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

24 Feb 2023

Five Interesting Stocks Today

Samvardhana Motherson International: This auto parts & equipment company’s share price has been on an uptrend since Monday, after its step-down subsidiary signed an agreement to acquire a 100% stake in SAS Autosystemtechnik at an enterprise value of 540 million euros (Rs 4,790 crore). As a result of the share price rise, the company features in a screener of stocks trading above their short-, medium- and long-term moving averages.

Based in Germany, SAS is a leading provider of cockpit module assemblies for cars. This acquisition will help Samvardhana improve integration in the automotive supply chain, increase customer proximity and diversify its products. Europe is a key market for Motherson, accounting for 60% of its revenues.

Vivek Chaand Sehgal, Chairman of Samvardhana Motherson International, said that the acquisition will help in diversifying the customer base and products. It will transform Motherson Group into a leading assembler of cockpit modules globally, with a special focus on EV models.

Analysts believe that the acquisition is in line with Samvardhana's strategy to expand its product line and enhance its footprint in the European market. ICICI Securities maintains its ‘Buy’ rating on the stock post the acquisition announcement. The brokerage believes the acquisition will help the company improve its logistical practices and, in turn, save costs and add new business opportunities.

Bharat Dynamics: The Aero India event has helped this defence company takeoff. It has risen 22.2% over the past week on the back of multiple memorandum of understanding (MoU) contracts from Indian as well as foreign companies at Aero India 2023. It also won an export order worth $255 million (approximately Rs 2,108 crore) on Monday. This order will be added to the company’s already strong order book of Rs 11,906 crore as of November 2022. The company features in a screener of stocks near their 52-week highs with significant volumes.

However, the share price had previously fallen around 10% in five trading sessions starting February 7 after it announced Q3FY23 results. Its net profit declined 60.7% YoY to Rs 213.3 crore in Q3FY23 and revenue also fell 42.6% YoY to Rs 461.6 crore. Talking about the result, the management said, “Supply of certain electronic components was delayed due to the Russia-Ukraine conflict, and this impacted the performance during the period. The company is exploring alternatives to mitigate the impact.”

ICICI Securities remains bullish on the stock and maintains its ‘Add’ rating with a revised target price of Rs 955, despite slower-than-expected order inflows during 9MFY23. The broker believes that the company is likely to benefit from several defence procurement opportunities in the pipeline.

The company has also launched several new products at Aero India 2023. It ranks high on Trendlyne’s checklist with a score of 56.5%, while the broker consensus on the stock is ‘Buy’.

United Breweries: This breweries and distilleries stock has fallen 1.5% in the past week. On the technical front, the stock is trading down 7.7% over a month, 13% lower in the past 3 months and 5% lower over the year. It shows up in a screener of weak momentum stocks where the price is below short-, medium- and long-term averages.

United Breweries faced two major incidents this week. Its Managing Director & CEO Rishi Pardal resigned on February 17 (the announcement came in after market hours), causing the stock to fall 2% in trade on Monday. But the stock held its ground during the second incident: The Supreme Court (SC) stayed a penalty order from the National Company Law Appellate Tribunal (NCLAT) and the Competition Commission of India in an alleged beer cartel case against the company. However, the SC has directed the company to pay a 10% additional penalty over and above the 10% paid to NCLAT. The total fine slapped on the company is around Rs 873 crore.

Its Q3FY23 results have not been encouraging either. It reported a net loss of Rs 2 crore on lower sales volumes, especially in Tamil Nadu and Andhra Pradesh, triggering an impairment review by the company. It reported an exceptional loss of Rs 33 crore on its profit and loss statement, which is the amount of impairment of property, plant and equipment. The management, in its earnings call, says that they are not planning a restructuring in these states yet, but will improve sales volumes in the coming quarters. High raw material costs (up 22% YoY) and an increase in excise duty have also led to rising expenses eating into earnings.

The stock shows up in a screener of stocks with declining revenue for the past two quarters. However, Trendlyne’s consensus recommendation of February shows that 10 analysts recommend a ‘Buy’, 2 ‘Hold’ and 1 ‘Sell’.

Zee Entertainment Enterprises Limited (ZEEL): This media stock slumped on Thursday and made news for its continued financial woes. It tanked 14% in the past two trading sessions after National Company Law Tribunal (NCLT) admitted IndusInd Bank’s insolvency plea against ZEEL.

In December 2021, Sony and ZEEL had signed a deal to merge their television networks, programme libraries, digital assets, and operations. But IndusInd Bank, Axis Bank and IDBI Bank opposed the ZEEL-Culver Max Entertainment (Sony) merger citing non-payment of dues. In line with that, IndusInd filed an application with NCLT seeking payment of Rs 89 crore against the loan default. Once the NCLT proceedings are initiated, the firm cannot go ahead with its merger.

ZEEL is also the guarantor for a Rs 150-crore loan given by IndusInd Bank to Siti Networks. Siti Networks is another Subhash Chandra-owned ESSEL Group company. NCLT has initiated insolvency proceedings against Siti Networks as well. The alternative solution for ZEEL is to repay the dues or file an appeal against the plea.

ZEEL MD & CEO Punit Goenka says they will “take all measures to protect shareholder interests and ensure the timely completion of the deal”. On Friday, it was reported that ZEEL has challenged the Mumbai NCLT order and successfully received a stay order from National Company Law Appellate Tribunal (NCLAT) till March 29.

Sonata Software: This IT consulting & software company rose 5.3% in trade on Thursday after announcing the acquisition of Quant Systems, a US-based software company. This comes while the company is in the midst of an uptrend since announcing its Q3FY23 results on January 24. Its net profit has risen 4.4% QoQ to Rs 117.7 crore and revenue surged 51.1% QoQ. Over the past month, the firm has gained 24.1% till Thursday and shows up in a screener for stocks trading above their short, medium and long-term moving averages.

The acquisition of Quant Systems is set to be the largest in the company’s history. Sonata Software has agreed to buy a 100% stake in the US-based company for an upfront cash consideration of $65 million and deferred achievement-based payouts up to $95 million, payable over two years. The management believes this deal will accelerate growth and scale while strengthening the company’s capabilities in a wide range of services. Samir Dhir, CEO and Managing Director of the company, believes that the acquisition will contribute 16.7% to the consolidated revenue, according to reports. This acquisition will also add two large clients to the company’s top five client list.

The management plans to accelerate growth by doubling its IT services revenue in the next four years by focusing on winning large deals. The company is looking to enhance its presence in the banking, financial services and insurance (BFSI) and healthcare verticals to accelerate its growth trajectory. According to Trendlyne’s Forecaster, the consensus recommendation on the company is a ‘Buy’.

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

The Baseline

24 Feb 2023

Chart of the week: India’s foreign exchange reserves under pressure?

By Abdullah Shah

India’s foreign exchange reserves declined for two consecutive weeks in February 2023, after rising for three straight months from November 2022 to January 2023. The week ending February 10, 2023 witnessed the sharpest fall in weekly reserves since April 2022. The reserves plunged by $8.4 billion.

The Adani-Hindenburg saga caused a massive sell-off in the Indian equity market, and foreign institutional investors sold Rs 10,068.3 crore over the past 30 days. At the same time, the Indian rupee took a hit as the US Federal Bank raised interest rates by a further 25 bps on February 1, 2023. The Reserve Bank of India (RBI) has been selling US dollars to put a floor under the rupee’s depreciation. This was the major reason for the decline in the foreign exchange reserves.

Despite the decline in reserves, data shows that India is still at double the reserve levels in 2013, when the RBI had gone on a dollar selling spree as the US Fed slowed its pace of bond buybacks.

How is India doing relative to other emerging markets? For comparison, we can look at some economies in the world which are facing tough challenges for economic growth. Pakistan’s foreign exchange reserves has suffered a drastic decline of 61.4% since February 2022 and stands at a meagre $8.7 billion as of January 2023. The country had already secured a $6 billion bail-out from the International Monetary Fund (IMF) in 2019 followed by another infusion of $1 billion in 2022. It has a total foreign debt of $126 billion which includes loans from China, the World Bank and the Asian Development Bank.

Another neighbour, Sri Lanka declared bankruptcy in July 2022 with a possibility of having to default on its sovereign debt repayment. The country’s foreign exchange reserve stands at just $1.9 billion as of December 2022, down 19.6% since January 2022 with loans from the IMF, China, India and Japan.

On the other side of the world, Turkey has seen its foreign exchange reserves fall to $75.6 billion in February 2023, its lowest level since July 2022. But it is still 21.9% higher than its multi-month low in August 2022.

Despite the drop, India still has a comfortable reserves cushion, although the impact of the trade deficit and appreciating dollar in the coming months will have to be closely monitored. At its current level of $566.9 billion, India’s foreign exchange is estimated to cover for 9.2 months of imports projected for FY23.

The Baseline

23 Feb 2023

Screener of the week: IT stocks that beat analyst estimates for revenue and net profit in Q3FY23

By Abdullah Shah

This week’s screener features stocks from the software & services sector which beat Trendlyne’s forecaster estimates for both revenue and net profit in Q3FY23. Major stocks in the screener are KPIT Technologies, Cyient, Tata Elxsi, Infosys and HCL Technologies.

Cyient’s Q3FY23 revenue beat analyst forecaster estimates by 1.8%, while net profit overtook the estimates by 10.3%. The company’s revenue and net profit have grown by 15.9% and 97.2% QoQ respectively. This rise was helped by growth in its overseas business and an 83% QoQ increase in the company’s order intake.

Tata Elxsi also beat the forecaster estimates in revenue and net profit by 1.3% and 10.2% respectively in Q3FY23. Its revenue has risen 28.7% on the back of growth in embedded product design (EPD), industrial design and visualization (IDV) and transportation segments. The company saw an increase in orders from the US and European markets.

You can find more screeners here.

The Baseline

22 Feb 2023

Which stocks did superstar investors sell in Q3FY23?

By Suhas Reddy

Superstar investors make portfolio changes every quarter, which give us insights into which stocks they are bullish and bearish on. Earlier, we looked at the companies in which superstars bought stakes in Q3FY23. Here, we look at their key sells.

Rakesh Jhunjhunwala’s portfolio takes holdings below 1% in three companies

Rakesh Jhunjhunwala's portfolio, currently managed by the Rare Enterprises team, sold stakes in 11 companies in Q3FY23. The investment firm reduced stakes to below 1% in Orient Cement, Man Infraconstruction and Anant Raj from 1.2%, 1.2% and 3.1% respectively.

Over the past year till February 21, the cement & construction firms, Orient Cement and Man Infraconstruction, have fallen by 22% each. The realty firm Anant Raj’s share price rose 60.5%.

The big bull’s portfolio reduced its stake in Dishman Carbogen Amcis by 1.6% to 1.6%. It also cut a 0.4% stake in Titan Co, bringing the holding to 5.2%, and pared stakes in Fortis Healthcare and Star Health & Allied Insurance Co by 0.2% and 0.1% to 4.5% and 17.3% respectively.

It also sold minor stakes in Metro Brands, Nazara Technologies, Aptech and Indian Hotels Co in Q3FY23.

Sunil Singhania makes minor changes to portfolio in terms of stake sell

Sunil Singhania’s Abakkus Fund sold a 0.5% stake in industrial machinery company The Anup Engineering in Q3FY23. Its stake in the company is now at 4.2%. The fund also cut a 0.2% stake in Jindal Stainless (Hisar), taking the stake to 3.7%. The stainless steel producer’s net profit fell 32.9% YoY to Rs 344.3 crore in Q3FY23.

The marquee investor cut a 0.1% stake in Route Mobile (internet software and services company) and Hindware Home Innovation (consumer durables manufacturer). The fund now holds 2.6% and 4.9% in these companies respectively. Hindware Home Innovation reported a YoY fall of 78.3% in its net profit during the quarter.

Abakkus Fund also cut a minor stake in IIFL Securities and HIL; it now holds 3.2% and 3.1% respectively.

Ashish Kacholia takes his holdings below 1% in two companies

Ashish Kacholia sold his stake in Rainbow Children’s Medicare (healthcare facilities company) and SG Finserve (financial services provider) to below 1% during Q3FY23. These companies were added to his portfolio in Q2FY23 when he bought 1% and 1.1% stakes in them respectively.

Like Singhania, Kacholia also pared his stake in Hindware Home Innovation by 1.3% during the quarter. He now holds a 1.3% stake in the company. The ace investor also sold a 1.2% stake in D-Link (India), an IT company, bringing his stake down to 2.1%. During the quarter, D-Link’s profit increased almost three-fold YoY to Rs 27.3 crore.

Dolly Khanna bearish in Q3FY23, reduces holdings in 18 companies

Dolly Khanna was on a selling spree in Q3, and pared her stakes in 18 companies. This seems to be a response to the volatility in markets - this investor tends to sell quickly in flat and bearish markets. The ace investor trimmed her stakes to below 1% in seven companies–Aries Agro, J Kumar Infraprojects, Manali Petrochemicals, NCL Industries, Polyplex Corp, Sharda Cropchem and Zuari Industries.

Of the 18 companies the investor cut her stakes in, three were from the cement & construction sector, three from the chemicals & petrochemicals sector, and two each from the fertilizers, automobiles & auto components, commercial services & supplies and textiles sectors. She also reduced her holdings in one firm each from the realty, FMCG, oil & gas and metals & mining sectors.

She sold a 0.6% stake in cement manufacturer KCP, bringing her holding down to 2.4% in Q3. She pared her stake in Chennai Petroleum Corp by 0.4% to 2.2%, Pondy Oxides & Chemicals by 0.3% to 3.1% and Rama Phosphates by 0.2% to 1.5%.

Khanna also reduced her holdings in Nitin Spinners, Mangalore Chemicals & Fertilizers, Ajanta Soya, Tinna Rubber & Infrastructure and Deepak Spinners by 0.1% each to 1.4%, 1.2%, 1.5%, 1.6% and 1.2% respectively. She sold minor stakes in Talbros Automotive Components and Control Print as well.

Vijay Kedia cuts stake in FMCG company Lykis to below 1%

After reducing his stake in Lykis to 2.7% from 9.3% in Q2FY23, Vijay Kediatook it to below 1% in Q3. Lykis’ share price has surged by 48.1% since the beginning of Q4FY23. In Q3, Kedia cut his stake in Cera Sanitaryware (furnishing products company) also to below 1%, as against the 1% held in Q2FY23.

Kedia slashed his stake in Talbros Automotive Components to 1.3% from 2.3% held in the previous quarter. He reduced his stake in Tejas Networks (telecom company) to 2.3% by cutting 0.3% and in Ramco Systems (IT consultant) to 1.4% by cutting 0.2%. He sold a minor stake in Repro India also and now holds a 7.1% stake in the company.

Porinju Veliyath takes stakes below 1% in three companies

Porinju Veliyath reduced his stakes in a total of four companies in Q3FY23. Among them, three firms were taken to below 1%, namely heavy electrical equipment company HPL Electric Power (from 1.3%), retailing company Praxis Home Retail (from 1.1%) and logistics firm Gati (from 1%). Praxis and Gati have fallen by 64.4% and 20.7% respectively over the past year till February 21. On the other hand, HPL Electric gained 31.6% in the same time period.

The ace investor also sold a 0.5% stake in Kerala Ayurveda, bringing down his stake in the pharmaceutical company to 1.9%.

Anil Kumar Goel cuts stakes in small-cap and micro-cap companies

Anil Kumar Geol & Associatesreduced stakes in three companies in Q3FY23. The investor took his stake below 1% in construction & engineering firm Salasar Techno Engineering. Over the past year till February 21, the stock has gained 73.8% but shed 10.2% in the past month.

Goel reduced his stake in TCPL Packaging, a paper & paper products company, by 0.3% to 10.2%. He also reduced his stake by 0.1% to 2.2% in Austin Engineering Co, a micro-cap industrial machinery firm.

The Baseline

21 Feb 2023

Five High Performing Analyst Picks This Week

By Abhiraj Panchal

This week, we take a look at analyst stock picks which saw positive YoY profit and revenue growth in Q3FY23, with strong Trendlyne Durability, Valuation and Momentum scores.

Oil India: Prabhudas Lilladher keeps its ‘Buy’ rating on this oil exploration & production company, and raises the target price to Rs 305 from Rs 300. This implies an upside of 19.8%. In Q3FY23, the company’s net profit surged by 76% YoY to Rs 2,284.4 crore and revenue grew by 37.7% YoY. Oil India has a high DVM score, with a Durability score of 85, Valuation score of 84.3 and Momentum score of 67.3.

Analyst Avishek Datta attributes the firm’s robust Q3 performance to healthy crude oil and gas realisations, along with increasing demand. He adds that the company’s Numaligarh refinery has had a steady performance.

Datta sees the company’s aggressive production expansion plans as a key positive, and expects oil volumes to increase by 30% and gas volumes to surge by 60% by FY25. The analyst believes, “Oil India’s earnings will ride on new capacity addition across crude oil, natural gas and refinery”. He expects the company’s net profit to grow at a CAGR of 15.7% over FY22-25.

Zydus Lifesciences: KRChoksey maintains its ‘Buy’ rating on this pharmaceuticals company and increases its target price to Rs 610 from Rs 507. This indicates an upside of 30.1%. In Q3FY23, the company’s net profit rose by 24.5% YoY to Rs 622.9 crore and revenue increased by 19.4% YoY. Zydus Lifesciences has a Durability score of 75, Valuation score of 33.3 and Momentum score of 67.7.

Analyst Abhishek Agarwal attributes the company’s growth in Q3 to healthy growth in the key markets of India and the US. He points to new product launches and innovations in the US market as growth drivers. According to the analyst, “Zydus Lifesciences has a strong portfolio of existing products and new US product launches in the pipeline, which provides revenue visibility over the long term.”

Agarwal expects growth in the India formulations business will be led by rising market share in key therapies. The consumer wellness segment will see an expansion in margins in the medium term, he says, due to pricing actions and recovery in rural demand. The analyst anticipates the firm’s revenue to grow at a CAGR of 14.3% over FY22-25.

JK Lakshmi Cement: Axis Direct maintains a ‘Buy’ call on this cement manufacturer with a target price of Rs 840, indicating an upside of 12.8%. In Q3FY23, the company’s net profit increased 19.1% YoY to Rs 76.4 crore, while its revenue grew 20.9% YoY. The company missed the brokerage’s estimates according to analysts Uttam Srimal and Shikha Doshi. JK Lakshmi Cement has a Durability score of 75, Valuation score of 37.5 and Momentum score of 60.8.

The analysts say, “The company is working on many levers – optimising geo-mix, higher production, sale of blended cement, increasing proportion of trade sales, premium and value-added products, logistic efficiency.” They expect the company to post EBITDA growth of 12% CAGR over FY21-24 on the back of better realisation, higher volume and cost-saving initiatives.

Srimal and Doshi are optimistic as the demand for cement remains robust on account of the government’s push for infrastructure development and affordable housing.

Mahindra & Mahindra: HDFC Securities maintains a ‘Buy’ call on this automobile manufacturer and increases the target price to Rs 1,554. It indicates an upside of 15.1%. In Q3FY23, the company’s profit rose 34.7% YoY to Rs 2,676.6 crore, while its revenue grew 30% YoY. Analysts Aniket Mhatre and Sonaal Sharma believe that the higher-than-estimated profit growth is backed by higher other income. Mahindra & Mahindra has a Durability score of 70, Valuation score of 47.5 and Momentum score of 58.9.

According to the analysts, “It is commendable that Mahindra & Mahindra has already achieved most of the targets it earmarked a couple of years ago (like EPS CAGR, improvement in auto margins, RoE at 18%, calibrated asset allocation, etc.) and the management has indicated that it is now time to raise its targets.”

They continue to remain positive about the company on the back of a big order backlog for utility vehicles, positive rural sentiment, strides taken to achieve a strong position in electric vehicles and cautious capital allocation.

Oil And Natural Gas Corp: ICICI Direct updates its rating to ‘Buy’ from ‘Hold’ on this oil and gas producer and gives it a target price of Rs 180, indicating an upside of 16.7%. In Q3FY23, ONGC reported an increase of 5.1% YoY in net profit to Rs 11,489 crore and a 15.7% YoY rise in revenue. Analysts Harshal Mehta and Payal Shah say the results are below estimates due to the decline in crude prices and increase in depreciation. ONGC has a Durability score of 70, Valuation score of 74.7 and Momentum score of 64.5.

The analysts believe that even if gas prices get capped, realisations are likely to remain high as they are well above historical averages, and with the commencement of production from the KG Basin in May, volumes are expected to grow. They add, “Sustained higher crude oil prices and gas realisations can result in better profitability.” Mehta and Shah remain optimistic due to the high dividend yield and payout ratio.

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

(You can find all analyst picks here)

The Baseline

18 Feb 2023

Five Interesting Stocks Today

Siemens: This heavy electrical equipment stock announced its Q1FY23 results on Tuesday with net profit growth of 85.1% YoY to Rs 462.7 crore. Revenue has also increased 17.4% YoY, with growth across segments like smart infrastructure, mobility, and digital industries among others. The stock closed 3% above on Wednesday after its robust results. It touched an all-time of Rs 3,248.05 on Wednesday and then increased again to Rs 3,250 on Thursday. It shows up in a screener of stocks with strong momentum.

The management says that a substantial increase in the outlay for capex in infrastructure and railways in the recent Budget announcements will boost all business segments. After the company received a Rs 26,000-crore locomotive order from Indian Railways on January 16, it entered into the golden crossover zone (SMA 50 day trading above SMA 200 day). Since then, the stock has gained more than 8% in a month.

ICICI Securities and Prabhudas Lilladher remain positive on the stock and expect the company to grow further in automation and digitization products, according to reports. Also, a large orderbook gives visibility for revenue streams in a long-term perspective. Bob Capital Markets expects traction to pick up in the automation and digitalisation businesses. It has raised target price for the stock by 22% to Rs 3,800. Trendlyne’s consensus recommendation shows that 12 analysts recommend a ‘Buy’, while five give ‘Hold’ and ‘Sell’.

However, the company is battling high import costs of machine components as input costs were up 37% YoY in Q1FY23. Also, any slowness in capex and low profitability from the mobility business can slow down growth.

Gujarat Gas: This city gas distribution company fell 2% on Tuesday as its sales declined 27.1% YoY to Rs 3,821.3 crore in Q3FY23. However, its net profit has grown 202.2% YoY to Rs 371.6 crore. The stock shows up in a screener of companies with increasing net profit and profit margin (YoY). Its net profit beat the Forecaster estimates by 7.5%, but revenue missed Trendlyne’s forecaster estimates by 21.4%.

ICICI Securities says that lower volumes from the key region of Morbi drove the drop in revenue. However, with rising propane prices, the brokerage believes the company may see some revival in volume trends in Q4FY23. The brokerage maintains its ‘Add’ rating on the company as volumes and margins are likely to remain volatile. But it believes a reduction in gas prices for both domestic and LNG, and a relatively stronger propane price environment could drive steady growth in operating margins. It has given the company a target price of Rs 540, indicating a potential upside of 11.8%. It estimates the company’s revenue to grow at a CAGR of 1.2% over FY22-25.

The stock ranks high on Trendlyne’s checklist with a score of 60.9%, while the consensus recommendation on the stock is ‘Hold’.

Zee Entertainment: This broadcasting & cable TV company has been falling after it posted weak results. In Q3FY23, the company’s profit fell 92% to Rs 24.3 crore from Rs 299 crore in Q3FY22, while revenue remained flat at Rs 2,111 crore. As a result, the company features in a screener of stocks with a decline in quarterly net profit and falling profit margin (YoY). Revenue has been in line with Forecaster estimates but profit missed estimates by over 90%.

Advertising revenue has declined to Rs 1,063 crore due slowdown in ad spends by FMCG companies, considering the challenging macroeconomic environment.

In addition, Zee’s EBITDA also fell 27.5% YoY and operating margins contracted because of elevated investments in content, marketing and technology.

Post results, foreign brokerage CLSA maintains its ‘Buy’ rating and believes the upcoming Zee-Sony merger could likely be a re-rating catalyst. But ICICI Securities maintains its ‘Hold’ rating. The brokerage has cut its EPS estimates for the company to around 14% for FY24E and reduced the target price to Rs 225.

On Tuesday, NCLT (National Company Law Tribunal) adjourned the hearing on the petitions against the merger of Zee Entertainment with Culver Max Entertainment (formerly known as Sony Pictures Networks India) to March 9, according to reports. In December 2021, Zee and Sony signed a definitive agreement to merge their operations. As the merger was nearing its finish line, Zee’s creditors and lenders, including IndusInd Bank, Axis Finance, IDBI Bank and Indian Performing Right Society (IPRS), filed a petition against the merger, seeking the repayment of debt. The company's merger had already been approved by NCLT, stock exchanges and shareholders. CCI has given conditional approval.

Torrent Power: Theelectrical utilities firm saw itsQ3FY23 revenue and profit grow by 33% and 86% YoY respectively. Torrent Power has been able to reduce its transmission and distribution losses across establishments. Electricity generation with Regasified LNG (RLNG) declined due to the higher cost of RLNG. However, it was offset by higher generation in solar power plants.

Torrent Power’s margins improved on the back of the sale of LNG and increased contribution of electricity generation from the newly acquired Dadar and Nagar Haveli units. The company has seen strong demand from its franchise and licence division. It gained 12% in the past week on the back of good results. The stock shows up in thescreener for strong momentum with price above short-term and long-term moving averages.

Its management sees a capex of Rs 1,500 crore in electricity generation and another Rs 250 crore in the transmission and distribution business to increase profitability. HDFC Securities says Torrent Power's profitability has increased on the back of solid LNG trading. Its investment in the transmission and distribution business will cut down losses and new plants (a 115 MW wind power plant, and a likely300 MW solar plant) will add to the revenue. The capex incurred by Torrent Power will help it sustain the growth, maintaining the bottom line. HDFC Securities maintains an ‘Accumulate’ rating on the company.

Finolex Cables: This electrical & telecommunication cables manufacturer has gained 22% till Thursday, since announcing its Q3FY23 results on February 9. Its consolidated net profit rose 7.9% YoY to Rs 154.3 crore. The firm’s standalone net profit surged 41.7% YoY, beating Trendlyne’s Forecaster estimates by 63.1%. Consolidated revenue grew 18.2% YoY, driven by robust growth in sales volumes across all segments. This healthy performance helped the company show up in a screener for companies with improving cash flows and high durability scores.

The stock’s bull run post its results comes on the back of a strong business outlook and economic tailwinds. The management believes that the company will be a direct benefactor of the Centre’s push toward infrastructure development. It expects demand for electric cables from real estate and construction sectors to increase in the coming quarters. Notably, the electric cables segment contributed 64.6% to the firm’s consolidated revenue in Q3 and grew by 14.6% YoY.

The company’s communication cables segment is also expected to benefit from the increased spending toward telecommunication from government and private companies. Although the segment has contributed only 10% to Finolex Cables’ revenue, it grew by 59.7% YoY. The sales volume of its optic fibre cables jumped 70% YoY on the back of robust demand.

Looking ahead, the management is focusing on expanding its distribution reach and improving product availability to gain market share. According to reports, brokerage Sharekhan believes the company is well-placed to capitalise on the Centre’s increase in infrastructure capex, given its debt-free balance sheet, improving cash flows and distribution reach.

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

The Baseline

15 Feb 2023

Chart of the week: The top Nifty sectoral indices have shifted between 2006 and now

By Abdullah Shah

The market has been under pressure over the past year with rising inflation amid slowing economic growth. However, Indian markets managed to outperform major global indices in 2022. In this edition of Chart of the Week, we take a look at the major Nifty sectora indices and their shift since 2006, tracking 14 years of data.

During 2007-09, the Nifty Energy index was among the top and highest-rising indices in India. The index rose 97.6% and 58.1% in 2007 and 2009 respectively. In 2008, the index declined 47.4%, as the year witnessed the Great Recession. As of 2022, the Nifty Energy index has risen at a compound average growth rate (CAGR) of 9.9% over the past 16 years.

It was a particularly gruesome year for investors as the global financial crisis hit the world in 2008, causing all major indices to decline. However, in 2009, all major indices recovered, with the Nifty Auto and Nifty IT indices growing the most, by 186.1% and 155.2% respectively.

2011 was a tough year for the banking sector in particular, as Nifty Bank declined 32.4%, owing to concerns about rising bad debts caused by a slowdown in economic growth. However, the index recovered in the years after, rising by 58.8% in 2012 and 64.7% in 2014. The Nifty Bank index has a CAGR of 13.1% over the past 16 years. In 2011, Nifty 50 and Nifty 500 also fell 24.6% and 27.2% respectively, their second-highest decline after the crisis of 2008.

However, Nifty FMCG rose by 8.6%, while Nifty Pharma fell the least among sectoral indices in 2011 as fast moving consumer goods (FMCG) and Pharmaceuticals are considered to be defensive sectors, which tend to be stable in a falling market. Owing to this, Nifty FMCG has a CAGR of 14.3% over the past 16 years, while Nifty Pharma has grown at a CAGR of 9.9%.

Nifty Energy and Nifty Bank witnessed a resurgence during 2016-19 and 2017 was especially good, as they rose 37.7% and 39.3% respectively. The Nifty IT index ended the decade till 2019 on a strong note and started the 2020s equally strong. It rose 55.6% in 2020 and 58.2% in 2021. However, 2022 was a difficult year owing to the rising inflation and interest rates all around the world and it declined 26%.

In 2022, investors switched to more domestic sectors which are not affected by global issues, and as a result Nifty PSU Bank witnessed a rise of 70.7%. With several macroeconomic factors at play in 2023, investors will have to wait and see how the indices fare going forward.

The Baseline

14 Feb 2023

Five infra picks from analysts this week

By Suhas Reddy

This week, for analyst picks, we take a look at companies from the utilities, cement & construction sectors with revenue and profit YoY growth above 10%.

Mahanagar Gas: ICICI Securities maintains its ‘Buy’ rating on this city gas distribution company and increases the target price to Rs 1,050, implying an upside of 12.3%. In Q3FY23, the firm’s net profit jumped over 3X YoY to Rs 172.1 crore and revenue rose 55.2% YoY to Rs 1,582.3 crore.

Analysts Probal Sen and Hardik Solanki write that the firm’s volumes have fallen on a YoY basis, but its profitability is better than expected. They attribute this to aggressive price hikes the company took. Going forward, analysts expect volumes to rise as gas costs will likely reduce due to the Kirit Parikh Committee recommended price implementation. They expect “volumes and margins to see an improvement over FY24-25”.

Sen and Hardik are optimistic about the company’s prospects for the next 12-18 months. They expect the company’s net profit to grow at a CAGR of 19% over FY23-25.

Praj Industries: Axis Direct maintains its ‘Buy’ rating on this construction & engineering company with a target price of Rs 500. This indicates an upside of 37.3%. In Q3FY23, the company’s net profit grew 68.2% YoY to Rs 62.3 crore and revenue increased 55.4% YoY to Rs 910 crore.

Analyst Prathamesh Sawant says that the company’s EBITDA margin and net profit beat his estimates due to the moderation in sleet prices. He adds that the completion of the old fixed cost order in Q3 has helped boost margins.

Sawant notes, “Praj Industries is the pure equity play on India Ethanol Revolution and now marching its footprints globally”. As the company has begun to expand its engineering services across growth industries like compressed bio-gas, green hydrogen, ethanol production, and others, the analyst believes its growth prospects will improve. He anticipates the firm’s net profit to grow at a CAGR of 29.2% over FY23-25.

Dalmia Bharat: Motilal Oswal maintains its ‘Buy’ rating on this cement & cement products manufacturer with a target price of Rs 2,120. This implies an upside of 10.5%. In Q3FY23, the company’s net profit jumped 98.1% YoY to Rs 204 crore and revenue rose 22.9% YoY to Rs 3,355 crore.

Analysts Sanjiv Kumar Singh and Mudit Agarwal are upbeat about the firm’s Q3 performance as it beat their net profit estimates by a healthy margin. They attribute the improvement in profitability to pricing recovery in eastern India and better cost controls. They add that the company is trading at an attractive valuation.

Kumar and Singh believe that Dalmia Bharat has good long-term prospects due to its diversified capacity expansion plan, dominant presence in the high-growth market of east India and its focus on sustainability. According to them, “The company maintains its target of delivering 1.5x demand growth than the industry average in FY23.” The analysts expect the company’s revenue to grow at a CAGR of 10.6% over FY23-25.

Tata Power: ICICI Securities maintains a ‘Buy’ call on this utilities company with a target price of Rs 262, indicating an upside of 28.8%. In Q3FY23, Tata Power’s net profit increased by 121.9% YoY to Rs 945 crore, while its revenue increased by 30.7% YoY to Rs 14,402 crore. Analysts Rahul Modi and Anshuman Ashit say, “Tata Power’s strong quarterly results continued in Q3FY23 as well, sustained by higher profits from the coal and Mundra businesses, and robust performance of distribution businesses.”

The company had planned a capex of Rs 8,000-10,000 crore, of which Rs 3,000 crore was incurred in H1FY23. The analysts believe that the utilities company has a strong long-term potential, especially its renewables and distribution businesses which can outperform. They also believe that Tata Power is among the best-placed private players in the power sector, with businesses across the value chain and backward integration.

Star Cement: Bob Capital Market maintains a ‘Buy’ call on this small-cap cement manufacturer with a target price of Rs 138. This indicates an upside of 25.4%. In Q3FY23, the company’s net profit grew 20.7% YoY to Rs 52.9 crore, while its revenue increased 12.3% YoY to Rs 631.3 crore.

Analysts Milind Raginwar and Yash Thakur state that the revenue growth is backed by higher realisations (up 8% YoY to Rs 6,823 per tonne) and volumes (up 5% YoY to 0.9 metric tonnes), indicating healthy demand in key markets. They further add that the cement manufacturer had hiked price in mid-December and its full impact will be reflected in Q4FY23.

The analysts “like Star Cement for its strong presence in the remunerative northeast market, plans to de-risk revenue, and light debt burden despite capex”.

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

(You can find all analyst picks here)

The Baseline

10 Feb 2023

Five Interesting Stocks Today

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.

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.

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.

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.

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.

The Baseline

10 Feb 2023

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.