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    The Baseline

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    The Baseline
    10 Feb 2023
    Five Interesting Stocks Today

    Five Interesting Stocks Today

    1. Cummins India: This industrial machinery company's stock rose 7% and hit its all-time high of Rs 1,618 on Thursday as its Q3FY23 net profit increased 65.9% YoY to Rs 413.8 crore. Both revenue and net profit beat Trendlyne’s forecaster estimates by 8% and 52% respectively. An increase in domestic and export sales has helped revenue grow 25.8% YoY. The company is in a screener of stocks with improving QoQ revenue for the past three quarters. 

    Cummins India’s revenue from the engines segment, which contributes to 77.7% of its revenue, has grown by 25.9% YoY. The company stands to benefit from the government’s estimated outlay of Rs 2.4 lakh crore in FY24 in the railways segment. Ashwath Ram, Managing Director of the company, states, “The recent budget announced by the Government of India has a stronger outlay for the infrastructure sector, including railways, which is expected to create strong demand from various segments in the domestic market.” 

    The company’s board of directors has also approved an interim dividend of Rs 12 per share on 27.7 crore shares. Record date for the payment of the dividend is set for February 21. 

    1. InterGlobe Aviation (Indigo): This airline stock’s net profit has zoomed 10X YoY to Rs 1,422.6 crore in Q3FY23. The stock closed 2% above its opening price since its declaration of results last Thursday. The surge in profit is because of reducing fuel costs –  aircraft fuel expenses have fallen 7.6% QoQ as jet fuel prices fell globally in Q3FY23. Another cost advantage Indigo has is the dip in lease charges as a percentage of revenue. In Q3FY23, lease charges fell to 12.9% of revenues, compared to 19.2% in Q3FY22. This is because Indigo’s number of fuel-efficient aircraft has gone up. As of December 2022, Indigo has 238 new engine (Neo) aircraft – which are designed to accommodate more passengers with the same fuel costs – out of the total 302. 

    Indigo’s domestic and international demand has been high in Q3. It aims to increase the international ASK (available seat per kilometre) mix to 40% over the next 3-5 years. A report from ICICI Securities suggests that the international ASK will increase more than 40% YoY in Q4FY23. The management, in its earnings call, said that Indigo is operating at 105% of its pre-Covid capacity. According to CEO Pieter Elbers, Q3 performance has been strong operationally and financially, as demand for air travel improved. Indigo expects capacity to increase by 15% in FY24. However, new airlines might eat into the current market share of 55%. 

    As of February, 17 analysts recommend a ‘Buy’ on the stock. ICICI Securities and Prabhudas Lilladher have increased their target price for the stock by more than 15% after the airline’s robust performance in Q3FY23. In the past three months, the stock has gained 15% and shows up in a screener with a high momentum score.

    1. Varun Beverages: This non-alcoholic beverage company rose over 5% on Tuesday after it posted strong Q4CY22 results. Varun Beverages’ (VBL’s) net profit has jumped 2.5x YoY to Rs 74.8 crore and beat its Forecaster estimates by over 25%. Its revenue increased by 27.7% YoY in Q4CY22 thanks to strong volume growth and higher realisations. With strong Q4CY22 results, the company features in a screener of companies with annual net profit improving for the past two years.

    VBL’s profit has risen as net realisation per unit improved through strategic measures, including selective price hikes, rationalised discounts and incentives, and improved product mix. This was also backed by energy drink Sting, which has a higher realisation. Commenting on the performance of the company, Ravi Jaipuria, Chairman of Varun Beverages said that a strong recovery in demand post-pandemic and continued efforts towards expanding the distribution network across markets resulted in the growth of sales volume.

    Axis Direct has maintained its ‘Buy’ rating on the stock post VBL’s Q4CY22 results announcement. The brokerage expects the company to perform well in terms of expansion in its distribution, growth in international geographies, and focus on expanding the high-margin energy drink, Sting, across outlets.

    Meanwhile, ICICI Securities maintains its ‘Hold’ rating but increases the target price to Rs 1,225. Though the brokerage is positive on growth prospects, it says that it would be difficult for the company to grow at a fast pace on a high base in CY23.

    1. Vinati Organics: This specialty chemicals stock released its Q3FY23results on February 6. Vinati Organics’ revenue has grown by 38% YoY to Rs 508 crore but fell 10% QoQ owing to low volumes in the ATBS chemical, which constitutes ~40-50% of overall revenue. The capacity is expected to expand from 40,000 MT to 60,000 MT for ATBS and the new chemical portfolio.  The upcoming commissioning of ATBS, MEHQ, Guaiacol and Iso Amylene plants will aid revenue growth. Post expansion, the revenue is expected to grow by 23% to Rs 2,630 crore. EBITDA margin has seen an expansion of 1,072 bps YoY, backed by increased pricing power for its products.

    Vinati Organics has not seen much growth post results. ICICI Direct and HDFC Securities have downgraded their target price owing to overvaluation. The stock shows up in our DVM scorescreener as an expensive performer.

    ICICI Direct says the IBB chemical, which contributes to approximately 30% of the company’s revenues, is seeing a revival in demand and an increase in market share. Revenue numbers are below the estimated levels, whereas EBITDA and PAT margins have exceeded expectations. ICICI Direct has a ‘Hold’ rating on the stock.

    According to HDFC Securities, the company’s shift in revenue mix towards lower margin products (IBB) will hamper EBITDA margin expansion going forward.  HDFC has a ‘Sell’ rating on the stock.

    1. Blue Star: This consumer electronics manufacturer has grown over 12% since announcing its Q3FY23 results on January 31, which beat the street’s estimates. Its net profit grew 23% YoY to Rs 58.4 crore, beating Trendlyne’s Forecaster estimates by 3.3%. The management attributes this improvement in profitability to a healthy order inflow, robust demand and a better product mix. Due to this strong Q3 performance, the stock is trading above its short, medium and long-term moving averages. 

    The company’s largest segment, electromechanical projects & commercial air conditioning systems, has grown 20.5% YoY and contributed 55.9% to the consolidated revenue. This growth was aided by healthy order inflow. BoB Capital Markets expects this segment’s order book to see greater traction in the near term, given the Centre’s push to increase the infrastructure capex. The brokerage also anticipates a rise in orders from the railway electrification business vertical.

    The unitary products segment, which primarily produces room air conditioners and commercial refrigeration products, saw its EBIT margins expand by 100 bps YoY to 7.4%. Margins improved on the back of a better product mix and sustained demand for commercial refrigeration products. 

    The company began commercial production at its new facility in Sri City, Andhra Pradesh in January 2023, just in time to ramp up for the summer season. The new facility will manufacture 3 lakh AC units and will reach 12 lakh units annually by 2027. The management is optimistic about the near-term demand growth given the onset of summer. It has also guided to increase its market share in the room air conditioners business to 15% in FY25 from 13.25% currently.  

    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
    10 Feb 2023
    Which stocks did superstar investors buy in Q3FY23?

    Which stocks did superstar investors buy in Q3FY23?

    By Abhiraj Panchal

    Many investors closely track the portfolios of superstars to identify interesting sectors and stocks to invest in. We take a look at some of the stocks superstar investors bought or added more of, during Q3FY23.

    Most superstar investors didn’t see major QoQ changes in their net worth in Q3FY23, except Dolly Khanna. Her net worth fell by 21.4% QoQ to Rs 409.74 crore during the quarter. 

    Sunil Singhania and Vijay Kedia’s net worth fell by 5.1% and 5.3% respectively, while Porinju Veliyath’s net worth fell by 1.3%. Ashish Kacholia’s net worth rose by 1.6% and Rakesh Jhunjhunwala's portfolio value rose marginally.

    These superstars have varied investing interests, as shown in the chart below, which indicates the sector with the biggest share in each superstar’s portfolio. 

    RARE Enterprises’ favoured sector is textiles, apparels and accessories, while Sunil Singhania’s is metals and mining, Ashish Kacholia’s is chemicals and petrochemicals.

    Rare Enterprises increases stake in Banking & Finance and Auto stocks

    Rakesh Jhunjhunwala’s portfolio rose marginally by 0.01% QoQ to Rs 33,230.4 crore in Q3FY23. Rare Enterprises, which manages the late big bull’s portfolio, increased stakes in several companies during the quarter. 

    Rakesh Jhunjhunwala’s portfolio increased its stakes in Rallis India and Federal Bank by 0.9% each to 10.3% and 3.5% respectively. It also increased its holding in Geojit Financial Services and Canara Bank by 0.8% and 0.6% to 8.4% and 2.1% respectively.

    Rare also increased holdings in Tata Motors and NCC by 0.5% each during Q3, and bought more shares in Karur Vysya Bank, Tata Communications and Edelweiss Financial Services. 

    According to shareholder filings, the portfolio’s largest buys were healthcare supplies company Bilcare and auto parts and equipment maker Autoline Industries. But this data point should come with a disclaimer. 

    In Q1FY23, the total holding of Rakesh and Rekha Jhunjhunwala in Bilcare and Autoline was 8.5% and 4.5%, respectively. In the Q2FY23 BSE fillings of Bilcare and Autoline Industries however, the names of Rakesh Jhunjhunwala or Rekha Jhunjhunwala are not mentioned in the shareholders list. But the Q3FY23 BSE filings of both the companies show Rekha Jhunjhunwala back in the list as a shareholder with significant stakes. She holds a stake of 7.4% in Bilcare and 4.3% in Autoline Industries. 

    The large movement in shareholding could be due to a filing error in Q2, and hence these companies are not included in the chart above. 

    Sunil Singhania’s Abakkus Fund increases stake in multiple small-cap companies

    Sunil Singhania’s Abakkus Fund saw its consolidated net worth fall by 5.1% QoQ in Q3FY23 to Rs 1,973.8 crore. It added Tracxn Technologies to the portfolio during the quarter by buying a 1.6% stake in the IT consulting company. It also bought a 1.8% stake in Dreamfolks Services, a travel support services company and added a 0.3% stake in Mastek, increasing its stake in the IT company to 3.1%. 

    The fund also bought an additional 0.2% stake in Sarda Energy & Minerals, Ion Exchange (India) and Technocraft Industries (India) each, bringing its stake to 2.1%, 3.2% and 3% respectively. It added minor stakes in already existing small-cap portfolio companies like Dynamatic Technologies, Stylam Industries, Siyaram Silk Mills and HG Infra Engineering, taking its holdings to 2.6%, 2.4%, 2.1%, and 1.5% respectively. 

    After selling its stake in CMS Info Systems in Q2FY23 to below 1%, Abakkus  now holds a 1% stake in the company.

    Ashish Kacholia adds four small-cap companies to his portfolio

    Ashish Kacholia’s net worth increased by 1.6% QoQ to Rs 1,800.3 crore in Q3FY23. During the quarter, he added Goldiam International (textile company), Raghav Productivity Enhancers (capital goods company), Likhitha Infrastructure (infrastructure service provider) and Knowledge Marine & Engineering Works (transportation company) to his portfolio. He purchased 1%, 2.1%, 2% and 2.3% stakes in these companies respectively.

    The marquee investor purchased 1.3% and 1.2% stakes in chemical companies Agarwal Industrial Corp and Yasho Industries respectively and now holds 3.8% in each. During Q3FY23, he added 0.8% of Best Agrolife (now holds 2.3%), 0.6% of SJS Enterprises (now holds 4.4%), 0.4% of TARC (now holds 2.2%) and 0.2% of Ador Welding (now holds 4.4%) to his portfolio. 

    Kacholia bought an additional 0.1% stake in Gravita India, Megastar Foods and Xpro India, and now holds 2.1%, 1.1% and 4.5% stakes respectively. The other companies where he increased stakes were Garware Hi-Tech Films and PCBL.

    Dolly Khanna makes no new additions to her portfolio in Q3FY23

    Dolly Khanna’s net worth fell by 21.4% QoQ to Rs 409.7 crore in Q3FY23. Compared to previous quarters, the investor drastically slowed down buying in Q3. She only increased her stake marginally in three companies and did not make any new additions to her portfolio. Khanna tends to turn bearish when markets become volatile, so this is not unusual for the investor.. 

    She raised her stake in Industrial Gases company National Oxygen by 0.1% to 1.2%. The company has risen over 6.3% over the past three months till February 8. She also raised 0.05% stake each in Monte Carlo Fashions and Prakash Pipes.   

    Porinju Veliyath makes three new additions to his portfolio in Q3FY23

    Porinju V Veliyath’s net worth fell by 1.3% QoQ to Rs 174.9 crore in Q3FY23. He added three new small and micro-cap companies to his portfolio. He bought a 1.3% stake in furniture manufacturer Priti International and 1.1% stake each in Max India and Lakshmi Automatic Loom Works in Q3.

    The investor raised his stake in Special Consumer Services company Kaya by 1% to 2.4% in Q3FY23. This is after he cut 0.1% from  the company holding in Q2FY23. He also bought an additional minor stake in Aurum Proptech.

    Vijay Kedia adds Siyaram Silk Mills to the portfolio

    Vijay Kedia’s net worth fell 5.3% QoQ to Rs 729.7 crore in Q3. Kedia’s only buy during the quarter was a new addition–a 1.1% stake in Siyaram Silk Mills, an Indian blended fabric and garment manufacturer. In Q3FY23, the textile company’s net profit fell for the first time in the past seven quarters to Rs 51.9 crore.

    Mohnish Pabrai increases his stake in Edelweiss Financial Services

    Mohnish Pabrai’s net worth in Q3FY23 fell by 6.9% QoQ to Rs 1,540.02 crore. The only change he made in his portfolio was buying an additional 0.3% stake in Edelweiss Financial Services. As of Q3FY23, he holds a 6.7% stake in the company. The financial services company reported a 42.7% YoY increase in net profit to Rs 101.3 crore in Q3FY23.

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    The Baseline
    09 Feb 2023
    Screener of the week: MFs and FIIs buying infrastructure-related companies

    Screener of the week: MFs and FIIs buying infrastructure-related companies

    By Abdullah Shah

    We take a look at a screener with key infrastructure companies that are seeing a jump in mutual fund and foreign institutional investor holdings. The companies are from three industries that could benefit from the Union budget – construction & engineering, heavy electrical equipment and roads & highways. 

    Out of seven companies, only Ashoka Buildcon is in the screener from the roads and highways industry. Construction & engineering, and heavy electrical equipment industries have three companies each (see chart above). 

    TD Power Systems, a heavy electrical equipment manufacturer, rose the highest in MF holding change QoQ, rising 1.22 percentage points to 12.93%. ICICI Prudential Infrastructure Fund bought 2.7 lakh shares (or 0.2% stake) in the company in Q3FY23. 

    Among the companies we discussed earlier, KEC International from the construction & engineering industry made it to the list as its FII holding increased by 1.04 percentage points, while its MF holding rose 3 basis points QoQ. Fidelity Funds-India Focus Fund bought 20.2 lakh shares (or 0.8% stake) in the company over the past quarter.

    You can find more screeners here,

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    The Baseline
    07 Feb 2023
    Five analyst picks this week post results

    Five analyst picks this week post results

    By Abhiraj Panchal

    This week in analyst picks we take a look at stocks with YoY revenue and profit growth above 10% in Q3. We also look at forward PE ratio estimates for these stocks one year from now. 

    The forward PE estimate is the expected value of earnings to the share price one year ahead. To calculate the FY24 forward PE ratio, we use the Forecaster's target price estimates and annual one-year forward forecaster EPS estimate.

    1. Larsen & Toubro: BOB Capital Markets maintains its ‘Buy’ rating on this construction and engineering company, and raises its target price to Rs 2,440 from Rs 2,390. This indicates an upside of 12.7%. In Q3FY23, the company’s net profit grew 24.3% YoY to Rs 2,552.9 crore and revenue rose 17.3% YoY to 46,389.7 crore. 

    Analysts Vinod Chari, Tanay Rasal and Nilesh Patil write that the firm remains “the best play on India’s capex story, and is our preferred capital goods pick.” They believe the company is well-positioned to benefit from the Centre’s push toward infrastructure given its robust tendering pipeline and order win rate of 15–20%. The analysts also see increasing private sector orders as a positive for the company. In Q3FY23, private sector orders accounted for 39% of L&T’s total order inflows, up from 18% a year ago.

    Given the robust order pipeline, the analysts anticipate healthy growth in order inflows in the coming quarters. Chari, Rasal and Patil expect the company’s revenue to grow at a CAGR of 16.9% over FY22-24. Larsen & Toubro’s FY24 forward PE estimate is 31.7, higher than the current PE TTM of 30.

    1. Coal India: ICICI Securities maintains its ‘Buy’ rating on this coal mining company and revises its target price to Rs 282 from Rs 294. This implies an upside of 28.6%. In Q3FY23, the firm’s net profit surged by 70.1% YoY to Rs 7,755.6 crore and revenue grew by 23.7% YoY to Rs 35,169.3 crore. 

    Analysts Rahul Modi and Anshuman Ashit cite cost increases - driven by higher wage provisioning and contractual expenses - for lowering the target price despite robust results. The analysts do point out that growth was driven by an increase in volumes and realisations. They expect this growth momentum to continue given the strong domestic demand for coal. The analysts expect Coal India’s production volume to touch 700 million tonnes in FY23. They added, “With 9MFY23 production/offtake already at 479 and 509 million tonnes (+15.8%/+5.4% YoY), CIL's volume is poised to reach 700 million tonnes in FY23.”

    Given the strong operational performance and with domestic demand for coal remaining strong, Modi and Ashit anticipate the company’s net profit to grow at a CAGR of 11.4% over FY22-25. The forward PE estimate for Coal India stands at 5.3, higher than its current PE TTM of 4.6.

    1. Bajaj Finance: KRChoksey maintains a ‘Buy’ call on this NBFC with a target price of Rs 8,030, indicating an upside of 30.3%. In Q3FY23, the company’s net profit grew by 39.9% YoY to Rs 2,973 crore while its revenue grew by 26.4% YoY to Rs 10,786 crore. 

    Abhishek Agarwal said, “Bajaj Finance continued to post strong growth in terms of business and profitability.” He added, “The NBFC has registered the highest-ever customer addition during the quarter.” The analyst is optimistic about the finance company on the back of its strong background, brand name, diversified product offerings, prudent risk management, and long-term potential for robust AUM growth. He expects Bajaj Housing Finance (a subsidiary) to be a core driver for growth in upcoming quarters, led by improving opportunities in the housing finance business. 

    Agarwal expects profit and net interest income to grow at 35.1% and 25.4% CAGR respectively, and the asset quality to remain stable. The forward PE estimate for Bajaj Finance is 39.5, which is higher than the current PE TTM of 34.4.

    1. Laurus Labs: ICICI Direct retains a ‘Buy’ call on this pharmaceutical company with a target price of Rs 400. This indicates an upside of 21.2%. In Q3FY23, the company reported an increase of 32.1% YoY in net profit to Rs 203 crore. It reported revenue of Rs 1,546.2 crore (up by 49.5% YoY), which the analysts Siddhant Khandekar, Kushal Shah and Utkarsh Jain believe increased on the back of 210% YoY growth in custom synthesis. 

    According to the analysts, the company is well-positioned to meet the fast-growing global demand for new chemical entity drug substances and drug products with ongoing supplies for seven commercial products. They are also positive about the pharma company due to its robust order book, product launches in anti-diabetic (FY23) and CV portfolio in the United States and Europe that have a target opportunity at $40 billion. The forward PE estimate for Laurus Labs is 27.7 as against the current PE TTM of 19.4. 

    1. Westlife Foodworld: Axis Direct maintains its ‘Buy’ call on this fast food restaurant holding company with a target price of Rs 930, indicating an upside of 32.7%. In Q3FY23, the company’s net profit increased by 72.4% YoY to Rs 36.4 crore and its revenue grew by 28.7% to Rs 619.2 crore. 

    Analyst Preeyam Tolia believes that same-store sales growth stood at 20% led by increased footfalls, improved product mix and price hikes. His confidence in the restaurant chain holder comes from bright future prospects supported by the company’s strong execution track record of revenue and EBITDA growth, driven by new product launches and cost rationalisation programs. He expects Westlife Foodworld to deliver revenue EBITDA growth of 30% and 43% CAGR, respectively,  over FY22-25. Westlife Foodworld’s forward PE estimate is 104.3 as compared to the current PE TTM of 102.7.

    All these stocks have a higher forward PE ratio as the average target share price of these stocks is relatively higher compared to their forward earnings per share.

    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 created a screener OR Parameter in example …
    07 Feb 2023

    OR Parameter in example filter without brackets

    Shows how the OR parameter behaves in a filter without brackets. Without brackets, OR applies to all the parameters used after it.
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    The Baseline created a screener OR Parameter in example …
    07 Feb 2023

    OR Parameter in example filter with brackets

    Shows how the OR parameter behaves in a filter with brackets. We use brackets here to stop the OR filter from making the rest of the query optional.
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    The Baseline
    03 Feb 2023
    Five Interesting Stocks Today

    Five Interesting Stocks Today

    1. KPIT Technologies: This IT consulting & software company reached its all-time high of Rs 813 per share on Wednesday after posting strong net profit growth of 20.4% QoQ to Rs 100.5 crore in Q3FY23. Growth from the UK & Europe and rest of the world (ROW) markets aided an improvement in the company’s revenue by 23.2% QoQ to Rs 917.1 crore. As a result, it features in a screener of stocks with increasing revenue for the past eight quarters. Both revenue and net profit beat Trendlyne’s Forecaster estimates by 4.2% and 5% respectively.

    The rise in revenue in Europe comes after KPIT’s subsidiary, KPIT Technologies GmbH acquired four companies under the Technica Group for a total consideration of Rs 640 crore on September 21, 2022. Additionally, a leading European OEM selected KPIT as its key partner for next-generation electronic control units (ECU) while Renault Group selected KPIT as a strategic technology partner on November 23, 2022.

    As a result, revenue from UK & Europe rose 48.2% QoQ in Q3, despite a broad economic slowdown in the region. Kishor Patil, Co-founder, Chief Executive Officer (CEO) and Managing Director of the company commented, “Q3FY23 has been better than expectations. Our performance gives us confidence in beating our FY23 growth outlook.”

    The stock ranks high in Trendlyne’s checklist with a score of 78.3%. However, the company has a high trailing twelve-month or TTM PE ratio of 60.4 against the industry PE average of 29.6. Because of the high PE ratio compared to its historical levels, the company features in the PE sell zone.

    1. Britannia Industries: This FMCG stock’s Q3FY23 net profit surged 2.5X YoY to Rs 932.4 crore. The surge in net profit was because of an exceptional gain reported by the company. The gain amounted to Rs 359 crore (net of tax) and was received by selling a stake in Britannia Dairy to Bel SA. As inflation moderated, the company’s operating margin improved by 447 bps YoY to 18.14%. Price hikes also helped in the growth of margins. The management plans to continue with gradual price hikes in the coming quarters. It also expects the partnership with Bel SA to drive sales in the under-penetrated cheese market. Net sales for the company grew 16.2% YoY to Rs 4,101.5 crore on new product launches, growing customer franchise and market share gains.

    The stock was trading near its 52-week high before touching an all-time high of Rs 4,596 in a volatile market today. Removing the exceptional gains from the net profit, Britannia beats Trendlyne’s Forecaster estimates by 21.6%. It shows up in screeners of stocks with increasing revenue and profit for the past two quarters. It also is in a screener of stocks with strong momentum growth.

    Foreign brokerage Jefferies has maintained a ‘Buy’ on the stock as its margin growth beat expectations on low input prices and raw material inventory. It has upgraded its target price by 14.4% to Rs 5,000. ICICI Securities maintains its ‘Add’ rating and expects its revenue CAGR to grow by 13% over FY22-24E. The outlook for the FMCG sector looks good as the Centre’s relief for the middle class in the Union Budget 2023-24 is likely to improve customer demand.

    1. AIA Engineering: This other industrial goods manufacturer’s stock rose 12.4% over the past week till Thursday, on account of its Q3FY23 results beating the street’s expectations. The company’s net profit and revenue beat Trendlyne’s Forecaster estimates by 64.9% and 5.8%, respectively. Its net profit jumped more than 2.5X YoY to Rs 352.5 crore on the back of higher realisations, strong sales volumes and falling raw material and power & fuel costs. Only freight expenses increased YoY, which the company was able to pass on to its customers.

    Cost declines helped the  EBITDA margin surge by 10.8 percentage points YoY to 29.8%. The firm shows up in a screener for stocks in the PE Buy zone with a high durability score and rising momentum.

    The company’s volume grew by 23% YoY to 71,439 metric tonnes per annum (mtpa) in Q3, led by a 60% growth in the non-mining segment. Its mining segment saw modest growth of 8% YoY in volumes. ICICI Securities expects demand from the mining sector to increase on the back of capacity expansion and elevated commodity prices. It believes AIA Engineering is well-placed to capitalise on this demand growth, given its technologically superior products. ICICI Securities upgraded its rating on the company to ‘Buy’ from ‘Hold’.

    In anticipation of growing demand, the management said it has planned to expand its installed capacity to 5.2 lakh mtpa from 4.4 lakh mtpa. The company has planned a capex of Rs 300 crore, most of which will be utilised towards capacity expansion. However, the management does acknowledge a risk of volatility in commodity prices.

    1. Data Patterns (India): Thedefence and aerospace solution provider released itsQ3FY23 results on 28th January. Data Patterns’ revenue grew by 2.5x YoY and 26.27% QoQ. On account of better execution, gross margins have expanded 140 bps QoQ while EBITDA margins for Q3FY23 were at 42.2% vs. 35.7% in Q3FY22. The order book at the end of Q3FY23 was Rs 888 crore. The company won orders worth Rs 163 crores in January 2023, which has increased the order backlog to Rs 1,014 crore. Development orders comprised 56% of total order backlog inflows as of Q3FY23. The production segment share was pegged at 38% with 6% from the services segment.

    The management maintained its FY23-25 revenue guidance of 25-30% growth with a gross margin of 65% and EBITDA margin of 40%. The company is confident of winning orders to the tune of Rs 150-200 crore in Q4FY23. The management expects Rs 2,000-3,000 crore worth of orders in the pipeline for the next three to four years. The stock shows up in thescreener for growth in quarterly net profit and increasing profit margin.

    ICICI Securities says Data Patterns has the ability to deliver revenue and PAT CAGR of 29.3% and 28.5% respectively over FY22-25E. However, the stock has run up, limiting further upside given the rich valuations and no room for execution error at such multiples. The brokerage has revised its Buy rating to Hold.

    1. Indian Hotels Company: This hotel company surged over 8% in trade on Wednesday after it announced strong Q3FY23 results. The Finance Minister’s announcement on the Centre’s support for the tourism industry in the Union Budget also added to the rise. The hotels industry rose over 5% in trade on the same day.

    The company reported its highest-ever net profit of Rs 383 crore, up 403% YoY in Q3. IHCL also posted strong growth in revenues, up 54% YoY to Rs 1,743.5 crore. Its solid performance was driven by robust demand across markets as well as airline catering. As a result, the company features in a screener of companies that saw growth in net profit with an increasing profit margin (QoQ).

    However, the occupancy rate remains below pre-covid levels at 72.1%. On the bright side, the average room rate jumped 25% to Rs 15,456, compared to pre-covid levels, due to a series of price hikes.

    Commenting on the company’s strong performance during the quarter, Puneet Chhatwal, Managing Director & CEO of Indian Hotels, said that the demand outlook for the sector in 2023 remains robust with sporting events such as the hockey and cricket world cup, global events like the ongoing G20, and the increase in inbound travel. In 9MFY23, IHCL has added over 30 hotels to the pipeline and has opened 14 hotels, in addition to strong growth in amã Stays & Trails and Qmin.

    ICICI Securities is positive about the company’s outlook due to its efforts in leveraging its existing brand equity to focus on new business segments. The brokerage upgraded its rating to ‘Buy’ from ‘Add’ and raised the target price to Rs 399 from Rs 366, implying a potential upside of 25.7%.

    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
    03 Feb 2023
    Chart of the week: Centre expects fiscal deficit  to fall to 5.9% of GDP in FY24

    Chart of the week: Centre expects fiscal deficit to fall to 5.9% of GDP in FY24

    By Abdullah Shah

    As global economic growth slows down, India’s GDP growth in FY23 is also expected to slow down to 7% from 8.7% in FY22. GDP growth in FY24 is expected to further reduce, to 6.5%. 

    This is important for India’s Budget as the fiscal deficit is expressed as % of GDP. As the GDP estimate is revised downward, the Centre will have to reduce the expenditure to reduce the fiscal deficit.

    The fiscal deficit as % of GDP rose to a record high of 9.5% in FY21, and Nirmala Sitharaman, the Finance Minister, had committed to reducing it. In line with the guidance, fiscal deficit as a % of GDP fell to 6.4% in FY23. The centre aims to further lower this to 5.9% of the GDP in FY24 and eventually to 4.5% of the GDP by FY25. 

    In order to achieve a lower fiscal deficit in FY24, the government has planned to reduce expenditure on subsidies and pensions while keeping the spending on rural development constant. However, the Centre continues to focus on transport and defence segments as its spending is expected to rise 32.4% and 5.7% in these segments respectively, when compared to FY23 revised estimates. In addition, interest expenditure is also expected to rise 14.8% in FY24. 

    Revised estimates of subsidies for food and fertilisers overshot FY23 budgeted amounts as the government had to boost support via free food grains and fertiliser subsidies amid higher commodity inflation. 

    In FY24, the government has decided to curb the expenditure on subsidies with an estimated spend of Rs 2 lakh crore on food (-31.3%) and Rs 1.8 lakh crore on fertilisers (-22.2%). The estimated expenditure on pensions has also been marginally reduced to Rs 2.3 lakh crore in FY24 from the revised estimates of Rs 2.4 lakh crore in FY23.

    The interest, transport and defence are the segments with the highest estimated expenditure in FY24. These segments contribute to 45.1% of the total estimated expenditure. The Centre has increased the estimated expenditure of interest to Rs 10.8 lakh crore in FY24 from t Rs 9.4 lakh crore in FY23 revised estimates. 

    The rise comes on the back of higher requirements for payment of interest on market loans, discount on Treasury Bills, Central Government securities issued by National Small Savings Fund and state provident funds. 

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    The Baseline
    02 Feb 2023
    Screener of the week: Adani group companies with high pledged shares by promoters

    Screener of the week: Adani group companies with high pledged shares by promoters

    By Abdullah Shah

    As Adani Group stocks rocket downward, we take a look at the implications for their pledged shares by promoters. This screener looks at Adani Group stocks’ promoter holding pledges and annual debt-equity ratio.

    Adani Group has pledged 100% of their stake as promoters of Ambuja Cements. The cement & cement products company has a high forward PE ratio of 50X, which is higher than its current PE. Analysts forecast its profits falling by 20% YoY in FY23. 

    The group has also pledged 25% of their stake in Adani Power. In Q3FY23, the promoters pledged an additional 14.1% of their shares in this electric utilities company. It has the second-highest annual debt-to-equity ratio of 8.9X among listed Adani group companies.

    Adani Transmission has a promoters pledge ratio of 6.6%. The electric utilities company stands a risk of seeing more of its promoter holding being pledged to lenders, as it has fallen over 35% over the past week. 

    Adani Green Energy is also at risk of seeing more promoter pledges due to its recent crash of 36% till January 31. This player has the highest annual debt-to-equity ratio of 43.9 among Adani group companies, and its return on capital (ROCE) is nearly half of its sector average.  

    You can find some popular screenershere.

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    The Baseline
    01 Feb 2023
    Budget 2023 Live Analysis

    Budget 2023 Live Analysis

    Budget 2023: Winners and Losers

    • Sector/IndustrySector Change 1 YearSector Change 1 YearBudget Impact
      Telecom-1.48%-0.96%Increase in government spending in telecom infrastructure from Rs 3,010 crore in FY23 to Rs 10,400 crore in FY24. However, telecom stocks traded in red as the Centre also increased its non-tax revenue collection target from telecom companies by 30% to Rs 89,469 crore. Telecom Services closed 1% lower in trade today.
      Life Insurance-16.99%-9.2%Life insurance stocks fell more than 9% in trade today after the Centre announced that all income earned from life insurance policies (excluding unit-linked insurance plans) with a premium of above Rs 5 lakh will be taxable. This is applicable post-April 01, 2023. Insurance companies are now worried that high-premium products will face slow demand. Major stocks like SBI Life Insurance, HDFC Life Insurance, Life Insurance Corp and Max Financial fell in trade today.
      Real Estate-8.41%-1.06% Much needed boost for infrastructure development both directly and indirectly. The Finance Minister (FM) has laid out Rs 10,000 crore for urban infrastructure development, with Rs 79,000 crore dedicated to PM Aawas Yojana - a housing development project. FM also specified that infrastructure will be one of the top three priorities. Increased capex will boost growth in these sectors. The index Nifty Realty however pared its gains and closed 0.94% lower in trade today.
      Banking6.68%-0.35%Banking stocks declined post the budget announcement. The budget deficit of 6.4% is higher than historical trends. As government borrowing increases, it sucks liquidity from commercial banks as banks are the biggest market for government bonds. Banks have been reeling with agriculture loans and MSME loans. The government has raised the agriculture loan target to Rs 20 lakh crore. MSME emergency credit line was not fully utilized in FY23. The allocation has been brought down to Rs 14,000 crore from earlier Rs 15,000 crore.
      General Industrials29.8%-1.34% The Centre has raised capex budget by 33% for FY24 with a special focus on railway infrastructure. This may attract higher private investments and start a new capex cycle. This bodes well for the order books of capital goods makers especially those which get business from Indian railways, manufacturing, power generation, defence and construction industries. Stocks in focus: Timken India, Siemens, Rail Vikas Nigam, Cummins, HAL, Bharat Electronics, CG Power, ABB India
      Agrochemicals / fertilizers47.14%-2.67% The majority of fertilizer stocks ended up negative post-budget announcement. The government has cut down the budget allocation of urea subsidy from Rs 1,54,098 crore (revised estimates) for FY23 to Rs 1,31,100 crore in FY24.
      Pharmaceuticals-0.1%-0.33% Indian pharma companies’ reactions to the Union budget unveiling were mixed. Finance Minister Nirmala Sitharaman said that the Centre will encourage the pharma industry to invest in research and development in priority areas. The impact of this on pharma companies will be dependent upon the priority areas or segments that the Centre will decide to focus on. With regard to the allocation to major schemes, the Centre has allocated Rs 1,250 crore (Rs 100 crore in FY23) for the Pharmaceutical department as per FY24 budget estimates.
      Defence49.5%-5.43% All 11 companies in this industry fell post-budget announcement after an early trading session rally despite a 13% increase in the Indian defence budget to Rs 5.94 lakh crore in FY23. This could be due to a less-than-expected increase in the capital outlay, which is mainly used to buy defense equipment. Capital outlay rose only 6.3% YoY to Rs 1.63 lakh crore. A slowdown in capital outlay growth momentum could hurt the order book growth of fast-rising defence companies. However, an already strong order book could help offset this; The focus falls back on the execution of orders going forward.
      FMCG10.64%-0.14% FMCG stocks rose as the Finance Minister announced plans to boost agricultural production. The Centre set an agriculture credit target of Rs 20 lakh crore and has announced various schemes to help farmers, fishermen and agricultural credit societies. However, the FMCG sector lost most of its gains by the end of today’s trade and closed flat. Although a surge in production may ease supply constraints to a certain extent, the focus still remains on cost pressures due to commodity prices still at elevated levels.
      Hotels, Restaurants & Tourism16.85%1.09% Hotel and Tourism stocks rallied in intra-day trade as the Finance Minister announced the promotion of tourism through government programs and public-private partnerships. At a time when demand for travel has almost recovered to pre-Covid levels, this Centre's focus on tourism is likely to push travel demand up in the coming years.
    • The Centre cuts food, fertilizer and fuel subsidy spends by 28% to Rs 3.74 lakh crore (estimated) for FY24.

    • The Centre cuts back spending on rural jobs guarantee schemes in the Union Budget. Also, customs duty has been revised in the import of parts for mobile phone manufacturing, seeds used in lab-grown diamonds, and open cells of TV panels.

      Basic custom duty on crude, glycerine proposed to be reduced to 2.5%

      Extend customs duty cut on imports of parts of mobile phones by 1 yr

      To reduce customs duty on open cells of TV panels to 2.5% pic.twitter.com/y4ftuyyDPK

      — Moneycontrol (@moneycontrolcom) February 1, 2023
    • Finance Minister, in her budget, has extended the date of incorporation for startups to avail tax benefits to March 31, 2024, from March 31, 2023. The FM also proposes the benefit of carrying forward losses on change of shareholding for startups to 10 years of incorporation from the current seven years.

    • Finance Minister proposes to remove the minimum threshold of Rs 10,000 on TDS and increase the rebate limit to Rs 7 lakh per year from Rs 5 lakh.

      Decoding the new income tax regime of Budget 2023!

      What do you make of FM Sitharaman's tax tweaks, let us know in comments! #IncomeTax#Tax#BudgetWithMC#Budget2023WithMC#Budget2023#UnionBudget#UnionBudget2023#NirmalaSitharaman#BudgetSession@nsitharamanoffcpic.twitter.com/U9ydiYOlTX

      — Moneycontrol (@moneycontrolcom) February 1, 2023
    • The government has a capex of Rs 35,000 crore for energy transition investment. Finance Minister Nirmala Sitharaman says that battery storage will get viability gap funding. The government also remodels the credit guarantee scheme for MSMEs with an investment of Rs 9,000 crore, reducing the cost of credit by 1 percentage point. This will come into effect from April 1.

    • Finance Minister announces an investment of Rs 75,000 crore for transport infrastructure projects in steel, ports, fertilizer, coal and foodgrain sectors, with Rs 15,000 crore coming from private sources. Iron & Steel/Interm.Products and Fertilizer industries trade in the green.

    • The fiscal deficit for 2022-23 stands at 6.4% of GDP. Finance Minister says that it will fall to 5.9% in 2023-24.

    • The government reduces more than 39,000 compliances and decriminalises more than 3,000 legal provisions to improve the ease of doing business.

    • Indian Railway Catering & Tourism Corp and Rail Vikas Nigam rise as Finance Minister Nirmala Sitharaman announces Rs 2.4 lakh crore capital outlay for railways.

    • Finance Minister Nirmala Sitharaman says the Centre’s capital outlay towards infrastructure development rises 33% to Rs 10 lakh crore. She adds that Rs 2.4 lakh crore will be allotted towards railways.

    • Finance Minister Nirmala Sitharaman says that India's per capita income has grown to Rs 1.97 lakh crore.

      India's per capita income has increased to Rs 1.97 lakh crore, says @nsitharaman#BudgetWithTimes#Budget2023#UnionBudget2023

      Follow LIVE updates: https://t.co/hElUd4KFYbpic.twitter.com/tYqJuCK3pV

      — The Times Of India (@timesofindia) February 1, 2023

    • The Centre is focused on increasing jobs for the youth and enhancing the agriculture sector by bringing modern technologies.

    • The Centre will bear the complete expenditure of Rs 2 lakh crore to ensure Food Security. Finance Minister Nirmala Sitharaman says that agriculture credit will be enhanced to Rs 20 lakh crore.

    • Hotel stocks rise as the Centre announces support for the tourism industry. 

    • Rupee gains 12 paise against the US dollar to Rs 81.76 per dollar in early trade today, ahead of the Union Budget.

      #RupeeCheck | Rupee opens at 81.77/$ Vs Tuesday’s close of 81.92/$ pic.twitter.com/Xa2as8bqyA

      — CNBC-TV18 (@CNBCTV18Live) February 1, 2023

    • Economic Survey reveals that direct income has risen by 26%. The survey also suggests that borrowing costs will continue to remain high as rate tightening cycle may last for a longer period. India’s core sector output has also increased by 7.4% in December 2022.

    • The government's tax revenue is expected to exceed budget estimates by Rs 4 lakh crore on higher income tax and customs duty. The Centre's planned capex for this fiscal year is Rs 7.5 lakh crore, compared to Rs 5.5 lakh crore last fiscal. Industries such as infrastructure, defence and logistics are expected to see a boost in funding.

    • India’s manufacturing PMI falls to a three-month low of 55.4 in January, compared to 57.8 in December 2022. However, the reading remains above 50 for the 19th consecutive time.

      The manufacturing purchasing managers’ index (PMI) started 2023 on a weak note as output and sales growth slackened, according to a survey by S&P Global.https://t.co/z15XudtDrG

      — Mint (@livemint) February 1, 2023
    • Reports suggest that nominal GDP growth in FY23 will be around 15.4%. The real GDP growth will be around 7% and is likely to come down to 6-6.5% in FY24.

    • The domestic market looks forward to more disposable income for the middle class and a reasonable disinvestment target from the Budget. The market will also focus on the defence, railways and capital goods sectors.

      #BudgetWithCNBCTV18 | What the market wants from #Budget2023 is as important as what the market doesn't want & @_AnujSinghal has both lists in his back pocket!#UnionBudget2023#Budget2023#CNBCTV18Marketpic.twitter.com/Vy3pKOBoEh

      — CNBC-TV18 (@CNBCTV18News) February 1, 2023

    • Minister of State Finance, Pankaj Chaudhary, says that the 2023-24 budget will accommodate the expectations of all sections of society. Pradeep Misra, CMD – REPL, adds that infrastructure spending is likely to go up by 10% of GDP in the upcoming budget. Infrastructure spending will boost employment and generation of capital in the economy.

    • Finance Minister Nirmala Sitharaman will present the last full budget of this government today. According to Economic Survey, India’s GDP growth is expected to be in the range of 6-6.8% for 2023-24. The Centre also plans to reduce the fiscal deficit and bring it to the level of 5.8-5.9% from 6.4%.

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