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

19 May 2023

Five Interesting Stocks Today

Exide Industries: This automotive and industrial batteries manufacturer has risen 9% since announcing its Q4FY23 results on May 8, reaching its 52-week high on Wednesday. This price uptrend comes despite its net profit declining 95% YoY to Rs 181.1 crore and revenue increasing 3.9% YoY. The street has not been deterred by the sharp drop in its profitability, as the high base last year had played spoilsport. The firm’s profit stood at Rs 3,959.2 crore in Q4FY22 due to gains made from divesting its entire share in Exide Life Insurance Co. Excluding the gains from this divestment, the firm’s consolidated profit rose 28.9% YoY in Q4FY23.

The management is optimistic about its lithium-ion battery business, as it expects to have a first-mover advantage with lithium-ion battery manufacturing in India. The company's present order book for lithium-ion battery modules and packs manufacturing stands at Rs 600-700 crore, which will be executed in the next 12-15 months.

Subir Chakraborty, Exide Industries’ CEO, says that the company is setting up a 12 GWh (Gigawatt hours) lithium-ion cell manufacturing plant in Bengaluru for Rs 6,000 crore with its joint venture (JV) partner SVOLT Energy Solutions (one of the largest players in China). He adds that construction has already begun, and the factory will be operational by the end of FY25.

ICICI Direct believes that the company will benefit from sourcing technology and raw materials from its JV partner. The stock also shows up in a screener for companies with broker recommendations or target price upgrades in the past three months.

CreditAccess Grameen: This NBFC stock rose 7.8% and reached its 52-week high of Rs 1,212.7 per share after posting an 86.4% growth in net profit in Q4FY23 on Wednesday. Its net interest income (NII) has expanded by 32.7% YoY to Rs 689.8 crore, while the net interest margin (NIM) improved by 90 bps YoY. The stock has risen 25.1% over the past month, helping it to show up in a screener of stocks that have gained more than 20% in one month.

The lender’s gross loan portfolio (GLP) stands at Rs 21,031 crore, reflecting a 26.7% YoY growth; Its asset quality has also increased, with gross and net NPAs declining by 240 bps YoY and 40 bps YoY, respectively. According to the management, the growth in its loan portfolio is supported by strong customer additions, and the addition of branches in newer geographies. The cost of borrowing for the lender has, however, increased due to rising repo rates over the past year.

Axis Securities maintains its ‘Buy’ rating on the stock, with an upgraded target price of Rs 1,315. This indicates a potential upside of 21%. The brokerage believes that the lender’s strong growth in GLP and a stable cost structure, helped by falling credit costs, will contribute to the expansion of the company’s NIM.

Karur Vysya Bank: This bank’s stock price has grown by 9% and is trading near its 52-week high since it posted results on Monday. Its Q4FY23 net profit increased by 58.3% YoY to Rs 337.8 crore and beat Trendlyne’s Forecaster estimates by 16%. But it missed revenue estimates by 25.1%. The bank's net interest income increased by 25.7% YoY during the same period.

Karur Vysya Bank's gross non performing assets (NPA) fell by 376 bps YoY to 2.3% in Q4. In value terms, gross NPAs stood at Rs 1,458 crore, down from 57.5% YoY. As a result, the company features in a screener for stocks with decreasing NPAs. The bank’s total loan advances increased by 16% YoY.

Despite the decline in NPAs, its provisions doubled in Q4, indicating preparations for contingencies. Speaking about NPAs, Managing Director Ramesh Babu says that lower slippages of NPAs and a better collection system should help them keep their credit cost at 75 bps for FY24.

ICICI Securities maintains a ‘Buy’ call on Karur Vysya Bank due to its competitive advantage in terms of cost of deposits over peers, a balanced loan book, broad-based growth, and superior return ratios. According to Trendlyne’s Forecaster, the bank has a consensus recommendation of ‘Strong Buy’ from eight analysts.

Amber Enterprises: This consumer electronics company surged 14% on Wednesday on the back of robust Q4FY23 results. Due to the rise in stock price, the company features in a screener of stocks with strong momentum. The company’s net profit has increased 81.7% YoY to Rs 104 crore in Q4, beating Trendlyne’s Forecaster by 46.3%. Its revenue also improved 38% YoY. As a result, it makes it to a screener of companies with increasing net profit and profit margin YoY.

The strong performance can be attributed to the addition of new clients in the electronics and RAC (room air conditioner) divisions, with the RAC segment contributing 79% to the company’s total revenues.

Commenting on the results and performance, Jasbir Singh, Chairman & CEO, says that the company’s RoCE is expected to improve from 15% in FY23 to 19-21% in the next few years.

Amber Enterprises’ management is targeting to deliver a growth of 10-15% in the core RAC business in FY24, while anticipating growth rates of 35-40%, 20-25% and 15-20% respectively for the electronics, motors and mobility divisions. However, they also expect a muted performance in Q1FY24 due to unseasonal rains in North India.

Following the results, BoB Capital maintains its ‘Hold’ rating but raises the target price to Rs 2,260. The brokerage anticipates better growth in the company’s new verticals but remains cautious of high competition, and the impact of unseasonal rains on the AC business.

Ceat Ltd: Theauto tyres and rubber products firm has seen its share price increase by33.9% in the past month, while the broaderNifty Auto index saw a 5.9% rise. The firm reported an 11% YoY increase in its revenue, led by the replacement market. It also saw strong demand in export and OEM markets. A stronger dollar has also added to the top line. Ceat is expanding into off-road, truck, and bus tyres in the US, Canada and South America, in addition to its existing European market. Ceat tyres will be categorised under the mid-premium category in the US. Currently, the export market contributes 18% of the revenue.

The firm has witnessed a margin expansion of 553 bps YoY to 13.1%, from lower raw material costs (which were 9% lower) and a better product mix. The firm has increased its market share in the passenger car radial segment from 13.4% in Q3FY23 to 14.2% in Q4FY23. Strong CV and PV markets are expected to drive the firm’s top line in FY24. Ceat shows up in a screener for stocks with strong momentum and price above short-term and long-term moving averages.

The firm has a planned capex of Rs 700 crore towards agri-radial tyres and other downstream products. The management is positive about volume growth in off-highway tyres and margin expansion led by speciality tyres.

Prabhudas Lilladher says that the margin expansion has been led by lower raw material costs; however, margins are expected to moderate once the benefits of lower input costs are passed on to end customers. Ceat expects to see a better replacement market and export mix in FY24.

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

The Baseline

17 May 2023, 11:36PM

Good things come in small packages: 7 smallcap stars | Screener of recently upgraded stocks

By Deeksha Janiani

There' was a lot of optimism around global growth at the beginning of 2023. China was reopening post Covid, inflation was slowing in the EU and US. India's rise was also being noticed by many analysts - "India is on the move", the writer Noah Smith declared.

But it's May now, and some of that early cheer has wilted in the heat. Germany, Europe's growth engine, is slowing down, China's reopening bump has faded, and Nomura in its recent report said that India is also affected. “India is on the cusp of a macro change," Nomura wrote, "moving from a 'high growth, high inflation' regime to a 'low growth, low inflation' one.”

India's retail inflation dropped to 4.7% in April (good), but industrial output stayed flat in March (not so good).

Financial organisations now forecast India’s GDP growth rate falling to 6% on average in FY24. They aren’t as optimistic as the RBI, which raised its growth forecasts slightly in April.

Signs of a slowdown are also visible in the Q4 results. According to India Inc’s Q4 results so far, net profit growth has fallen to single digits due to weaker sales growth, higher interest costs, and depreciation. On the positive side, industries like cement, paints and auto have seen margins improve as their input costs declined.

Even with growth decelerating, some companies have achieved industry-beating performance in Q4 and are confident of their prospects in the year ahead.

In this week’s Analyticks:

Smallcap stars: Industry outperformers which are forecasting good growth in FY24
Screener: Stocks which saw recent broker target price or recommendation upgrades

Let’s get into it.

When good things come in small packages: Seven smallcap stocks that are beating their industries

Size isn't everything. Tendulkar was the 'Little Master' of cricket for decades - his height was probably the only area where he underperformed compared to the other cricketers.

Some companies in the smallcap index are similar outperformers. We identify seven stocks from the BSE SmallCap that have beaten their respective industries in terms of both top-line and bottom-line growth in Q4. These companies also have a positive growth outlook for the future.

Syngene International to benefit from global supply chain shifts

Pharma player Syngene International beat consensus net profit estimates by 18% in Q4. Its growth was driven by its strong performance in both research services and contract manufacturing.

Commenting on the demand environment, Jonathan Hunt, CEO at Syngene, said, “We have seen a weaker funding environment for biotech startups in the US. So they are much more cost conscious and are looking to make sure that the funding they have can go a long way. That’s not a bad thing for Syngene as we are cost-competitive”.

The company’s management has guided for a 17%-19% growth in FY24 revenue (dollar terms). However, net profit growth may be lower due to a change in the tax rate. But analysts expect Syngene’s profits to rise by over 25% in rupee terms.

KPIT Technologies to gain from changing auto priorities in FY24

This tech player, which serves the auto space, outperformed the industry’s net profit growth by more than 30 percentage points in Q4. KPIT Tech’s strong performance in both top line and bottom line, with over 35% growth, was driven by the European markets.

Going forward, the company’s management is confident of clocking 27%-30% revenue growth (in dollar terms) in FY24. Its focus remains on getting more business from existing clients.

With auto OEMs working to reduce the number of electronic control units in vehicles, KPIT sees a big opportunity. It expects OEMs to spend $40 billion annually over the next 5-7 years to build centralized software architecture.

Market share gains, capacity additions to boost Blue Star’s growth

Blue Star surpassed its industry’s revenue and net profit growth by over 15 percentage points (excluding extraordinary gains) in Q4. Its growth was driven by its unitary products segment, which includes room ACs and commercial refrigerators.

The company sees the room AC market growing at a CAGR of 20% in the next three years, as summers keep getting hotter. Its own business will grow even faster aided by market share gains. To capture a higher share, Blue Star plans to spend Rs 500-600 crore in capex in the next two years.

Analysts are optimistic about the company and expect it to clock bottom-line growth of over 40% in FY24, backed by healthy sales and margin improvement.

Craftsman Automation set to see growth in all segments in FY24

Craftsman outperformed the auto parts industry’s net profit growth by over 90 percentage points in Q4FY23. This was partly due to the acquisition of DR Axion India in the quarter.

Going forward, the company sees all its segments - powertrain, aluminum die-casting, and industrial engineering - growing by at least 20% in FY24. The demand for off-highway commercial vehicles and trucks is expected to be the driver for its powertrain business.

Analysts predict over 40% top-line and bottom-line growth in FY24. Their estimates are high as they see DR Axion contributing an additional 20-25% to its revenues.

Glenmark Life set for a turnaround in FY24

Glenmark Life delivered an impressive earnings performance in Q4. It beat analyst estimates on net profit growth by 35%. However, the API maker posted lackluster growth in FY23, due to inventory rationalization undertaken by its parent company, and contract manufacturing clients.

During a recent earnings call, Yasir Rawjee, Managing Director at Glenmark Life, commented, “Glenmark Pharma was in inventory tightening mode. But they have finished that. So, we began to see very good demand from them in Q4, which will be sustainable.”

The company’s management has guided for 12%-14% top-line growth in FY24 and plans to double its reactor capacity by FY26. Analysts' growth expectations are similar.

Newgen focuses on larger deal wins

Newgen Software beat the IT industry’s net profit growth by over 35 percentage points in Q4. It also delivered a double-digit earnings surprise. Its growth was driven by the India and Middle East markets.

The company is now focussing on winning more business from existing clients and pulling in larger accounts. Commenting on the latter strategy, Virender Jeet, CEO at Newgen, said, “Initially in the US, we focused on banks which were sized from $1 billion and up to $20 billion. We have now started focusing on banks which are at least $10 billion”.

Newgen has set a minimum revenue growth target of 20% in FY24. However, analysts are slightly conservative here.

Stylam Industries announces new capex plans

This laminates maker outperformed its industry’s net profit growth by over 50 percentage points in Q4. Growth was fueled by a jump in exports and healthy growth in the domestic markets.

Stylam is planning a greenfield expansion involving an outlay of Rs 150 crore in FY24. This has a sales potential of Rs 500 crore. Including Stylam’s ongoing brownfield expansion, its overall capex spends will be around Rs 170-176 crore.

Going forward, the company sees a resilient export market and expects strong demand from new home construction in the domestic market. Analysts expect the company’s bottom line to rise over 25% in FY24.

Screener: Stocks which saw recent broker target price or recommendation upgrades

This screener shows stocks which have received broker upgrades for target price and recommendationin the past month, while also boasting a high analyst rating.

Stocks from the banking, NBFC, hotels, gems & jewellery and personal products industries feature in the screener. Major stocks in the screener are Cholamandalam Finance, ICICI Bank, Titan, Indian Hotels and SRF.

Chola Finance stands out with seven target price upgrades from brokers over the past month. These upgrades were driven by the company’s impressive growth in Q4 and improving asset quality. With an average broker rating of 4.6, it leans towards a ‘Strong Buy’ consensus.

ICICI Bank has received six target price upgrades from brokers in the past month. This comes as a result of its strong growth in Q4 net profit and continued investments in its digital capabilities. The stock has an average broker target price upside of nearly 20%.

Titan has six target price upgrades and one recommendation upgrade from brokers in the past month. Brokers remain positive on the stock following the Q4 results, citing strong demand trends in jewellery and scalability in wearables, eyewear and Taneira.

You can find some popular screenershere.

The Baseline created a screener test

16 May 2023

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The Baseline

16 May 2023

Five analyst picks trading in the PE Buy Zone post Q4 results

By Suhas Reddy

This week, we take a look at five analyst picks trading in the PE Buy Zone (a stock is in the PE Buy Zone if it is trading at a PE lower than its historical PE average). These stock picks also have PE TTM lower than their respective industry, as well as revenue and profit growth of more than 10% YoY.

Chalet Hotels: IDBI Capital maintains its ‘Buy’ rating on this hotel chain with a target price of Rs 457, implying an upside of 9.2%. The company is trading in the PE Buy zone and its current PE TTM is lower than the hotel industry’s PE average. Over the past year the company has gained 45.5%.

In Q4FY23, Chalet posted a net profit of Rs 39.3 crore, an improvement compared to a loss of Rs 11.6 crore in Q4FY22. Its revenue has also jumped 128.3% YoY.

Analyst Archana Gude states that the firm beat her estimates on various key parameters and “the company continued its robust operational performance in Q4FY23 as well, which resulted in highest-ever quarterly net sales and best ever margins”. The analyst believes that the company’s foray into the leisure segment by acquiring Dukes Retreat, Lonalvla, is encouraging, as it will add inventory, particularly in an industry facing rising demand and supply shortages.

The analyst believes that the hotel is well-placed to benefit from the growing demand for corporate travel in the near term. She anticipates the company’s revenue to grow at a CAGR of 21.5% over FY23-25.

Equitas Small Finance Bank: ICICI Securities keeps its ‘Buy’ rating on this bank and increases its target price to Rs 100 from Rs 70. This implies an upside of 27.1%. The stock is trading in the PE Buy zone, and its current PE TTM is lower than the banking industry’s average. Over the past year the stock rose by 44.2%.

In Q4FY23, the bank’s net profit rose 59% YoY to Rs 190 crore and revenue grew by 29%. Analysts Renish Bhuva, Jai Prakash Mundhra and Chintan Shah attribute the bank's profitability growth to a sustained rise in advances, stable NIMs, and a decline in the cost/income ratio. They believe that continued investments towards building capabilities and new product launches have aided growth momentum. They add, “Disbursements in its newly launched products (e.g. affordable housing, used car financing, etc) continue to gain momentum”.

Bhuva, Mundhra and Shah highlight that the bank’s asset quality has improved on the back of slippages moderating sharply in Q4. They are also optimistic about the bank’s ability to maintain its credit cost within its guided range of 1.2%-1.25% in FY24. The analysts expect the bank’s net profit to grow at a CAGR of 42.1% over FY23-25.
Craftsman Automation: Motilal Oswal reiterates its ‘Buy’ call on this auto parts manufacturer with a target price of Rs 3,950, indicating an upside of 12.8%. The company is currently trading in the PE Buy Zone, and its PE TTM is lower than the auto parts and equipment industry’s average. Its price changed by 59.9% in the past year.

In Q4FY23, Craftsman Automation’s profit grew by 50.9% YoY to Rs 77.7 crore, and revenue increased 49.1% YoY. According to analysts Jinesh Gandhi, Amber Shukla and Aniket Desai, the company’s growth has been driven by the auto powertrain, Al products and Industrials & storage segments.

The analysts say, “Craftsman’s track record of creating and gaining market leadership organically is uncommon in the auto component industry.” They believe that this has enabled it to deliver a good balance of strong growth and superior capital efficiency. The analysts expect growth in the aluminum division and industrials to drive overall growth in FY24/25. They estimate consolidated revenue and profit CAGR of 27% and 37%, respectively, for FY24-25.

Mahanagar Gas: ICICI Direct maintains its ‘Buy’ call on this utilities provider with a target price of Rs 1,300, indicating an upside of 22.5%. The company is currently trading in its PE Buy Zone, and its PE TTM is lower than the non-electrical utilities industry average. Its price rose by 44.5% in the past year.

In Q4FY23, Mahanagar Gas’s net profit increased by 103.9% YoY to Rs 268.8 crore and its revenue grew by 35.8% YoY to Rs 1,644.1 crore (in line with the brokerage’s estimate).

Harshal Mehta and Payal Shah note that the company has passed on the benefits of revised APM gas prices to its customers while still maintaining profitability. In Q1FY24, spot LNG prices have further softened. Owing to these reasons the analysts say, “growth in sales volume will be a key factor to monitor, going ahead.”

Mehta and Shah remain positive as they believe Mahanagar Gas will benefit from India’s aim to increase the share of natural gas in the energy mix from 6% to 15% by 2030, and also due to the company’s debt-free balance sheet and consistent dividend payout.

DCB Bank: Axis Securities maintains its 'Buy' rating on this bank with a target price of Rs 140, indicating an upside of 20.5%. The company is currently trading in the PE Buy Zone, and its PE TTM is lower than that of the banking industry. Its price rose by 39.1% in the past year. In Q4FY23, DCB Bank's operating revenue increased by 28.19% YoY to Rs 1,179.28 crore, and its net profit grew by 25.36% YoY to Rs 142.21 crore.

According to analysts Dnyanada Vaidya, Prathamesh Sawant, and Bhavya Shah, DCB Bank will sustain its growth momentum as it looks to double its balance sheet in the next four years. They believe the bank is on track to deliver a 1% RoA and an RoE of 11-13% over the medium term.

The analysts expect advances growth of 18% CAGR over FY24-25 due to strong traction in disbursements with continuous sequential growth. They opine that the stock currently trades at attractive valuations as the bank aims to double its balance sheet to Rs 1 trillion in four years.

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

(You can find all analyst picks here)

The Baseline

15 May 2023

Chart of the week: FPIs turn positive on Indian equities after selling for the first two months of 2023

By Abdullah Shah

Foreign portfolio investors (FPIs) have been net buyers in the Indian equity market in April, the second consecutive month in 2023 after selling equities earlier in the year due to the Adani-Hindenburg debacle.

FPIs started buying Indian equities in November 2022, as they turned optimistic with falling inflation and slowing rate hikes. We take a look at the sectors that have attracted them to the market over the past twelve months.

In April 2022, the market saw a sell-off of Rs 17,141 crore from FPIs, on the back of rising interest rates and inflation. The financial services and IT sectors had the highest outflows of Rs 12,891 crore and Rs 8,579 crore respectively. However, FPIs invested Rs 5,231 and Rs 1,756 crore in the healthcare and FMCG sectors respectively, indicating that they shifted towards a defensive play due to fears of an economic downturn.

June 2022 saw a massive selling spree that resulted in Rs 50,203 crore being wiped out from the market. All major sectors witnessed an outflow with the financial services and IT sectors experiencing the largest outflows.

However, FPIs became net buyers of equities in August 2022, as companies posted strong results for the June quarter. The month saw a net inflow of Rs 51,206 crore, with investments in all sectors. Financial services and healthcare had the largest investments of Rs 12,799 crore and Rs 8,509 crore, respectively, in August.

However, there were two more months of outflows from FPIs in September and October. This trend reversed in November, as FPIs became net buyers with an inflow of Rs 36,240 crore in equities. Financial services had the highest investment of Rs 14,205 crore that month, while sectors like FMCG, IT, automobile & auto components and consumer services saw a healthy inflow.

FPIs made these investments with the hope that rate hikes would slow down due to falling inflation. This sentiment continued in December 2022, with FPIs net buyers of Rs 11,120 crore in equities.

In contrast FPIs sold equities worth Rs 28,851 crore in January 2023, with Indian markets losing ground to China as lockdown restrictions there were lifted. The second half of January was marred by the explosive Adani-Hindenburg saga, which further discouraged foreign investors. Financial services and oil, gas & consumable fuels sectors saw the highest outflows of Rs 15,204 crore and Rs 7,596 crore respectively during the month.

In the past year, FPIs have made a net investment of Rs 11,629 crore in the market as inflation and rate hikes have eased up. Most of the major sectors had a net inflow during the month, with financial services attracting the highest investment and IT experiencing the highest outflow.

The Baseline

12 May 2023

Five Interesting Stocks Today

Godrej Consumer Products: This FMCG company is trading near its 52-week high of Rs 992.5 after reporting strong Q4 results on Thursday. Godrej Consumer’s net profit has grown 24.5% YoY to Rs 452.1 crore, beating Trendlyne’s Forecaster estimates by 1.8%. Its revenue also increased by 10% YoY, led by a volume growth of 6%. The personal care (which contributes to 58% of total revenue) and home care (39% of total revenue) segments grew by 17% and 14% respectively.

Commenting on the results, Managing Director and CEO, Sudhir Sitapati, says that the performance is broad-based, with the India-branded business experiencing a 13% increase in volumes.

In International markets, the Africa, USA, and Middle East cluster delivered 8% sales growth, while the Latin American region witnessed a 3% decline. The performance in Nigeria was impacted by the election and demonetisation.

Post the results, ICICI Securities maintains its ‘Add’ rating and raises the target price to Rs 1,050, implying an upside of 6.9%. The brokerage believes that Godrej Consumer’s margins have improved, led by a moderation in input costs. As a result, the company features in a screener of companies where brokers have upgraded their recommendations or target prices in the past three months.

KEI Industries: This electrical cables and wires manufacturer has risen 10.8% till Friday since announcing its Q4FY23 results on May 2. Its net profit rose 19.1% YoY to Rs 138.1 crore and revenue grew 9.1% YoY in Q4, driven by growth across all its segments. This healthy performance has enabled the stock to show up in a screener for companies with net profits rising sequentially for the past three quarters. According to Trendlyne’s Forecaster, the consensus recommendation from 13 analysts on the company is ‘Buy’.

The company’s sales volume increased by 13% YoY on the back of lower metal prices, but this also meant selling prices fell in Q4FY23. However, the decline in raw material costs boosted its EBITDA margin by 66 bps YoY to 10.7%. Also, the management’s focus on increasing the contribution of the retail and extra-high voltage segments towards revenue aided margin expansion.

The management believes that the firm is well-placed to capitalise on the Centre’s infrastructure push, given its capex plans to increase production capacity. Anil Gupta, Chairman and MD of KEI Industries, says, “We'll be spending around Rs 250 crore to Rs 300 crore every year over the next three years to maintain a revenue CAGR of 17% to 18% per annum, as against achieved CAGR of around 15% during the last 15 years.” He adds that the capex requirements will be entirely funded by internal accruals. The management aims to improve EBITDA margins by increasing retail sales, exports, and optimising costs in the coming quarters.

Shoppers Stop Ltd: Thisretailing firm owned by Raheja group has a pan-India presence with 280 stores in 54 cities, and an online channel that contributes to nearly 33% of its revenue. According to Trendlyne Technicals, its share price has increased 13.5% in the past month. Shoppers Stop has expanded itself in major Tier 1 and Tier 2 cities, which are high-growth areas with major sales in private brand labels. The firm has done Rs 280 crore capex for store expansion and technology, and plans a capex of Rs 150-200 crore for FY24.

In Q4FY23, Shoppers Stop reported its highest-ever revenue and gross margins at Rs 1,175 crore and 43.2% respectively. The increase in the volume mix of private labels has been driving margins, with revenue from the private brand and beauty segments growing 35% and 29% YoY respectively. The firm’s average transaction value (ATV) per customer and average selling price of products (ASP) grew 6% (to Rs 4,086) and 9% YoY (to Rs 1,540), respectively. This has led to growth in the bottom line. The firm increased its Q4FY23 profit by 35% YoY by pruning loss-making stores and optimizing store sizes and its distribution network.

It expects growth in its beauty segments and categories (loungewear, innerwear, athleisure) by partnering with international brands. The stock shows up in thescreener for stocks that have been efficiently managing their assets to generate profits and improve ROA over the past two years.

HDFC Securities says Shoppers Stop’s aggressive focus on store expansion and assortment management reflects its outperformance in key performance indicators. However, business relevance and longevity remains an open question, as the company directly contends with deep-pocketed e-tailers. The brokerage has maintained a ‘Sell’ rating on the stock on account of higher valuation.

Escorts Kubota: This commercial vehicles manufacturer traded lower on Tuesday and Wednesday but recovered on Thursday. However, the stock closed 0.34% lower on Friday. Its Q4FY23 earnings report showed a 14% YoY increase in consolidated net profit to Rs 216.4 crore. However, the company still faces challenges due to the high cost of materials, with input costs rising 38% YoY in Q4. Despite this, the stock gained 4% in the past week, outperforming the automobiles & auto components sector by nearly 1%.

The company’s domestic wholesales have fallen 5.5% YoY in FY24, according to its recent business update. Its exports fell by more than 50%. Retail sales were also impacted by unseasonal rainfall and crop damage in certain regions. However, the management remains positive about demand revival and expects rural demand to bounce back in Q2FY24, driven by better crop prices. Bharat Madan, CFO of Escorts Kubota, says the company is targeting a 25% growth in exports in FY24, once supply chain issues ease up.

The management plans to double tractor capacity and invest Rs 350 crore in capex (a 40% YoY increase) in FY24. With the government's continued support for infrastructure projects and strong demand, the company's earnings are expected to improve. The management expects margins to improve further as commodity prices decline. It also forecasts mid-single-digit growth in wholesales in FY24. According to Trendlyne’s consensus recommendation, five analysts maintain a ‘Buy’, seven recommend ‘Hold’, and 10 maintain ‘Sell’ on the stock.

Dr. Reddy's Laboratories: This pharmaceutical company announced its Q4FY23 results on Wednesday, reporting a significant increase in net profit to Rs 960.1 crore – up nearly 10x YoY. The surge in profit was due to a high base of expenses on the impairment of non-current assets in Q4FY22, when the profit had fallen 82.6% YoY.

The impairment cost of non-current assets decreased from Rs 741 crore in Q4FY22 to Rs 54 crore in Q4FY23. If the charges are adjusted, the profit has risen only 22.3% YoY during Q4FY23. According to the Q4FY22 earnings call, the high impairment charges were partially caused by the decrease in market potential of Tepilamide Fumarate Extended-Release Tablets (PPC-06) valued at Rs 430 crore, and also the impairment of Shreveport plant assets and goodwill of Rs 310 crore.

Even with the adjustment, the pharma company is still profitable in YoY terms. Its revenue increased 15.3% YoY to Rs 6,453.7 crore. The management attributed the growth to new product launches, though it was partly offset by price erosion. Dr. Reddy's Laboratories features in a screener for stocks that have seen improvement in net profits, operating profit margin and revenues in recent quarters.

Despite the positive results, the company’s share price fell 8.2% since results, as it did not meet its estimates. According to Trendlyne’s Forecaster estimates, the pharma company missed net profit estimates by 6.3% for Q4FY23.

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

The Baseline created a screener Revenue and Net Profit …

12 May 2023

Revenue and Net Profit Surprise in Latest Quarterly Results

The Baseline

11 May 2023

Which stocks did superstar investors buy in Q4FY23?

By Abhiraj Panchal

Investors closely follow the portfolios of superstar investors to identify interesting trends and stocks to invest in. We take a look at some of the stocks superstar investors bought or added to their portfolios during Q4FY23.

The superstars tracked here have diverse investing interests, as can be seen in the chart below, which shows the sectors that make up the largest share of each investor’s portfolio.

Rare Enterprises favoured textiles, apparels and accessories sector, while Sunil Singhania preferred software and services, and Ashish Kacholia and Mohnish Pabrai preferred chemicals and petrochemicals. Vijay Kedia’s favoured sector was telecom services, Porinju’s preference was diversified consumer services, and Dolly Khanna preferred oil and gas.

Rare Enterprises (Rakesh Jhunjhunwala) adds two new stocks

Rakesh Jhunjhunwala’s portfolio fell 4.6% QoQ to Rs 31,988.1 crore in Q4FY23. The late big bull’s portfolio is currently being managed by his wife, Rekha Jhunjhunwala, and Rare Enterprises. Despite a slowdown in buying in Q4, the portfolio had two new additions, a fresh 1.9% stake in Sun Pharma Advanced Research Co, a clinical-stage biopharmaceutical firm, and a 5.2% stake in Raghav Productivity Enhancers, an industrial goods manufacturer.

Rekha Jhunjhunwala was also allotted 6 lakh shares of Raghav Productivity Enhancers upon the conversion of 6 lakh unsecured compulsorily convertible debentures (CCD). The unsecured CCDs were originally allotted to Rakesh Jhunjhunwala. The transfer brings her ownership to 5.2% of the company.

Rare Enterprises increased its stake in only one company in Q4. It bought an additional 0.1% stake in Titan Co, bringing its holding to 5.3%.

Sunil Singhania’s Abakkus Fund adds Uniparts India to the roster

Sunil Singhania’s Abakkus Fund’s net worth grew by 4.2% QoQ to Rs 2,166.1 crore in Q4FY23. It added heavy electrical equipment manufacturer Uniparts India to its portfolio by buying a 2.3% stake in the company. The fund also bought a 0.2% stake in Technocraft Industries (India), a commercial services and supplies company, increasing its total stake to 3.2%.

Abakkus Fund purchased a 0.2% stake each in industrial machinery company Dynamatic Technologies and IT consulting firm Mastek, increasing its stake in them to 2.8% and 3.2%, respectively. It also bought an additional 0.1% stake in Stylam Industries (forest products manufacturer) and Sarda Energy & Minerals (metal and mining company). It now holds 2.5% and 2.2%, respectively.

The fund also purchased minor stakes in Siyaram Silk Mills (now holds 2.1%), Ion Exchange (India) (total now 3.3%), IIFL Securities (3.2%), HIL (3.1%), Rupa & Company (4.1%), and Hindware Home Innovation (4.9%).

Ashish Kacholia adds one small-cap and one micro-cap company to his portfolio

Ashish Kacholia’s net worth fell by 11.6% QoQ to Rs 1,656.6 crore in Q4FY23. He added Aditya Vision and Virtuoso Optoelectronics to his portfolio, buying a 1.1% stake in the specialty retailing company and a 5.4% stake in the consumer durables manufacturer, respectively.

Apart from these, the marquee investor added a 0.2% stake in the transportation services provider Knowledge Marine & Engineering Works, taking his total stake to 2.5%. He also increased his stake in specialty chemical companies Fineotex Chemical and Yasho Industries to 2.8% and 4% respectively by buying a 0.2% stake in each. He also purchased a 0.2% stake in Garware Hi-Tech Films (containers and packaging company), increasing his stake to 4.2%.

Kacholia bought an additional 0.1% stake in Faze Three and Gravita India, and now holds 5.2%, and 2.2% respectively. He also increased his stake in Repro India.

Porinju Veliyath adds two new micro-cap companies

Porinju V Veliyath’s net worth declined by 12.5% QoQ to Rs 137.9 crore in Q4FY23. He added two new micro-cap companies to his portfolio – he bought a 1.1% stake in Ansal Properties & Infrastructure, a realty firm. He also purchased a 1.1% stake in Kovilpatti Lakshmi Roller Flour Mills, a flour milling company.

The ace investor increased his stake in Ansal Buildwell by 1.4% to 3.4%. He raised his stake in a special consumer services company, Kaya, by 0.6% to 3% in Q4, after previously adding 1% to his holding in Q3FY23.

Vijay Kedia buys a big stake in Atul Auto

Vijay Kedia’s net worth dropped 7% QoQ to Rs 596.1 crore in Q4FY23. He added a 1.3% stake of Patel Engineering (a construction and engineering company) and a 1.1% stake of Precision Camshafts (an auto parts manufacturer) to his portfolio during the quarter. The investor bought a 1.1% stake in Affordable Robotic & Automation in H2FY23, and now holds 13.4% of the company.

Kedia’s biggest buy of the quarter was adding a 6.9% stake in Atul Auto, an auto components manufacturer. He now holds an 8.4% stake in the company. He also increased his holding in Neuland Laboratories and Heritage Foods to 1.2% each by buying a 0.2% stake and a 0.1% stake, respectively.

Kedia bought a minor stake in Repro India and Siyaram Silk Mills during the quarter, and holds 7.1% and 1.1%, respectively.

Dolly Khanna’s cautious approach leads to minor changes in portfolio

Dolly Khanna’s net worth marginally dropped by 0.1% QoQ in Q4FY23, likely due to her bearish outlook given the market volatility. The investor added just one new company to her portfolio, Som Distilleries & Breweries, in which she acquired a 1.3% stake.

Khanna also increased her stake in Control Print, a commodity printing/stationery company, by a small margin.

Mohnish Pabrai adds stake in Edelweiss Financial Services for two consecutive quarters

Mohnish Pabrai’s net worth in Q4FY23 fell by 14.6% QoQ to Rs 1,054.2 crore. He bought an additional 0.2% stake in Edelweiss Financial Services and increased his holding to 6.7%. This marks the second consecutive quarter where Pabrai has added to his stake in Edelweiss, with no other changes made to his portfolio during the period.

The Baseline

10 May 2023

The New Oil: Shortages emerge in a key metal needed for EVs | Stocks outperforming post Q4 results

By Tejas MD

Sometimes it's hard to see how fast things are changing, until you take a step back. Look at transportation, for example. Electric vehicles used to be tiny, funny looking cars. Remember the Reva? Everything about the Reva was small - the battery life, mileage and leg room. You could sit in the backseat but not stretch your legs.

In the last ten years however, electric vehicles have become expensive, futuristic, and can walk like a crab into a parking space.

Electric cars are just one part of the big shift in the global energy landscape, as countries move from fossil fuels to renewable energy. Countries have set ambitious plans for how and when they will achieve 'net-zero' in emissions - the US and Europe plan to reach this goal by 2050, while India is targeting 2070. However, India also wants to decarbonize 50% of its energy consumption by 2030, just seven years from now. Hitting these targets will need bold regulation, as well as critical metals and minerals.

Electric vehicles (EVs) are gaining popularity fast, and their sales surged by 60% in 2022. Now one in every seven cars sold globally is electric, and this is set to increase as battery costs fall:

Despite the semiconductor shortageaffecting EV supply in 2021 and 2022, car buyers are snapping up electric vehicles. But the higher selling price of EVs, compared to traditional internal combustion engine (ICE) cars is a challenge. And a new chokepoint is now emerging: a copper supply crunch.

High EV demand is expected to drive up the price of copper to $15,000 per tonne by 2025 (approx 60% above current prices). Copper is becoming the ‘new oil’, and holds the key to the switch to electric.

In this week’s Analyticks:

The 'new oil': Copper supply shortage will hamper the move to electric
Screener: Outperformers of Q4, which beat analyst estimates and are beating the Nifty after strong results

Looming copper supply issues put clean energy at risk

Governments globally are pushing for more renewable energy use, to address the climate and energy crisis. This has led to growing demand for electric vehicles (EVs), solar panels and transmission cables.

Clean energy generation has high copper usage, typically four to six times more than fossil fuels. Electric cars and bikes in particular, rely heavily on copper for the motor coil that drives the engine.

As a result, copper demand is set to soar in the coming years. Bloomberg NEF predicts a copper supply deficit of more than six million tonnes per year by the early 2030s.

Countries are now scrambling to lock down imports and production of copper, the ‘new oil’. The world's attention is on top copper mining nations like Chile and Peru, which together produced about 34% of the total mined copper in 2022.

According to S&P Global, the US is expected to import over 60% of its copper by 2035. Amid growing concerns about political instability in Chile and Peru, the US is shifting its focus to the African continent.

In December 2022, US-based startup KoBold Metals announced plans to invest around $150 million to develop a new copper mine in Zambia. This is a significant move. Zambia is the second-largest copper producer in Africa, and China has the biggest presence there. China is Zambia’s largest infrastructure creditor, and also became the largest importer of copper ores in 2021. China imported over 34% of total copper by value globally in 2021.

India however, has been slow to secure copper resources. Khanij Bidesh India, a joint venture between three PSUs - National Aluminium Company, Hindustan Copper and Mineral Exploration and Consultancy - was formed to obtain the minerals critical for India’s industrial growth, but it has not been very successful.

Since the closure of the Sterlite copper plant in Tamil Nadu in 2018, which catered to around 40% of the domestic demand, India has been a net importer of copper. The plant's closure came after protests by locals, social and environmental activists who were worried about pollution. Vedanta-owned Sterlite Copper is now exploring plans to reopen the manufacturing facility.

As a net importer of copper, India could face shortages and fail to achieve its 30% EV vision by 2030. The country's copper demand is forecast to reach three million tonnes by 2030, even as it mines only 2.5% of the copper it needs.

Copper supply deficit will worsen amid demand growth and roadblocks to mining

A 2001 Copper Association report predicted a copper supply shortfall after 65 years, based on the production rate at the time. But the report did not account for the increasing demand for copper as technologies changed. Now, copper demand is expected to rise by more than 50% between 2023 and 2040. But the metal’s supply is projected to increase by only 16%.

A major driver of copper demand is the growth in electric vehicles. A decade ago, copper demand for transport was less than half of that in construction. By 2040, transportation demand is expected to be 33% higher.

S&P Global’s worst-case projection puts the copper shortfall at around 20% of consumption by 2035.

Although it seems logical for mining companies to raise production to meet growing demand, several factors make this difficult. A new copper mining project can take over ten years to complete and start production. In fact, no new copper discoveries are expected to be operational in the next three years.

Additionally, miners now use ore grades of 0.5% copper, a quarter of the concentration used a century ago, making mining more challenging and costly.

Nobody wants a mine in their backyard

Mining companies are not very popular, because of the environmental impact. In leading copper mining countries like Chile and Peru, mining firms are facing political unrest and disagreements over taxes. In August 2022, mining CEOs warned during investor calls that Chile must reduce a proposed tax increase on copper production or risk losing investments.

India needs to focus on ramping up its sources of copper, as the metal becomes central in the clean energy transition. As we already saw with Covid-era semiconductor shortages, supply chain issues can significantly impact manufacturing plans. The looming shortage of copper is no small problem. Countries like the US and China are proactively securing copper imports, and India must do the same.

Screener: Outperformers of Q4, which beat estimates and are on the rise

In this edition, we look at a screener of stocks that have outperformed the Nifty 50 over the past week. These stocks have also seen a rise in operating profits, while beating Trendlyne's forecaster estimates for revenue or net profit in Q4FY23.

The screener includes stocks from the automobiles & auto components, oil & gas, banking & finance and hotels, restaurants & tourism sectors. Major stocks that show up in the screener are Bajaj Auto, Indian Hotels, Sona BLW Precision Forgings, IndiaMART InterMESH, KEI Industries and AU Small Finance Bank.

Bajaj Auto surpassed Forecaster’s revenue estimates by 5.2%, with a revenue of Rs 9,192.7 crore in Q4. The auto company saw a 21.8% YoY improvement in its operating profit, and increased its operating profit margin by 150 bps YoY to 18.5%. The stock rose 2.7% over the past week, outperforming the Nifty 50 index by 150 bps.

Indian Hotels’ revenue grew by 73.3% YoY to Rs 1,654.5 crore in Q4FY23, beating Forecaster estimates by 4.2%. The hotel company’s operating profit increased by an impressive 236.8% YoY, and the operating profit margin surged by 14.7 percentage points YoY to 32.9%. The stock rose 9.1% over the past week.

Sona BLW Precision Forgings saw its revenue increase by 32.6% YoY to Rs 748.5 crore in Q4FY23, beating estimates by 2.7%. The company’s operating profit grew by 48.8% YoY, helping its operating profit margin rise 246 bps YoY to 27.1% during the quarter. "I hope I never get tired of saying this," CEO Vivek Vikram Singh said, "but this was our best quarter ever, and our best financial year ever." The stock rose by 8.3% over the past week.

You can find more screeners here.

The Baseline

09 May 2023

Five analyst picks that outperformed Nifty 50 over the month

By Abhiraj Panchal

This week in analyst picks we look at companies that relatively outperformed the Nifty 50 over the past month:

Supreme Industries: Geojit BNP Paribas upgrades its rating on this plastic products company to ‘Buy’ from ‘Hold’ and raises the target price to Rs 3,223 from Rs 2,703. This implies an upside of 15.7%. The firm has outperformed the Nifty 50 index by 3.6% over the past month. In Q4FY23, its net profit increased by 11% YoY to Rs 359.4 crore and revenue grew 1.6% YoY.

Analyst Anil R is optimistic about this stock, as its Q4 performance has exceeded expectations on the back of a 15% YoY increase in volumes. He sees this volume growth as driven by strong demand in the housing and agricultural sectors. The expansion of the firm’s EBITDA margin by 320 bps YoY to 18.5%, led by stable raw material prices, he notes, is a key positive.

Given the softening of raw material costs, the analyst anticipates healthy margin and profit growth in the coming quarters. “Stable demand from the housing & agriculture sectors will continue to drive volume & revenue going ahead,” Anil adds. He expects the company’s revenue to grow at a CAGR of 11.4% over FY23-25.

IDFC First Bank: ICICI Direct retains its ‘Buy’ call on this bank as valuations look reasonable, and gives it a target price of Rs 75. This indicates an upside of 15.5%. The bank has outperformed the Nifty 50 index by 13.7% in the past month. In Q4FY23, its profit increased by 131.7% YoY to Rs 816.1 crore, while its revenue grew 45.3% YoY.

IDFC First’s share price rose by 60% in the past year. Customer deposits grew by 46.8% YoY to Rs 1.36 lakh crore, which according to analysts Kajal Gandhi, Vishal Narnolia and Pravin Mule was led by a 41% YoY rise in CASA. The analysts say, “Credit growth continued to remain strong and ahead of industry growth, coupled with a gradual improvement in cost to income.” They also believe that the bank has steady asset quality – Return on Assets reached 1.1% in FY23, and the analysts expect it to improve to 1.3% in FY24.

Godrej Properties: Motilal Oswal reiterates its ‘Buy’ call on this realty company with a target price of Rs 1,575, indicating an upside of 15.1%. The company has outperformed the Nifty 50 index by 22.4% in the past month. In Q4FY23, Godrej Properties posted a net profit growth of 58.2% YoY to Rs 412.1 crore, while its revenue increased by 20.8% YoY. According to analysts Pritesh Sheth and Sourabh Gilda, the revenue was driven by strong completion and they expect the company to sustain its improved profitability level

The realty company reported pre-sales of Rs 4,000 crore in Q4 (up 25% YoY and 12% above the brokerage's estimates). For FY23, the bookings surpassed its full-year guidance by Rs 2,200 crore, say the analysts. They add, “The company continues to provide strong visibility on pre-sales growth with sustained aggression in business development activity as it is targeting to add Rs 15,000 crore worth of new projects in FY24.”

Mold-Tek Packaging: IDBI Capital upgrades its rating on this containers and packaging company to a ‘Buy’ with a target price of Rs 1,252. This indicates an upside of 26.8%. It has outperformed the Nifty 50 index by 1.3% in the past month. In Q4FY23, the company’s profit increased 23% YoY to Rs 23 crore and its revenue grew marginally by 3.7% YoY. The results were in line with the brokerage's estimates on key parameters, says Archana Gude. According to her, the Q4 sales volume off-take was impressive due to weak demand in Q3 and low-base sales. The management has also guided sales volume to be in the range of 15%-20% in the near term.

Gude says, “Mold-Tek Packaging’s strategy of timely capacity expansion and entry into high-value products have been key drivers of sustainable earnings growth of the company.” She believes that expansion into the northern markets will pave the way for further improved earnings. She expects this expansion, along with healthy earnings growth, will lead to decent returns for the stock.

Kotak Mahindra Bank: KRChoksey keeps its ‘Buy’ rating on this bank with a target price of Rs 2,330, indicating an upside of 7.5%. The company has outperformed the Nifty 50 index by 6.6% over the past month. In Q4FY23, the firm’s net profit rose by 26.3% YoY to Rs 3,495.6 crore and revenue grew by 39% YoY.

Analyst Abhishek Agarwal believes that the bank’s healthy performance in Q4 has been driven by robust growth in net interest income, lower expenses and improved asset quality. This led to lower provisions and further strengthened the balance sheet. He adds that the bank continues to be a market leader in terms of the CASA ratio.

Agarwal says, “Overall, on the credit side, the bank is optimistic about the demand trajectory in the upcoming quarters, with improved contributions from high-margin segments.” For the coming quarters, Kotak Mahindra will continue to invest in digital capabilities and expand its branches, according to the analyst. He expects the company’s net profit to grow at a CAGR of 12.7% over FY23-25.

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

(You can find all analyst picks here)