenses to 9% (vs 6% in FY20). It expects the spend to remain at elevated levels in near future,” they added. The analysts expect the bank’s net profit to grow at a CAGR of 20.1% over FY22-25. 

    1. Motherson Sumi Wiring India: ICICI Direct maintains its ‘Buy’ rating on this auto parts & equipment manufacturer with a target price of Rs 75, indicating an upside of 25.9%. Motherson Sumi Wiring India has a Trendlyne Durability score of 60.

    Analysts Shashank Kanodia and Raghvendra Goyal believe that the company is “a good proxy to play upon the recovery in the domestic automobile space with a superlative return ratio profile (RoCE of 40-50%) and structural levers for long-term growth”. They expect the company to benefit in the long term on the back of increasing components per vehicle along with increasing electrification. 

    The analysts also pointed out that the company is committed to achieving an annual revenue of $36 billion by FY25 and intensifying expansion into non-auto-related segments. They expect the company’s net profit to grow at a CAGR of 25.9% over FY22-25. 

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

    (You can find all analyst picks here)

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    The Baseline
    09 Dec 2022, 06:22PM
    Five Interesting Stocks Today

    Five Interesting Stocks Today

    1. JK Lakshmi Cement: This cement stock touched an all-time high of Rs 860.4 on Thursday. Trendlyne’s Technicals suggest that the stock gained more than 19% over the past month and over 70% in three months. Its trajectory has been interesting given that it rose for five consecutive sessions from November 28, before breaking the streak on December 6 as markets fell. The gain is because of a sector report by ICICI Securities, which suggests that if cement companies take better price hikes in Q3FY23 and global crude oil falls or maintains at current levels (between $85-$90 per barrel), they will see a significant improvement in margins. 

    Fall in crude prices will definitely help JK Lakshmi Cement’s input prices go down. In Q2FY23, the company’s power and fuel costs rose by 49.9% YoY to Rs 418.85 crore, which caused a dent in net profit as it fell nearly 27% YoY. The management, in its earnings call, mentioned that their profits were affected by high global fuel prices. They tried to mitigate these problems by expanding volumes, improving product mix and increasing sales of their premium products. The company is currently working on increasing its capacity with its subsidiary, Udaipur Cement Works. The plant is expected to be ready by March 2024 and start contributing towards revenue growth in FY24. Axis Securities expects JK Lakshmi Cement to clock revenue CAGR of 16% over FY22-24E.

    Axis Securities expects Centre’s spending in the infrastructure space to boost demand for cement. The housing and infrastructure segment consumes nearly 80-90% of the total cement produced in the country and this bodes well for cement stocks. Trendlyne’s Forecaster estimates operating revenue to be 11% more than Rs 1,302.7 crore in Q2FY23. However, JK Lakshmi Cement missed its estimated target (Rs 1,347 crore) by 3.3% in Q2. Consensus recommendation suggests 15 analysts recommending a ‘Buy’ on the stock.

    1. Westlife Development: This quick-service restaurant company, which holds the master franchise for McDonald's in the western and southern parts of India, held ‘Strategy day’ on December 1. In reaction, its stock price rose in the subsequent three trading sessions, hitting its life-high on Tuesday. As a result, it features in a screener of companies with share prices above their short, medium and long-term moving averages. Post Westlife’s investor day, brokerages like Axis Direct and Edelweiss also remained positive about the company’s prospects as they both maintained ‘Buy’ ratings. 

    What excited investors could be the management’s ambitious target of a three-fold jump in sales, between Rs 4,000 crore and Rs 4,500 crore, in the next five years. Westlife Development plans to drive revenue growth on the back of network expansion, widening of product mix and an omnichannel approach. 

    QSR companies have been expanding rapidly post-Covid as they look to offset slowing sales growth by adding more stores. Despite strong Q2FY23 results, QSR companies' share prices fell as investors had expected higher growth. The only exception to this was Westlife, which rose after its results. In fact, it is the only QSR company that beat the Nifty 50 in the past quarter in terms of price change. 

    Going forward, the company’s management intends to focus on expansion in tier 2 cities. Akshay Jatia, Executive Director of Westlife Development, said, “Non-metro towns continue to post 1.6x growth vs metros on the pre-COVID base of Q2FY20.” 

    1. Dabur India: This FMCG company touched its 52-week high of Rs 610.8 on Wednesday after Morgan Stanely upgraded its rating on the stock to ‘Overweight’ and raised its target price to Rs 660 from the earlier Rs 578. The rally was also backed by the rise in the Nifty FMCG index in the past week. 

    Morgan Stanley expects Dabur’s top-line growth and margins to improve in H2FY23 and FY24 due to rural recovery and softening of inflation. It said 45% of the company’s revenue comes from the rural economy, and recovery of rural demand will be positive. It also expects strong growth in Dabur’s food and beverage portfolio, driven by rural opportunities for beverages, and its recent acquisition of Badshah in the spices category. ICICI Securities also expects an improvement in the volume growth of FMCG companies, backed by the recovery of rural demand and monsoons. As a result, Dabur features in a screener of companies where brokers upgraded recommendations or target prices in the past three months.

    Recently, Dabur announced its entry into the D2C space by launching its website, Dabur Shop. Dabur’s CEO Mohit Malhotra said this will become a one-stop shop for its entire product portfolio over time. The company also announced its foray into the women’s personal hygiene space on Wednesday, as part of its social initiative to support women’s health. This launch would strengthen Dabur’s presence in the personal products space.

    1. Macrotech Developers: This realty company rose nearly 3% in intraday trade after it announced the launch of its Qualified Institutions Placement (QIP) of equity shares on Wednesday. The promoters, with this QIP, intend to reduce their stake to 75% from 82.2% to achieve the minimum public shareholding of 25%, as stipulated by SEBI. According to reports, the management aims to raise around Rs 3,500 crore from the sale of its shares through the QIP route.

    Meanwhile, the Lodha Group company gained nearly 17% in the past month after announcing the launch of 16 new projects in H2FY23. The combined estimated sales potential of these projects stands at Rs 10,300 crore, with a total area of 7.3 million square feet. These new launches are a mix of fully owned and joint development projects. The management expects the demand for housing during the festive season to remain robust despite the rise in home loan interest rates. It believes that a long-term upcycle in housing has started in India. 

    The company’s collection rose 24% YoY in Q2FY23 but its revenue fell 16.9% YoY, posting a loss of Rs 933.1 crore. This was due to a one-off provision of Rs 1,177 crore made for a loan to its British arm, Lodha Developers UK. Excluding the provision, the firm’s net profit in Q2 grew 28% YoY to Rs 367 crore. The realty firm also shows up in a screener for companies with improving net cash flow over the past two years and the consensus recommendation for the stock is a ‘Buy’ rating.

    1. JSW Steel & Power: This iron & steel company has been on a rise since November 28, following a series of pledge releases over the past two weeks. Siddeshwari Tradex, a promoter entity of the company, released 16 lakh pledged shares (or 0.16% stake) to Standard Chartered Capital and 10 lakh shares (or 0.1% stake) to RBL Bank on November 29. 

    Opelina Sustainable Services, also a promoter entity of the company, released 1 lakh pledged shares (or 0.01% stake) to JM Financial Credit Solutions on December 2 and 16 lakh shares (or 0.16% stake) to Aditya Birla Finance on Monday. 

    According to reports, Jindal Steel & Power won a Rs 410-crore bid for the liquidation of a power plant of the debt-ridden Monnet Power in Odisha. The new power plant will supply energy to the company’s steel plant in Angul, which is in the process of expansion. 

    The stock ranks high in Trendlyne’s checklist with a score of 52.2%. It also features in a screener with stocks that have momentum and return on equity (RoE).


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

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    The Baseline
    07 Dec 2022
    Stock Screener: Stocks with high forecaster estimates for capex, revenue and profit

    Stock Screener: Stocks with high forecaster estimates for capex, revenue and profit

    By Abdullah Shah

    Continuing with the investments theme this week, we take a look at companies which will incur a big capex in the ongoing fiscal year. This screener reflects companies which may see over 20% rise in their capex, revenue and net profit in FY23, according to Trendlyne’s forecaster. It reflects 50 stocks from Nifty 500 and 4 stocks from the Nifty 50 index. 

    The screener features stocks from industries like cars & utility vehicles, heavy electrical equipment, non-alcoholic beverages, other apparels & accessories, and travel support services. Major stocks listed in the screener are IRCTC, Page Industries, Adani Ports, Asian Paints, Varun Beverages and Maruti Suzuki India.

    IRCTC may see the highest capex rise of over 3X YoY in FY23. Analysts also expect the company’s annual revenue to jump by over 75% YoY in FY23 . The company’s Chief Financial Officer (CFO) expects the capex outlay to be Rs 250 crore for the new office and Rs 100 crore to upgrade the IT services.

    The forecaster sees Asian Paints capex rising by over 94% YoY in FY23. The company also announced a new capex plan of Rs 6,750 crore post its Q2FY23 results. It seeks to expand its overall paints capacity by 30% in the next three years.

    Maruti Suzuki India is likely to see its capex nearly double in FY23. Reports say the company will be spending more than Rs 7,000 crore during FY23, which is significantly more than the Rs 5,000-crore capex guidance given by it in April. 

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    The Baseline
    07 Dec 2022
    Portfolio X-Ray: An analysis of Sunil Singhania’s Abakkus Fund

    Portfolio X-Ray: An analysis of Sunil Singhania’s Abakkus Fund

    By Abhiraj Panchal

    In many ways, Sunil Singhania, the founder of Abakkus Asset Manager LLP, is an old-school investor.  You are not going to find a loss-making startup with crazy valuations in his portfolio. He is not a PayTM or Zomato kind of guy. 

    Rather, Singhania, over his 28-year long career tracking equity markets, built a reputation for finding diamonds in the rough - smaller companies with strong financials, who were just starting to see strong growth momentum. Here we take a closer look at his portfolio, to see if that reputation of picking winners still holds up in his recent bets. 

    Singhania founded Abakkus in 2018, and it has grown to $1.4 billion since inception. Before Abakkus, he worked at Reliance Capital as Chief Investment Officer and global head for equities, managing over $10 billion in investments. During his 22 years at Reliance Capital he significantly increased the size of the Reliance Growth Fund. 

    Been fortunate to have managed Reliance Growth Fund in its journey of being 100x for most of that journey! https://t.co/hWJfr7Epq3

    — Sunil Singhania (@SunilBSinghania) August 9, 2019

    Singhania was also the chairman of the investment committee at CFA Institute, overseeing over $400 million worth of investments in an honorary capacity. 

    As the head of the Abakkus Fund, Singhania has invested primarily in small and micro-caps, and a few mid-cap companies. The Fund’s net worth during Q2FY23 was Rs 2,079.2 crore, and it publicly owns a stake in 24 companies.

    Singhania’s track record of choosing good companies still looks quite strong. Hindware Home Innovation, HIL, Siyaram Silk Mills and Mastek are among the oldest stocks in the portfolio. The best long-term performing companies in the Abakkus portfolio are Mastek and AGI Greenpac, which have increased by 304.7% and 285% respectively since Q4FY19. The small-cap investor cut a 1.5% stake in Mastek in Q2FY23 and now holds 2.8%. However, its price fell 47.6% during H1FY22. He also reduced stakes in AGI Greenpac to 1.9% in Q2FY23 from 3% in Q3FY21.  

    Other high-performing long-term companies in the portfolio are Jindal Stainless (Hisar) (bought in Q4FY19), Hindware Home Innovation and IIFL Securities (bought in Q3FY20), and HIL and ADF Foods (bought in Q1FY21). Singhania purchased a stake in Polyplex Corp in Q4FY19 but cut it to below 1% in Q2FY23. During this period, the packaging company’s price grew by 232.7%

    Singhania maintains a well-diversified portfolio

    While Abakkus is a well-diversified portfolio, Singhania maintains 19.7% of the portfolio in the metals and minings sector, aggregating to Rs 363.7 crore, and 19.3% in the software and services sector (Rs 357.2 crore). While cement and construction amounts to 11.4%, consumer durables has 10.9%, and textiles, apparel and accessories, 7.9%. The least invested in sectors are diversified consumer services, FMCG, retailing, and food, beverages and tobacco, with less than 2% each.

    During Q2FY23, the marquee investor increased his stake in eight companies and reduced it in nine. He added a 1.2% stake of pharma company Jubilant Pharmova to his portfolio. He also bought an additional 0.4% in Stylam Industries, 0.1% each in Sarda Energy & Minerals, Hindware Home Innovation and HIL. He cut a 1.5% stake in Mastek, a 1% stake in The Anup Engineering and a 0.2% stake in Route Mobile. Singhania also cut stakes in Polyplex Corp, Saregama India, Surya Roshni, Paras Defence and Space Technologies and CMS Info Systems to below 1%.

    23 out of 24 stocks report consolidated profits in Q2FY23

    Sunil Singhania’s LinkedIn profile mentions his strength as “a balance sheet-focused investor with a keen eye on numbers”. All companies in the portfolio have reported consolidated profits in Q2FY23, except HIL, which reported a loss of Rs 6.8 crore (against a profit of Rs 26.1 crore in Q2FY22), despite just a marginal fall in revenue of 0.3%.  

    During Q2FY23, Ethos reported a 410.5% YoY rise in profit to Rs 13.6 crore, while its revenue grew 32.3% YoY. Route Mobile and J Kumar Infraprojects reported a net profit of Rs 73.6 crore and Rs 67.54 crore, indicating an increase of 74.5% YoY and 64.5% YoY, respectively. Their revenue also grew 94.2% and 31.2% respectively. Even though 23 out of 24 companies reported profits for the quarter, 11 companies saw a YoY fall in their net profit. Jubilant Pharmova, DCM Shriram Industries and Rupa & Company reported a fall in net profit by 96.2%, 92.6% and 68.2% respectively.

    Sarda Energy & Minerals, J Kumar Infraprojects, AGI Greenpac and Stylam Industries outperformed their respective industries over a year, while eight companies outperformed their respective industries over a quarter, 11 outperformed over a month. 

    From the portfolio, HIL announced the highest basic annual EPS of Rs  280.5, followed by Sarda Energy & Minerals (Rs 223.1), Ion Exchange (India) (Rs 137.3), Technocraft Industries (Rs 109.3) and Mastek (Rs 106.5).

    Currently, out of 24 stocks in the holding, eight are trading in the PE Buy Zone, aggregating to 33% of stocks, and five stocks are trading in the PE Sell Zone, aggregating to 21%. Stocks in the Buy Zone include Route Mobile, Ethos, AGI Greenpac and J Kumar Infraprojects, whereas Rajshree Polypack, Ion Exchange (India), Jubilant Pharmova, ADF Foods and DCM Shriram Industries are in the Sell Zone. Additionally, all stocks’ PE is below their respective sectors. 

    How volatile is Singhania’s portfolio?

    For a year, beta for 14 stocks in his portfolio is greater than 1 and the other 10 have it lesser than 1. However, only eight stocks have a beta greater than one for a quarter. The average beta of the portfolio for a year is 1.1, whereas it is 1  for a quarter. 

    The volatility of Singhania’s portfolio is in line with the benchmark index, which shows that the marquee investor is not a risk taker nor is he especially risk-averse. He also holds stocks within both the PE Buy and Sell Zones. He tends to focus on value stocks, as all of his stocks have PE ratios lesser than that of their sectors. To conclude, even though Sunil Singhania has a neutral-risk portfolio, he looks for positive fundamentals and decent valuations while placing his bets.

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    The Baseline
    05 Dec 2022
    Five analyst picks with high upsides in target price

    Five analyst picks with high upsides in target price

    By Abhiraj Panchal

    This week we take a look at analyst picks with high upsides (over 15%).

    1. Mahindra & Mahindra: BOB Capital Markets assumes coverage of this auto manufacturer with a ‘Buy’ rating and a target price of Rs 1,496. This implies an upside of 18.7%. In Q2FY23, the company’s net profit surged 43.8% YoY to Rs 2,772.7 crore and revenue rose 39.1% YoY.

    Analyst Milind Raginwar is optimistic about the firm’s prospects on the back of an improving business environment. He said, “Margin headwinds are likely to recede with better raw material availability, moderating costs, price hikes and optimal utilisation.” The analyst also sees the company’s strong order book amid moderating raw material costs as a key positive. 

    Raginwar points out that the demand for Mahindra’s new sports utility vehicles is higher than the planned supply capacity. He believes this will lead to an expansion in production capacity in the coming quarters. The analyst expects the company’s net profit to grow at a CAGR of 24% over FY22-25. 

    1. Ashok Leyland: ICICI Securities maintains its ‘Buy’ rating on this commercial vehicle (CV) manufacturer with a target price of Rs 180. This indicates an upside of 22.2%. In Q2FY23, the company turned profitable on a YoY basis with a net profit of Rs 163.9 crore and its revenue rose 72.6% YoY. 

    Analysts Basudeb Banerjee and Pratit Vajani believe the robust retail demand for trucks is driven by infrastructure, mining and e-commerce segments. They added that the demand for new trucks was also due to the need to replace old fleets with more efficient ones. The company’s management is confident about the CV upcycle lasting till FY25.

    Banerjee and Vajani are positive about the company’s dominant position in the CV market. They said, “Ashok Leyland has recovered its M&HCV (medium & heavy commercial vehicle)market share from sub-25% a year ago to around 32% now and is confident of retaining it.” The analysts estimate the firm’s revenue to grow at a CAGR of 39.4% over FY22-24. 

    1. ICICI Prudential Life Insurance (ICICIPRU): Motilal Oswal maintains a ‘Buy’ call on this life insurance provider with a target price of Rs 600, indicating an upside of 26.2%. Analysts Nitin Aggarwal and Yash Agarwal arranged an interactive session with the top management of ICICIPRU to discuss various regulations being introduced by the regulator, the industry, and its growth and margin outlook. Based on the discussion, the analysts understand that the insurance provider is focusing on revenue growth rather than targeting product mix.

    The analysts said, “The management indicated that growth in absolute value in new business (VNB)  is the most important metric.” They believe that a pick up in annual premium equivalent (APE) and an improving product mix will keep the margin steady and drive VNB growth.

    The analysts added that an increase in agent recruitment, new partnerships and a strategy to approach customers with a wider product range through all channels will boost premium growth. They expect ICICIPRU to deliver 23% CAGR in VNB over FY22-24, led by premium growth and improvement in margin.

    1. Maruti Suzuki India: Sharekhan reiterates a ‘Buy’ call on this auto manufacturer with a target price of Rs 10,965. This indicates an upside of 24.7%. Analysts from the brokerage said, “We stay positive on Maruti Suzuki India as volumes are expected to regain pace on the back of new launches and improving demand in both rural and urban markets.” They added that easing in electronic components shortage, softening commodity prices and positive operating leverage are likely to keep earnings growth momentum intact.

    Maruti’s management expects to regain market share on the back of new launches and a stronger distribution network. The analysts believe that the automobile manufacturer is well positioned to accomplish its electric vehicle plans as well. They expect exports to be a long-term key growth driver for the company.

    They remain optimistic on the back of a better product mix, structural growth outlook, healthy balance sheet, and comfortable valuations. 

    1. CESC: Emkay maintains a ‘Buy’ call on this electric utility company but reduces the target price to Rs 101, indicating an upside of 33.1%. The company reported a standalone profit after tax of Rs 243 crore (up 3.4% YoY), in line with the brokerage's estimates. The consolidated profit after tax fell 5.9% to Rs 320 crore, which analysts Abhineet Ananda and Chinmay Kabra believe fell due to lower profit at Haldia Energy. 

    The analysts said, “Performance of distribution segments of Rajasthan and Malegaon was not encouraging. Rajasthan distribution franchises, despite having completed four to five years, have not been able to see break-even.” 

    Yet Ananda and Kabra remain positive about the company as the performance of Dhariwal Infrastructure and Noida circle has improved. Haldia profits are normalising as well. According to them, the key triggers include an increase in standalone tariffs and the performance of distribution franchises 

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

    (You can find all analyst picks here)

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