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

02 Dec 2022

Five Interesting Stocks Today

Larsen & Toubro: This construction and engineering company reached an all-time high of Rs 2,110 today as it closed a $107 million three-year loan from Sumitomo Mitsui Banking Corp. The company’s subsidiary, L&T Energy Hydrocarbon, secured two offshore contracts worth Rs 1,000-2,500 crore in total on Monday. The contract is India’s first order to decommission offshore facilities from British Gas Exploration and Production India.

The company’s infrastructure business, L&T Construction, also won an order worth Rs 1,000-2,500 crore from Greenko Group on November 24. It is for the construction of an off-stream pumped storage project in Madhya Pradesh. Larsen & Toubro also acquired the entire stake held by Chiyoda Corp in L&T-Chiyoda, a joint venture between the two companies, on November 22.

According to Sharekhan, the company’s H1FY23 performance was strong despite cost pressures in its core business, and supply chain challenges. L&T also has a rich order intake in the domestic and international markets. The brokerage maintains its ‘Buy’ rating on the company with a target price of Rs 2,390. This indicates a potential upside of 15.8%. The company features in a screener of stocks with high Trendlyne momentum score.

Apollo Tyres:This tyre stock rose more than 4% in trade after it announced Q2FY23 results. While its net profit rose 11.9% YoY to Rs 194.5 crore, its standalone net profit fell 9.9% YoY to Rs 80.8 crore. This was caused by a 9.9% YoY increase in raw material costs, which also pulled its EBITDA margin down by 61 bps YoY to 12%. The company’s management, however, expects raw material costs to ease from Q3FY23.

Apollo Tyres’ revenue rose by 16.8% YoY in Q2 driven by price hikes, which were in the range of 5-12%. Decent performance in the European markets helped drive revenue growth for Apollo Tyres, despite these markets facing high energy prices. The management expects replacement demand in domestic markets to improve, especially in the OEM (original equipment manufacturers) segment. The stock also shows up in a screener with increasing revenue for the past two quarters.

Reports suggest that easing crude oil prices and correction in rubber prices bode well for tyre stocks. Rubber and crude oil consist of nearly 60% of the raw material cost as a percentage of sales and a fall in prices would significantly bring down raw material costs. Apollo Tyres rose 6% in trade on Monday and touched an all-time high on Thursday in hopes of low costs and improving margins in H2FY23. The stock rose nearly 9% in the past month and 11% in the past week.

Trendlyne’s consensus recommendation has 20 analysts suggesting a ‘Buy’ on the stock. Reliance Securities maintains a ‘Buy’ as it expects the company’s volumes to grow in FY23-24 on the back of increasing demand from OEMs and EBITDA margins to be around 13.1% in FY23E. However, the stock is in the PE Sell Zone as it is trading below its current PE valuation.

Zomato: This internet software company saw a series of senior-level exits in the past month. Zomato fell over 4% after its co-founder Mohit Gupta resigned from his post on November 18. Although the company rose 6.5% in the past month, it has fallen by 57.8% from its 52-week high of Rs 157.9. Recent reports on the company's plans to lay off 3% of its workforce in order to scale down costs and turn profitable have likely weakened the investor sentiment.

In the recently ended quarter, Zomato’s net loss narrowed to Rs 250.8 crore, as against Rs 429.6 crore in Q2FY22. Brokerage firm Ambit is optimistic about the company’s growth and has a ‘Buy’ rating on the company with a target price of Rs 94. It says that Zomato's market share in the food delivery space rose to 55% in H1CY22. The brokerage expects the entire enterprise (including Blinkit) to turn profitable in approximately four years, by FY27.

Motilal Oswal also recommends a ‘Buy’ rating on the stock. The brokerage says that the acquisition of Blinkit has been positive for the company and it has not lost market share in the last quarter.

Meanwhile, Alipay Singapore Holding sold a 3.15% stake (26.2 crore shares) in Zomato for Rs 1,631.4 crore in a bulk deal on Wednesday. In another deal, Camas Investments picked up a 1.18% stake (9.8 crore shares) worth Rs 607.6 crore in the company.

Rail Vikas Nigam: This rail infrastructure construction company gained 84.6% in the past month. With improving investor sentiment, the stock’s momentum score has steadily risen since mid-October. The uptrend comes on the backdrop of a strong business outlook for the company. Its robust Q2FY23 performance, order wins, and a rise in government capital expenditure on railway infrastructure has fuelled the street’s optimism surrounding the stock.

Rail Vikas Nigam’s net profit in Q2 rose 36.5% YoY to Rs 381.2 crore and beat Trendlyne’s Forecaster estimates by 37.6%. The stock also has a Trendlyne consensus recommendation of ‘Strong Buy’ and shows up in a screener which lists companies with improving cash flow and high durability.

The company has been trying to diversify its order book and bag non-railway infrastructure projects as well. Between September and November, the company won four infrastructure contracts, of which three were non-railway projects. It won an international contract from the Indian government for the construction of a harbour in the Maldives for Rs 1,544.6 crore. It also won contracts worth Rs 484.2 crore from the Ahmedabad Municipal Corporation for the construction of canals. Overall, the company had an order book of Rs 55,000 crore at the end of Q2 and the management aims to increase it to Rs 1 lakh crore in a few years. To meet its target, it has been aggressively focusing on bidding for projects in the domestic and international markets.

Aditya Birla Fashion & Retail: This fashion retailer announced that its arm TMRW acquired eight digital-first lifestyle and apparel brands on Monday for Rs 289 crore. The management expects these acquisitions to increase the firm’s digital presence across apparel segments like casual wear, kids wear and western wear. The company has been scaling up its digital capabilities to increase sales through e-commerce. Robust growth in e-commerce sales was a key growth driver in Q2FY23. Digital sales grew 24% YoY.

The company’s revenue rose 49.7% YoY to Rs 3,074.6 crore and net profit jumped nearly 7X YoY. This growth was led by aggressive network expansion offline and online. The company added 85 branded stores in Q2 and plans to continue ramping up its store count across business segments in H2FY23. Aditya Birla Fashion acquired Reebok’s India operations to diversify its product portfolio with an entry into the footwear segment. It also acquired a majority stake in Masaba to expand into the beauty segment.

The management aims to acquire 30 brands across the fashion sub-categories within three years, which will be funded through internal accruals initially. This is in line with the company’s strategy to lower debt and strengthen its balance sheet. It reduced debt to Rs 243 crore in Q2FY23 from Rs 2,500 crore at the end of FY20. The stock shows up in a screener for companies with low debt.

Looking ahead, the management expects consumer demand to rise in H2FY23 on the back of the festive/wedding season and normalisation of economic activities. However, ICICI Direct sees the risk of rising margin pressure as investments into new brands may lead to higher-than-expected working capital requirements.

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

The Baseline

01 Dec 2022

Chart of the week: India’s interest rate hikes in 2022 lower than most central banks

By Abdullah Shah

Supply shocks, rising demand and high energy prices caused the world to see a sharp rise in inflation in 2022. The Russia-Ukraine conflict only aggravated supply chain disruptions and drove costs higher. Sanctions imposed on Russia by the western nations also made oil, metal and coal pricier.

Inflation was further worsened by falling currency values, which made imports more expensive. To counter inflation, major central banks began raising interest rates in March, and rates are expected to rise at least until mid-2023.

The Reserve Bank of India increased interest rates by 190 bps in 2022 on the back of the US Fed raising rates, and the rupee falling against the US dollar. However with inflation muted domestically, the RBI has stayed cautious, raising rates at a lower pace compared to other Central Banks.

South American Central Banks in Brazil, Chile and Mexico have hiked interest rates sharply.The Central Bank of Chile raised interest rates by 675 bps in 2022, the highest among all central banks, followed by the Central Bank of Brazil’s hike of 450 bps. Mexico’s Banxico has also raised the interest rate by 375 bps. The South American region is battling steep inflation due to bottlenecks in production, high commodity prices and high demand.

The Federal Reserve of the United States has raised interest rates by 375 bps so far in 2022, while the Bank of Canada increased it by 350 bps. The United Kingdom’s Bank of England has also bumped up the rates by 275 bps on the back of higher energy prices and high demand.

China is the only economy which has dropped rates by 15 bps. The People’s Bank of China made this move to tackle an economy that is weakening due to the zero-Covid policy and falling property prices

The Baseline

30 Nov 2022

Stock Screener: Indices that are five year outperformers, under pressure in short-term gains

By Abdullah Shah

The Sensex and Nifty 50 closed at record highs this week. But it's increasingly clear that this year, the preferred stocks and sectors have changed. This screener shows the Momentum score of various NSE and BSE indices, and tracks the share price changes over one year, three years and five years. Some of the biggest gainers of the past five years have been muted in recent months.

Major indices that show up in this screener include Nifty IT, Nifty Tata Group, S&P BSE Energy, Nifty Services Sector, S&P BSE Industrials, Nifty Financial Services, BSE Cap Goods and Nifty PSU Bank.

The Nifty IT index (which includes Tata Consultancy Services, Infosys, HCL Technologies) rose 171% over the past five years, the highest among major indices, even though it fell 12% over the past year. The index has a Trendlyne momentum score of 54.6, suggesting mid-range bullishness. Edelweiss believes that demand outlook in the IT sector has still not fully incorporated global macro-concerns. So the index may fall further.

The S&P BSE Energy index (which includes heavyweights like Reliance Industries, Adani Total Gas and Oil and Natural Gas Corp) rose 111% over the past five years, while it was 17% over the past year. The index has a mid-range Trendlyne momentum score of 55. As Brent crude prices touched $123.2 per barrel in March, the index fell 2.4% since the start of the year. In recent weeks, Brent crude prices dipped to $87.4 per barrel, helping the index rise 3.7% in the past week in hopes of demand recovery and lower pressure on margins for Indian companies in this space.

The Nifty Tata index (which includes Tata company stocks like Titan, Tata Motors and Tata Steel) rose 132% over the past five years and 1% over the past year. It has a Trendlyne momentum score of 52.8.

The Nifty PSU Bank index (which includes State Bank of India, Bank of Baroda and Canara Bank) rose 2.8% over the past five years, while it is up 55.8% over the past year. The index has a Trendlyne Momentum Score of 69.6. According to ICICI Securities, financiers are optimistic on growth momentum as some corporate segments like retail and SME are showing sustained growth.

The Baseline

29 Nov 2022

Five analyst picks this week

By Suhas Reddy

Delhivery: ICICI Securities upgrades its rating on this logistics company to ‘Buy’ from ‘Sell’ with a target price of 460, implying an upside of 43.3%. In Q2FY23, the firm posted a loss of Rs 254.1 crore and its revenue grew by 19.9% YoY.

Analysts Abhisek Banerjee, Amit Dixit and Heenal Gada have turned positive on the company as they believe “Delhivery’s current valuations provide a great opportunity to buy this high-quality stock”. By the end of November, Delhivery fell by around 50% from its peak in July due to concerns over the sustainability of its revenue growth and profitability, But analysts believe that the company’s low-cost structure, effective management, strong balance sheet and high brand recall alleviate these concerns.

They also expect the logistics firm’s EBITDA margins to improve steadily in the coming quarters. They see the firm gaining market share in niche segments like secured delivery. Analysts estimate Delhivery’s revenue to grow at a CAGR of 25.6% over FY22-25.

Can Fin Homes:Keynote Capitals initiates coverage on this housing finance company with a ‘Buy’ rating and a target price of Rs 670, indicating an upside of 22.7%. In Q2FY23, Can Fin Homes’ net profit rose 14.6% YoY to Rs 141.7 crore, and its revenue grew by 40.6% YoY.

Analyst Devin Joshi is positive about the company’s future growth prospects given its “strong growth history and best-in-class asset quality across various industry phases driven by excellent risk management techniques”. He anticipates the firm’s loan book to grow by 18-20% and maintain its robust asset quality in the coming quarters.

Joshi finds the company’s strict credit policy, which allows lending to only low-risk and safe customers like salaried or self-employed, a key positive. He believes this policy aids the firm in maintaining its excellent asset quality. He also sees the housing finance company’s AUM (assets under management) expanding as it plans to establish 12-15 new branches every year. The analyst expects Can Fin Homes’ net profit to grow at a CAGR of 17.6% over FY22-24.

State Bank of India: Motilal Oswal maintains its ‘Buy’ rating on this PSU Bank with a target price of Rs 700, implying an upside of 15%. In Q2FY23, the bank’s standalone net profit surged 73.9% YoY to Rs 13,264.5 crore and revenue grew 14.9% YoY.

Analysts Nitin Aggarwal and Yash Agarwal attribute the company’s robust performance to “strong loan growth, margin expansion, and lower provisions”. The improvement in its treasury performance (which supported other income) and controlled operating expenses led to healthy growth in core pre-provision operating profit, they added. They expect loan disbursements to grow 14-16% in FY23, driven by the retail and corporate segments.

In the near-to-medium term, analysts expect a high mix of floating loans to aid profitability and growth in net interest income. They are banking on the asset quality remaining robust while the restructured book is under control. They anticipate the bank’s net profit to grow at a CAGR of 32% over FY22-24.

Cyient: ICICI Direct maintains a ‘Buy’ call on this IT consulting and software company with a target price of Rs 920, indicating an upside of 13.9%. Analysts Sameer Pardikar and Sujay Chavan attended Cyient’s analyst meeting at their Hyderabad campus and noted that the company is targeting a quarterly revenue run rate of $250 million in FY24 from the current $175 million, which will be driven by organic and acquisition synergies. They expect Cyient’s acquisition to improve diversification and drive annual revenues to $1 billion by FY24.

Pardikar and Chavan expect improved demand from large deals, healthy order book, rebound in DLM business and organisation restructuring to accelerate Cyient’s growth. They are optimistic about the IT consultant as it is also partnering with auto space start-ups and looking to strategically acquire them in the future.

ACC: Axis Direct recommends a ‘Buy’ call on this cement producer with a target price of Rs 2,710. This indicates an upside of 7.2%. To cater to the high-growth market of central India, the company is expanding its cement grinding capacity to 39.2 metric tonnes per annum from the present 36.1 metric tonnes. The analysts at Axis Direct expect the cement manufacturer to deliver volume growth of 7% CAGR over CY22-24 and record revenue CAGR of 10%.

“The company exhibits a robust financial position with a debt-free balance sheet, high-interest coverage ratio and healthy cash flows Housing and Infra, which consumes around 80-90% of the total cement produced in the country, will further accelerate the demand as the Central government is keen on developing infrastructure under various government schemes and initiatives,” they added.

On the back of expanded capacity, better pricing, increased demand and moderation in commodity prices, the analysts expect ACC to report revenue and APAT CAGR of 10% and 40% respectively over CY22-24.

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

(You can find all analyst picks here)

The Baseline created a screener Indices with Momentum Score …

28 Nov 2022

Indices with Momentum Score > 50

Stock market indices showing momentum, tracking share price changes over month, year, three years and 5 years.

The Baseline

26 Nov 2022

MFs choose mid and smallcap stocks, prefer healthcare and banks in Q2FY23

By Deeksha Janiani

Most people have the intelligence to pick stocks - but not everyone has the stomach. This is especially true in a volatile stock market, as downside risks increase. Even India's mutual fund managers have become cautious about fresh stock buys, as markets grew moody in a slowing global economy. Their investments in Q2FY23 rose at the slowest rate since Q1FY22, and they preferred sectors with good potential while cutting stakes in those losing traction.

In this week’s Analyticks:

MFs make their bets: Where did the smart money go in Q2FY23?
Screener: Companies in which promoters bought or sold over 0.5% stake in Q2

Let’s get into it.

Domestic mutual funds pick new favourites in Q2FY23

Indian indices rode turbulent seas in the past year. After touching their lows in mid-June, the Nifty 50 index and BSE Sensex gained around 18% by mid-September.

Domestic mutual funds pumped over Rs 70,000 crore into equities in Q1FY23, when valuations were comfortable. However, their buying activity slowed down to approx Rs 22,000 crore in Q2 as they became more selective. One reason was rising valuations: according to reports, Nifty 50 is trading at an average 1-yr forward PE of around 20X, which is 22% higher than its long-term average of 16X.

The stock market is commanding a premium despite a series of downgrades for India’s GDP growth rate in FY23 and in the earnings of top companies. This has kept domestic funds on the fence.

In this week’s edition, we take a look at the top companies and sectors which mutual funds are still bullish on, buying significant equity stakes on a QoQ basis in Q2FY23. We also analyze sectors that saw intense selling action.

Mutual funds pick up over 2.5% stake in key small and mid-cap companies

Mutual funds led by SBI MF bought over 6% stake in auto ancillary player Sona BLW Precision and construction company G R Infraprojects, in Q2FY23. This buying activity specifically took place as the promoters of these firms sold off partial stakes in the open market. Triveni Turbine saw its promoters selling over 11.5% stake in Q2, after which FIIs and domestic mutual funds increased their holdings in the company.

MFs led by Nippon India funds, Mirae asset funds and ICICI Prudential funds picked up 2.9% stake in Gland Pharma. Notably, this company lost over 25% of its value in Q2 on intense selling by foreign and retail investors. The financial stress on its promoter entity, Fosun International, spooked markets.

Auto OEMs and ancillaries see fresh buying on improved demand and easing chip supply

Passenger and commercial vehicle makers saw a robust rise in their wholesales in the first two quarters of FY23 on the back of healthy festive demand and easing semiconductor supplies. However, two-wheeler makers are yet to see the sales levels of the pre-covid era.

Prices of key base metals used in auto manufacturing like steel, aluminium and copper cooled off by 25-35% from the highs of March 2022. Rising sales volumes and lower metal costs helped the margins of auto OEMs and ancillaries.

Mutual Fund houses picked up stakes in auto majors like Maruti Suzuki and Hero MotoCorp in Q2. In fact, Maruti saw consistent buying from mutual funds between May and September 2022. Fund houses also raised their holdings in auto ancillaries like Bosch, Ceat and Sundaram Fasteners.

Small and mid-cap banks and NBFCs attract mutual fund investments in Q2

Banks and NBFCs are the flavour of this season for many investors. The industry saw a strong rise in their advances in both Q1 and Q2 backed by robust traction in retail loans, particularly housing, auto and personal loans. This led to healthy growth in their net interest incomes. The recent interest rate hikes also improved their net interest margins.

Domestic MFs bought stakes in small and mid-cap banks like Au Small Finance Bank, Federal Bank and RBL Bank. They also raised their stake in NBFCs like Muthoot Finance, IDFC and LIC Housing Finance in Q2.

Ambitious expansion plans of healthcare players pique MF interest

Top hospital chains saw their occupancy levels improve steadily from Q4FY22, which was hit by the omicron wave. Their average revenue per operating bed also saw a healthy rise sequentially as their payer mix improved. But what has caught investor interest is their aggressive expansion plans, which were paused between FY20-22 due to the pandemic.

Mutual fund houses picked up a 1%+ stake inKIMS, Max Healthcare and Apollo Hospitals in Q2. MFs also bought over 12% stake in Max Healthcare in the past four quarters. These chains plan to expand their bed capacity by 20% in the next three years.

MFs pour in funds in top hotels and restaurants ahead of the upcoming holiday rush

The hospitality sector saw strong demand in the summer of ’22 and the monsoon months, thanks to leisure travel and an increase in corporate events. The outlook is encouraging for this sector as highlighted by the management of Indian Hotels. The upcoming wedding and holiday season as well as the influx of foreign travellers during the winter months in H2FY23 is set to drive higher topline growth for hotels.

Mutual funds bought over 1.5% stake in Indian Hotels and EIH in Q2. They also raised holdings in QSR chains like Jubilant Foodworks, Sapphire Foods and Westlife Development, backed by strong consumption trends.

MFs place bets on general industrials, as capex activity picks up in key sectors

Heavy electrical equipment manufacturers saw strong demand from sectors like railways, mining, data centres, commercial realty, biotechnology and pharma. As a result, most companies saw their order book jump by over 30% YoY at the end of September 2022.

The outlook for these companies is positive, backed by the government's focus on infrastructure development, the Make-in-India initiatives and 14 PLI schemes approved for encouraging higher private capex.

Domestic fund houses added on to their stakes in CG Power, Cummins India, Bharat Heavy Electricals and Triveni Turbine in Q2FY23. DSP Funds led the buying activity in CG Power, while Nippon India, Tata Funds and Edelweiss led purchases in BHEL.

Mutual funds rejig their holdings in the pharma space

Pharma players have seen muted growth in the past few quarters due to intense competition in the US Generics market. The Indian pharma market performed well in comparison. Now that companies are diversifying away from generics and into speciality drugs, hopes are high for this space.

Mutual funds have cut more than 1% stake in large-cap players like Dr. Reddy’s and Torrent Pharma. On the other hand, they have added to their holdings in mid and small-cap companies like Alkem Labs, Syngene International and Suven Pharma.

Mutual funds cut stake in an oil marketing company and consumer durable makers

OMCs like Bharat Petroleum and Hindustan Petroleumsuffered material net losses in the past two quarters. This was on account of negative marketing margins on diesel, as pump prices were not in sync with global levels. Accordingly, mutual funds sold 3% stake in BPCL in Q2. This was led by Nippon India funds, Mirae asset funds, Aditya Birla funds and Franklin India funds.

Mutual funds also cut their stake in consumer durable players like KEI Industries, Voltas and Orient Electric. Higher inflation has impacted the demand in mass market segments of these companies in the past few quarters.

MFs reduce holdings in metals and mining companies on reversal of fortunes

Correction in metal prices and higher input costs led to a substantial contraction in the EBITDA of top steel and aluminium producers in H1FY23. Subdued demand, particularly from China and other developed nations, weighed on the international prices of key metals.

Seeing the metals cycle heading downwards, mutual funds cut stake in Tata Steel, Hindalco and Vedanta in Q2FY23. The selling activity in Tata Steel was led by SBI mutual funds, Nippon India funds and Kotak funds.

Screener: Increasing or Decreasing Promoter Holding QoQ

In this edition, we take a look at major stocks which saw over 0.5% QoQ rise or fall in the holdings of their respective promoters in Q2FY23. This screener features 33 stocks from Nifty 500 and 4 stocks from the Nifty 50 index.

Stocks from industries like cement & cement products, IT consulting & software, healthcare facilities, auto parts & equipment and pharmaceuticals show up in this list. Major stocks in the screener include UNO Minda, ACC, Infosys, Max Healthcare Institute, Sona BLW Precision Forgings and HDFC Asset Management.

Uno Minda’s promoter holding increased the most, by 2.7% QoQ in Q2FY23. Axis Securities believes that the company’s well-diversified product portfolio and increasing electric vehicle kit value will lead to higher wallet share with existing and potential clients.

ACC saw its promoter holding rise by 2.2% QoQ in Q2FY23. BNP Geojit Paribas believes that the recent reduction in energy prices and a traditional post-monsoon rebound will boost the company’s performance in the upcoming quarters.

Max Healthcare Institute’s promoter holding fell the most by 26.8% QoQ in Q2FY23. PE firm KKR sold its entire stake in the company for over Rs 9,000 crore via its affiliate, Kayak Investments, in August 2022.

You can find some popular screeners here.

The Baseline

25 Nov 2022

Five Interesting Stocks Today

InterGlobe Aviation (Indigo): This airline stock fell 4.9% following its Q2FY23 results as it posted a net loss of Rs 1,435.7 crore. However, the company’s revenue rose by 122.8% YoY to Rs 12,497.6 crore on the back of a 75.9% YoY increase in passengers carried in Q2FY23 (1.9 crore).

Pieter Elber, Chief Executive Officer (CEO) of the company, said, “This is the second consecutive quarter in which we operated at higher than pre-covid capacity. In spite of a seasonally weak quarter, we witnessed relatively good yields with strong demand across the network. However, fuel prices and exchange rates have adversely impacted our financial performance.” The company’s revenue beat Trendlyne’s Forecaster estimates by 10.9%.

Over the past two weeks, the stock rose 10.7% as the airline launched its first freighter aircraft from Mumbai to Delhi on November 15. More recently, Indigo launched 19 connecting flights to Europe under its codeshare partnership with Turkish Airlines on Thursday. The airline will have connecting flights to Portugal and Switzerland through Istanbul.

According to ICICI Securities, domestic demand will continue to rise in the upcoming festive and winter season. International air travel has also demonstrated a strong recovery, which is likely to continue. The company features in a screener of stocks benefiting from lower crude oil prices.

Aarti Industries: This specialty chemicals company was up 2.4% in trade on Monday after it announced a 20-year arrangement for the supply of Nitric Acid worth Rs 8,000 crore with Deepak Nitrite on November 19. Although the stock rose on Monday, it cut its gains and is now trading near its 52-week low of Rs 642.1. The company has underperformed the Chemicals & Petrochemicals sector by 1.8%; its PE ratio TTM (18.6) is below the sector PE ratio.

Post Aarti’s announcement, Anand Rathi maintained its ‘Buy’ rating and revised the target price to Rs 800. The brokerage believes that the agreement with Deepak Nitrite would enable Aarti Industries to focus on growth opportunities and introduce value-added products.

However, the company’s share price has fallen over 50% from its 52-week high after the demerger from its pharma business. Rajendra Gogri, Chairman and Managing Director, said in the earnings call, “This will extensively enhance value for our stakeholders and also help us achieve operational efficiencies.”

KR Choksey maintains its ‘Buy’ rating on the stock with a target price of Rs 841. This indicates a potential upside of 24.2%. The brokerage says that the demerger from Aarti’s pharma business will enable it to pay attention to its core speciality chemicals business.

Medplus Health Services: This healthcare supplies company has risen nearly 15% after its Q2FY23 results announcement. Medplus Health Services’ revenue grew over 20% YoY in Q2 but its net profit fell sharply by 68% due to high overhead costs. But what’s exciting investors could be the pace at which the company is adding new stores. The company is in a phase of rapid expansion. It added 348 stores (net) in Q2FY23, which is 1.5x its usual average. In fact, in the last 12 months, Medplus’s total store count increased by 42%. Management expects sales growth to remain steady as stores mature, and margin pressure to continue in the near term as it maintains 1,000+ store additions in FY23.

The pharmacy segment (both offline and e-commerce) is under intense competition with companies from different industries. While peers like PharmEasy are expanding aggressively in this segment, hospital companies like Apollo Hospital Enterprises and Aster DM Healthcare are also after market share in the pharmacy space. As a result, Medplus’ stock price fell over 35% from its issue price of Rs 796 and hit a lifetime low of Rs 570 on November 10. However, with the Q2 results announcement, MedPlus’ share price recovered, helping it feature in a screener of companies that are classified as overbought by the money flow index (MFI).

Post Q2 results, Nomura and Credit Suisse maintained their ‘Buy’ rating on Medplus and increased their target price. Nomura sees an upside of 60%, while Credit Suisse’s target price implies an upside of 28%. With 33% of the total stores being less than 12 months old, brokerages believe an improvement in margins from these store additions could help ease the margin pressure for Medplus going forward.

One97 Communications (Paytm): It is not a ‘Happy anniversary’ for this internet software company as the stock lost more than 70% of its price value in the last year. Trendlyne’s technicals suggest that Paytm fell over 42% in the last three months alone. While looking at the financials, Paytm’s Q2FY23 results have been encouraging as its net loss narrowed to Rs 588.8 crore in Q2FY23, compared to Rs 628 crore in Q1FY23. Revenue also grew by 10.6% QoQ to Rs 1,490.2 crore, with the most revenue coming in from payment services given to merchants.

What triggered the decline was the end of the lock-in period for pre-IPO investors, which ended on November 15. The first investor to offload a stake in the company was Societe Generale, cutting a 0.06% stake in the company for Rs 23.2 crore in a bulk deal. The stock fell 4% in trade after the deal but the bigger cut was by SVF India Holdings, a subsidiary of Softbank. SVF India sold a 4.5% stake (worth Rs 1,630.8 crore) in Paytm on November 17, which caused the stock to crash more than 10% in trade. It now holds a 12.9% stake in Paytm, compared to 17.4% earlier. Although other funds like BNP Paribas Arbitrage, BofA Securities Europe and Morgan Stanley picked up nearly 2.8% stake in Paytm, the investor sentiment is yet to turn positive on the stock.

To add to this, Macquarie said that Jio Financial Services’ foray into the payment provider space may add to the problems of Paytm. The stock fell 11% on Tuesday on the fresh speculation. Suresh Ganapathy, an analyst at Macquarie, says that although Jio Financial Services has not declared the segments it plans to target, it will be focused on customer and merchant lending. It may prove to be a threat to not only Paytm, but also NBFC players like Bajaj Finance. Trendlyne’s consensus recommendation suggests that six analysts recommend a ‘Buy’ while two recommend a ‘Hold’ and ‘Sell’.

Escorts Kubota: This commercial vehicle manufacturer’s stock rose 8% till Thursday since holding its analyst & investor meet on Friday. The upward price movement enabled this company to show up in a screener for stocks with strong momentum where their prices are above the short, medium, and long-term moving averages.

The positive price movement comes on the back of the street’s healthy business outlook for the company after it unveiled its medium-term business plan. The company aims to increase its revenue 2.5X by FY28 and increase the contribution of its exports towards the revenue to 15-20% from 6.4% in FY22. Overall, the management aims to increase the firm’s revenue by expanding its network and production capacity, gaining market share and increasing exports. The company is targeting the key high-volume export markets of US, Europe, Thailand and Brazil. Another element of the management’s medium-term strategy is to increase its dividend payout and buybacks by using up to 40% of its net profit.

To carry out its medium-term business plans, the management has planned a capex of Rs 4,000 crore. This will be spent on greenfield expansion, repaying the debt of the merged entity, and new product launches. The company plans to build a new manufacturing facility to increase its production capacity of tractors and engines by 76.5% to 3 lakh units by FY28. The management also aims to ramp up its distribution network by 50% from its current network of about 1,400 dealers. Although Escorts Kubota has laid out a positive trajectory for itself, effective execution will be key in realising its growth potential in the coming quarters.

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

The Baseline

24 Nov 2022

Chart of the Week: India’s trade deficit grows as merchandise exports fall

By Abdullah Shah

India’s trade deficit widened to $14.6 billion in October 2022, the highest since June 2020. A major reason for this was the 16.7% YoY fall in merchandise exports to $29.8 billion. It was the first such decline in exports in the past 19 months. Demand fell across the US and EU markets, while the festive season in India slowed domestic production. In this edition of chart of the week, we take a look at the merchandise sectors which had the most impact on imports and exports.

The electronic goods sector is the only major sector which saw a rise in exports in October. It grew 37.6% YoY to $1.8 billion. The engineering goods sector fell 21.3% YoY in exports and contributed $7.4 billion (nearly 25%) to merchandise exports in October. Export of handloom products fell the most by 46.2% YoY to $719 million, while it was down 11.3% YoY to $4.7 billion for petroleum products.

Although exports fell, merchandise imports rose by a small margin of 5.7% YoY to $56.7 billion in October. Biggest contributor to this rise in imports was the petroleum, crude & products sector – up 29.1% YoY and contributed $15.9 billion. On the contrary, the gold sector imports fell the most by 27.5% YoY to $3.7 billion, while the electronic goods sector declined 9.2% YoY to $6.2 billion.

The Baseline

21 Nov 2022

Five rising stocks with analyst ‘Buy’ calls

By Abhiraj Panchal

We take a look at five stocks that have been rising over 5% in the past month, with analyst ‘Buy’ calls.

Oil And Natural Gas Corp: HDFC Securities maintains its ‘Buy’ rating on this oil & gas exploration & production company with a target price of Rs 169. This indicates an upside of 24.8%. In Q2FY23, the company’s net profit fell 54% YoY to Rs 8,299.4 crore and revenue rose 38.2% YoY.

Analysts Harshad Katkar, Nilesh Ghuge, Akshay Mane and Rutvi Chokshi are positive about the company due to an improvement in crude oil realisations and domestic gas price realisations.

The analysts were also positively surprised by the firm’s standalone Q2FY23 results, as it beat their net profit estimates. They attribute this outperformance to “lower-than-expected statutory levies, lower employee cost, lower depreciation, depletion & amortisation costs and higher other income”. The analysts find the management’s crude oil and gas production guidance for FY23, FY24 and FY25 encouraging. They expect the company’s revenue to grow at a CAGR of 10.6% over FY22-25.

Hindustan Aeronautics: ICICI Direct maintains its ‘Buy’ rating on this defence company with a target price of Rs 3,300. This indicates an upside of 24.3%. In Q2FY23, its net profit rose 44.2% YoY to Rs 1,221.2 crore despite its revenue declining 7.3% YoY.

Analysts Chirag Shah and Vijay Goel said the firm’s EBITDA margins also grew by 919 bps YoY to 31.5%. They attributed the improvement in profitability and margins to lower other costs and a higher share of revenue contribution from the maintenance, repair & overhaul (MRO) segment.

Shah and Goel believe the company’s revenue growth in the coming quarters will be driven by its healthy order book, which stands at Rs 83,800 crore. They also expect a continuous order inflow in the MRO segment to bolster the order pipeline. The analysts added that “execution of other key orders and sustained growth in MRO will drive revenue growth in double digits from FY25”. They estimate the company’s net profit to grow at a CAGR of 11.8% over FY23-25.

Bharat Forge: Prabhudas Lilladher reiterates its ‘Buy’ call on this forging company with a target price of Rs 950, indicating an upside of 14.9%. The stock price rose by 6.4% during the past month. The company’s net profit in Q2FY23 fell by 46.2% YoY to Rs 145.9 crore despite a 28.1% YoY rise in revenue to Rs 3,122.3 crore. According to analyst Mansi Lall, the poor performance was caused by high raw material costs and a one-time charge of Rs 13 crore on a defence business.

Bharat Forge won export orders for passenger vehicles and industrial segments, as well as a defence export order worth $155 million for artillery products to be executed over the next three years. Lall said, “The management highlighted that near-term demand for commercial vehicles looks positive in both India and export markets.” She remains optimistic on the back of a “positive outlook for the automotive industry as semiconductor supply issue eases out along with healthy order wins in the industrial space”.

Bharat Heavy Electricals: ICICI Securities maintains a ‘Buy’ call on this industrial valve manufacturer with a target price of Rs 100, indicating an upside of 38.8%.The stock rose by 5.7% in the past month. In Q2FY23, the company reported a net profit of Rs 12.1 crore, as against a loss in the previous year, while its revenue increased marginally to Rs 5,418.7 crore.

Bharat Heavy Electricals’ order inflow during Q2FY23 stood at Rs 12,000 crore and the total order book now stands at Rs 1.06 lakh crore. Rahul Modi, Ashwani Sharma and Aashna Manaktala said, “Given the addition of new orders with favourable payment terms, we expect execution to gather pace, followed by margin improvement supported by the recent correction in commodity prices.”

The valve manufacturer's trade receivables declined 8% but overall receivables grew 8% YoY. The analysts concluded that Bharat Heavy Electricals’ efforts to improve cash flow and reduce receivables could achieve sustainable and profitable growth.

Manappuram Finance: Motilal Oswal maintains its ‘Buy’ call on this NBFC with a target price of Rs 140. This indicates an upside of 25.7%. The stock price rose by 7.9% during the past month. In Q2Y23, the company’s net profit grew by 10.4% YoY to Rs 408.4 crore (17% higher than the brokerage’s estimate), while revenue increased 10.3% YoY to Rs 1,714.1 crore. Net interest income improved 9% YoY to Rs 1,080 crore, 6% higher than the brokerage’s estimates.

Analysts Abhijit Tibrewal, Nitin Aggarwal and Parth Desai ask the question: Should the NBFC now change from gold loan growth and margin compression to healthier yields and diversification in the loan book. “We feel Manappuram Finance should tread carefully in the non-gold segments as it is yet to exhibit a clear ‘right to win’ in these segments and strong non-gold AUM growth is also fraught with risks,” they said.

The analysts raised their estimates and model profit CAGR of 13% over FY22-24 by factoring in higher margins in the gold loan segment and moderation in credit costs in the MFI business.

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

(You can find all analyst picks here)

The Baseline created a screener test marketcap

21 Nov 2022