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

21 Oct 2022

Chart of the week: Best performing IPOs of 2022

2022 has seen 109 initial public offerings (IPO) listed to the Indian exchanges. With two months to go, we are already closing in on the 117 number - which was the total IPOs listed in 2021. In this week’s chart of the week, we take a look at the best performing IPOs listed in 2022.

The best performing IPO of the year is telecom company Steelman Telecom which has risen 135.3% since its listing. The IPO was listed on October 10 with an issue size of Rs 26 crore at an issue price of Rs 96 per share. The company offers support services and solutions to address the network requirements of the Telecom industry. The stock is currently trading at around Rs 225.

The second best performing IPO of 2022 is snack business Annapurna Swadisht, which has risen 129.7% since its listing on September 27. The issue size of the IPO was Rs 30.3 crore with an offer price of Rs 68 per share, and it has been trading at around Rs 155 since its listing. The IPO was 133.4x oversubscribed. The company is a manufacturer of snacks and food products like fryums, cakes, candies, namkeen, chips, and gohona bori.

Telecom equipment manufacturer Frog Cellsat comes third, with a 79.5% rise in price since its listing on October 13. The IPO debuted with an issue size of Rs 41.6 crore at an issue price of Rs 102 per share. The company manufactures telecom equipment like 2G/3G/4G multi-band digital RF repeaters, multi-band frequency shift repeaters, multi-band optical DAS systems, relative software, and accessories. The stock has been trading at around Rs 195, at a substantial premium to its issue price.

The fourth best performing IPO is electronics retailer Electronics Mart India, which has risen 60.9% since its listing. The IPO listed this month on October 17 with an issue size of Rs 500 crore at an issue price of Rs 59 per share. The company offers a range of products with a focus on large appliances, air conditioners, televisions, washing machines, refrigerators, and also mobiles and small appliances, IT and others. Last traded price of the IPO was Rs 93.

See the full list of most successful IPOs

The Baseline

21 Oct 2022

Five Interesting Stocks Today: Results Edition

KPIT Technologies: This IT Consulting & Software company fell nearly 7% in intraday trade on Wednesday after announcing its Q2FY23 results but recovered to close only 1.7% lower. The company’s net profit in Q2 declined 2.3% QoQ despite its revenue rising 8.6% QoQ. The fall in profitability is due to rising employee benefit costs and other expenses, which also led to a decline in its EBIT margin by 90 bps QoQ to 14.2%. The stock makes it to the screener for companies with revenues rising sequentially over the past eight quarters.

The recovery in the stock price despite its weak Q2 performance is due to the management raising its revenue guidance for FY23. It revised the organic revenue growth guidance to 23% from 18-21% and the constant currency (CC) revenue growth guidance to 31-32% for FY23. The management’s revenue guidance seems to be higher than the street’s expectations as Trendlyne’s Forecaster estimates the company’s revenue to grow by 20.7% in FY23.

The management expects organic growth across all its business segments, led by strategic clients. It is especially optimistic about the demand from vehicle manufacturers as they are heavily focusing on software-defined vehicles, which augurs well for the company. The software firm bagged new deals with a total contract value (TCV) of $142 million in Q2. The CEO and Managing Director, Kishor Patil cites a healthy order pipeline and expectation of winning more deals in the next 3-4 months for increasing the revenue guidance for FY23. Along with the anticipation of higher demand, the company also expects attrition rates to fall in the coming quarters.

Polycab India: This consumer durables stock touched its 52-week high on Wednesday after it reported an increase in net profit by 37% to Rs 270.5 crore in Q2FY23. Despite falling commodity prices and inflationary pressures, revenue was up 11% YoY on the back of strong volume growth in the cables and wires business. The company’s revenue and net profit beat Trendlyne’s Forecaster estimates by 10.1% and 9.7%, respectively. Its EBITDA margin grew sequentially to 12.8% during the quarter.

ICICI Securities remains optimistic about the company considering its competitive advantages and growth prospects in the consumer durables sector. It raised the target price to Rs 2,700 from Rs 2,250. However, it maintains its ‘Hold’ rating on the stock as it is cautious about the possible increase in input prices.

Polycab shows up on a screener with stocks that have high TTM EPS growth. This is in line with Trendlyne’s Forecaster estimates that expect the company’s EPS to grow by 25.1% in FY23. It also makes it to the screener with stocks that outperformed their sectors in the past month.

Ultratech Cement:This cement stock has underperformed its industry by 10.8% in the past 90 days, which is not a surprise given that Q2 is a seasonally weak quarter for the cement industry. However, the stock rose for six consecutive sessions until it declared its Q2FY23 results. Its net profit fell 42.5% YoY to Rs 756 crore dented by high energy costs causing the stock to fall by 1.7% on Thursday. It missed Trendlyne’s Forecaster estimate by 8.5%. But the company reported an increase in net sales by 15.8% YoY.

Although profitability fell, the management expects demand to improve post the festive season. They even gave a double-digit volume growth guidance for FY23-24. The company has capex plans worth Rs 6,000-7,000 crore to be rolled out for FY23 and FY24. Also, an additional capacity of 15.4 million tonne per annum is to be added in H2FY23 increasing total capacity to 131.3 million tonne per annum which will aid revenue growth in the second half of the year. ICICI Direct expects Ultratech’s capacity to grow by nearly 10% CAGR as against the industry capacity growth of 7.2% over the next three years.

Also, with the price hikes taken in September and further hikes expected post-Diwali, the company’s EBITDA earnings are likely to improve. IDBI Capital expects EBITDA to improve by 2-10% in FY23-24.

The only hindrance to growth lies with the high energy costs. Pet coke – a key raw material, saw a fall in its prices to $170 per tonne in Q1FY23. But prices have again increased to $205 per tonne. Imported coal prices are still high. And although crude prices cooled off a bit, the prices are likely to hover around $90 per barrel because of production cuts taken by OPEC. Ultratech Cement’s management expects fuel costs to fall in H2FY23 but remains cautious given the volatility and tightening crude oil supplies. Despite these risks, Forecaster’s consensus estimate shows 36 analysts recommending a ‘Buy’ on the stock.

Tata Elxsi: The stock of this engineering, research and development player fell nearly 13% since it declared its Q2FY23 results on October 14. This is despite the fact that the company saw strong sequential growth of nearly 5% and YoY growth of over 25% in its revenues. The ER&D player, however, disappointed investors on the earnings front. Its net profits fell nearly 6% on a QoQ basis owing to the sharp compression in margins.

Tata Elxsi saw its EBITDA margins contract by nearly three percentage points sequentially in Q2FY23. The company went on a fresh hiring spree and onboarded the highest-ever no. of employees in Q2. Tata Elxsi also had to make investments in building a new leadership team at the mid-and senior-management levels as it was facing a supply crunch there. These factors coupled with the expansion of facilities at centres like Bengaluru, Chennai and Pune caused a material fall in its EBITDA margins. This ultimately weighed negatively on the bottom line of the company. Tata Elxsi missed the consensus estimates of analysts on Q2 net profits by nearly 7%. Since its PE valuations are also pricey at 69X, the market came down heavily on the stock. The concerns on the cost and supply front are not the only factors worrying the investors.

While Tata Elxsi witnessed strong sequential growth in its transportation and healthcare segment, its media and communication segment was essentially flat. According to the management, media clients in the US and Europe deferred decisions to sign new deals to a later time. Key clients are now on a wait-and-watch mode and are being a little careful with their R&D spends. Notably, the media segment contributes over 35% share to the company’s revenues. Hence, the slowdown in this segment has spooked investors even though the outlook for transportation and healthcare segments continues to be robust.

PVR: This multiplex operator’s share price fell marginally on Monday after it announced its Q2FY23 results. PVR’s net losses narrowed to Rs 71.2 crore from Rs 153.1 crore in Q2FY22 with its revenue jumping 5.7X YoY. But this did not excite the investors as both revenue and net profit missed Trendlyne’s Forecaster estimates.

PVR’s lower-than-expected earnings could be attributed to the underperformance of Bollywood movies in Q2. The average gross collection of the top five Bollywood movies for PVR dropped by 37% to Rs 25.6 crore over the pre-pandemic base (Q2FY20). Regional movies’ contribution rose to 44% in Q2FY23 against 28% in Q2FY20. This outperformance of regional movies vs Bollywood movies could diversify the genre and regional risk for multiplex operators. However, footfalls overall were 39% lower than a comparable pre-COVID quarter. But the management is focused on improving admissions back to cinema halls and expects a full recovery in footfalls to pre-Covid levels by the end of FY23.

Despite a revenue miss in Q2, brokerages maintain a positive outlook on PVR on the back of a strong content slate in the near term. The company shows up in the screener that lists stocks with high analyst ratings with at least a 20% upside. Investors are also looking ahead to PVR’s merger with Inox Leisure, which is expected to be completed in three months. Inox’s revenue jumped nearly 8X in Q2FY23. According to Trendlyne’s comparison tool, Inox outperforms PVR on 27 out of 40 parameters including YoY revenue and net profit growth.

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

The Baseline

17 Oct 2022, 04:10PM

Five analyst picks with high target upside

By Suhas Reddy

HCL Technologies: Motilal Oswal reiterates its ‘Buy’ call on this IT consultancy company with a target price of Rs 1,240. This indicates an upside of 24.6%. In Q2FY23, HCL reported an increase in net profit of 6.3% QoQ to Rs 3,489 crore (2.8% higher than the brokerage’s estimate) and an increase in revenue of 4.4% QoQ to Rs 24,922 crore. Analysts Mukul Garg and Raj Prakash Bhanushali note that the revenue growth was led by IT services, and engineering, research and development verticals.

Garg and Bhanushali say, “Strong sequential growth within services, robust headcount addition, healthy deal wins, and a solid pipeline indicate an improved outlook.” Given the company’s abilities in the digital space, its strategic partnerships, and investments in the cloud, analysts expect HCL Technologies to emerge stronger on the back of an expected increase in enterprise demand for these services.

Havells India: ICICI Securities maintains a ‘Buy’ call on this consumer durables company with a target price of Rs 1,621, indicating an upside of 31.1%. Aniruddha Joshi, Manoj Menon, Karan Bhuwania and Pranjal Garg say, “While consensus appears concerned about higher copper prices hurting earnings and stock price movement, we note there is a strong positive correlation (0.8) between copper prices and revenues and EBITDA of Havells.” They add that while copper prices increased at a CAGR of 8.5%, the company’s revenue grew at 15.3% CAGR over FY09-22.

The analysts, while settling down the concern about inflation add, “Havells has historically been able to initiate pricing action to pass on additional costs and maintain/improve margins. With steady earnings growth, the stock price has also improved in spite of volatility in copper prices.” They remain positive on the company on the back of strong moats and growth opportunities.

Tata Consultancy Services: KRChoksey upgrades its rating on this IT consulting & software company to ‘Buy’ from ‘Accumulate’ with a target price of Rs 3,739. This indicates an upside of 20.6%. Analyst Saptarishi Mukherjee is bullish on the stock despite its Q2FY23 revenue and net profit being marginally below the brokerage’s estimate. The analyst is positive about the company’s future growth prospects as all its business verticals grew on a sequential basis.

Mukherjee sees TCS’s deal booking of $ 8.1 billion in Q2 as an indication that the demand for its services is healthy and stable. He adds “Operating margin is expected to improve on the back of lowering the sub-con cost, improvement in retention, pricing, and efficiency”. Overall, he believes the company is well-positioned to weather global macro uncertainties given its size, market leadership, and robust order book to deliver industry-leading growth in the coming quarters. The analyst expects the software giant’s revenue to grow at a CAGR of 13.6% over FY22-24.

Titan: Sharekhan maintains its ‘Buy’ rating on this jewellery & watch manufacturer with a target price of Rs 3,140. This implies an upside of 19.7%. The analysts at Sharekhan expect the company’s consolidated revenue to grow 20% in Q2FY23. They expect this growth to be led by the jewellery and watches segments after the company announced its pre-quarter business update. The firm’s standalone jewellery and watches segment grew by 18% and 20%, respectively. “The strong tailwind demand led by a desire to own more premium watches helped brand Titan grow fastest in the watches category aided by higher volume and average selling prices YoY”, the brokerage adds.

Analysts at Sharekhan are optimistic about the company’s future growth prospects given its aim to increase its revenue at a CAGR of 20% over FY22-27. They also believe that its consistent margin improvement will improve cash flow in the coming quarters. The analysts expect the company’s financial performance in FY23 to be strong due to a low base in its core businesses. They estimate the firm’s revenue to grow at a CAGR of 22.1% over FY22-25.

Bharti Airtel: Axis Direct maintains its ‘Buy’ rating on this telecom services company with a target price of Rs 875, implying an upside of 13.9%. The analysts at the brokerage expect data consumption in India to increase in the coming quarters, which they believe augurs well for the company. They add that in Q1, “The company continued a strong share of 4G net ads in the market as the 4G customer base grew by 4.5 million QoQ to reach 195.5 million”. The home business segment also saw a healthy addition of new customers, write the analysts.

Axis Direct is bullish on Airtel’s future growth as its revenue has consistently been rising sequentially, with growth across its business verticals. Positives here include the company’s efficient execution, superior customer mix, and strong customer additions in 4G will aid margins. The analysts expect Airtel’s net profit to grow at a CAGR of 39% over FY22-24.

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

(You can find all analyst picks here)

The Baseline

14 Oct 2022

Despite ‘September effect’, MFs make fresh buys in FMCG, Capital goods stocks

By Ketan Sonalkar

Traders often talk about the September Effect - that since 1928, indices have historically seen a decline during this month. And 2022 was no exception, as the benchmark Nifty index fell by 3.7% and retreated from the highs made in August. The month saw rising uncertainty around the Russia Ukraine war, and the US Fed and other Central Banks hiking rates to control inflation and the rise in oil prices.

Despite this, mutual funds found buying opportunities in stocks that hold future potential. This month also saw a lot of recently launched schemes add stocks to their portfolios. This month's buys include a life insurance company, FMCG players as well as capital goods manufacturers.

This list is based on a screener where the mutual fund holding grew by a certain minimum percentage and at least four schemes bought more than a lakh of shares each.

HDFC Life - Tie up with group company to widen customer base

HDFC Life is one of India’s leading private life insurance companies and part of the HDFC Group. It has been gaining market share and also has better operating metrics than other private insurers.

In September 2022, it partnered with another group company, general insurance player HDFC ERGO, to provide a combination of life insurance along with health insurance. This is expected to further widen its customer base. Another positive development for HDFC Life includes the approval of the merger of Exide Life with HDFC Life from the NCLT.

Fund managers who bought shares of HDFC Life

Shares of HDFC Life were added to respective schemes by Mahesh Patil for Aditya Birla Sun Life Frontline Equity Fund Growth, Hiten Shah for Kotak Equity Arbitrage Fund Growth, Aniruddha Naha and A. Anandha Pabmanabhan for PGIM India Flexi Cap Fund Regular Growth as well as Vinay Sharma and Kinjal Desai for Nippon India Banking & Financial Services Fund Growth.

CG Power - Railway orders put the company on the fast track

CG Power (CG Power and Industrial Solutions) is a manufacturer and distributor of electrical equipment such as transformers, reactors, and other control equipment. It also manufactures industrial motors and pumps, and communication systems.

Indian Railways, which is undergoing dynamic growth in both freight and passenger transportation, has fueled CG Power with various opportunities for future growth. Indian Railways continue to give orders to CG Power for electrification, signaling system upgrades, and high horsepower locomotives. The company has also approved a capex of Rs 32 crore for the railway business. The motors business, which constitutes around 78% of the CG Power product portfolio, has also been issued a capex of Rs 80 crore.

Fund managers who bought shares of CG Power

Buying interest in CG Power saw addition to portfolios by Atul Bhole and Dhaval Gada toDSP Flexi Cap Fund Payout of Income Dist cum Cap Wdrl, Vinit Sambre and Resham Jain to DSP Midcap Fund Growth, Shridatta Bhandwaldar to Canara Robeco Flexi Cap Fund Growth and Atul Bhole and Vikram Chopra to DSP Equity & Bond Fund Growthschemes respectively.

Triveni Turbine - Robust demand and capacity expansion drive interest in the stock

Triveni Turbine is the domestic market leader in steam turbines up to 30 MW. The company designs and manufactures steam turbines up to 100 MW, and delivers end to-end solutions to customers.

In Q1FY23 it registered a robust revenue growth of 40.7% to Rs 259 crore supported by 59% YoY increase in export business, while domestic business increased by 32% YoY. The management expects execution to pick up pace and to generate 35% top-line growth in FY23. This is backed by its expansion plans with the addition of a new bay in the Sompura plant. This is expected to augment the space for assembly and testing of steam turbines at the factory. The management expects this to be complete in Q2FY23 and post the expansion, the capacity will rise from 150-180 machines to 200- 250 machines per annum.

Fund managers who bought shares of Triveni Turbine

Fund managers who bought Triveni Turbines include Sohini Andani and Mohit Jain for SBI Magnum Midcap Fund Regular Growth, Mahesh Patil and Dhaval Shah for Aditya Birla Sun Life Multi-Cap Fund Regular Growth, Vishal Gajwani for Aditya Birla Sun Life Small Cap Fund Growth and Sudhir Kedia and Ravi Gopalakrishnan for Sundaram Flexi Cap Fund Regular Growthschemes respectively.

Dabur - Expanding product range and good monsoon to provide a boost

Dabur is one of India’s largest FMCG companies with a presence in segments like health supplements, oral care, hair care, home care and juices. Dabur also derives around 50% of its sales from rural regions with a presence in 90,000 villages.

Dabur introduced new products across categories in the past few months. These include the premium tea segment with the Vedik Tea brand. It has also entered a new segment of peanut butter. Dabur is also pushing its marketing strategy by hiring Amitabh Bachchan as their brand ambassador. Another factor favourable to Dabur is a good monsoon season which is expected to boost the rural economy, a major contributor to its sales.

Fund managers who bought shares of Dabur

Fund managers who added shares to respective schemes include Mahesh Patil for Aditya Birla Sun Life Frontline Equity Fund Growth, Yogesh Patil forLIC MF Large & Mid Cap Regular Growth andLIC MF Large Cap Fund Growth, and Hiten Shah forKotak Equity Arbitrage Fund Growth.

Sundram Fasteners - Rebound in the auto sector drives growth

Sundram Fasteners manufactures a range of high tensile fasteners for precision-driven sectors like Automotive, Wind Energy, Aviation, Farm Equipment and Infrastructure. They specialize in cold extruded and precision forged parts used in two-wheelers, front wheel drive vehicles and internal combustion engines.

The company has planned a capex with fresh investments worth Rs 400 crore over the next two years as it sees bright prospects for the Indian automobile sector. The powertrain components division had won contracts worth Rs 150 crore for EV products in July 2022.

Fund managers who bought shares of Sundram Fasteners

Addition of shares of Sundram Fasteners was done by Harish Bihani and Sharmila D’mello to ICICI Prudential Long Term Equity Fund (Tax Saving) Growth andICICI Prudential Smallcap Fund Growth, Samir Rachh and Kinjal Desai to Nippon India Small Cap Fund - Growth and Vishal Gajwani to Aditya Birla Sun Life Small Cap Fund Growth.

Tata Chemicals - Strong leadership to be further strengthened with capacity expansion

Tata Chemicals is one of the top five players in the global soda ash market. The company manufactures soda ash, sodium bicarbonate, cement, salt, marine chemicals and crushed refined soda along with other specialty chemicals. Basic chemicals form 75% of overall revenue while the rest comes from specialty products.

The company posted its highest ever quarterly revenues and net profits in Q1FY23. In the Q1FY23 results management commentary, they said that demand for soda ash is strong in spite of high prices. Demand is also robust from the detergent and glass industry. They expect better growth from solar panels to aid demand for the glass industry and thereby soda ash.

The company has expansion plans with a capex of Rs 1,100 crore in progress where the capacity of soda ash will increase by 2.3 lakh MT, bicarb by 0.7 lakh MT and salt by 3.3 lakh MT.

Fund managers who bought shares of Tata Chemicals

Buyers of Tata Chemicals for respective schemes include Pankaj Tibrewal for Kotak Small Cap Growth, Kayzad Eghlim and Priyanka Khandelwal for ICICI Prudential Equity Arbitrage Fund Regular Growth, Sailesh Jain for Tata Arbitrage Fund Regular Growth and Neeraj Kumar and Arun R. for SBI Arbitrage Opportunities Fund Regular Growth.

Interglobe Aviation - Demand for air travel crosses pre Covid levels

Interglobe Aviation, more commonly known as Indigo is one of India’s low cost carriers (LCC) with a market share of 54% in the Indian aviation sector.

The airline industry which was affected badly during the pandemic is now bouncing back in FY23. Indigo operated at a load factor of 80% in Q1FY23. The rising load factor was driven by a strong rebound in leisure & corporate travel. Further, international travel has normalised and has reached its precovid levels.

Indigo in September also announced that it has entered freight services. Its first freight plane was one that was converted from a passenger plane. The freight carriers will be able to service markets between China in the east and the Gulf in the west, as well as the CIS countries to the north, according to the management. IndiGo also said it will be utilising the same pool of pilots and engineers that fly and service its current fleet for the cargo planes.

Fund managers who bought shares of Interglobe Aviation

Shares of Indigo were bought by Manish Gunwani and Kinjal Desai for Nippon India Growth Fund - Growth, Atul Penkar and Dhaval Gala for Aditya Birla Sun Life Tax Relief 96 Pyt of Inc Dis cum Cap Wdrl, Sailesh Jain for Tata Arbitrage Fund Regular Growth and Mahesh Patil for Aditya Birla Sun Life Frontline Equity Fund Growthschemes respectively

Syngene - New international deal to have significant long term impact

Syngene International serves pharmaceutical, biotechnology, nutrition, animal health, consumer goods and speciality chemical companies globally, with a range of integrated research services for the clinical development and manufacturing process.

Recently Syngene signed a 10-year biologics manufacturing agreement with leading animal health company, Zoetis. It will manufacture the drug substance for Librela (bedinvetmab), a monoclonal antibody used for treating osteoarthritis in dogs. According to the management, this agreement paves the way for development and manufacturing of other molecules in the coming years and is expected to be worth $500 mn to Syngene over 10 years, subject to regulatory approvals and market demand.

Fund managers who bought shares of Syngene

Addition of shares of Syngene was done to respective schemes by Harish Bihani and Sharmila D’mello for ICICI Prudential Long Term Equity Fund (Tax Saving) Growth and ICICI Prudential Smallcap Fund Growth, Gaurav Misra for Mirae Asset Focused Fund Regular Growth, and Pranav Gokhale and Amit GanatraInvesco India Growth Opportunities Fund Growth.

Hatsun Agro Products - Expansion to a pan India brand drives revenue growth

Hatsun Agro Products manufactures and markets dairy products like milk, curd, ice creams, dairy whitener, skimmed milk powder, ghee, paneer and other milk based products. The Q1FY23 results recorded highest ever quarterly revenues at Rs 2,020 crore. This was the result of expanding beyond its stronghold in South India.

While the company for most of its existence was limited to the southern states, its retail expansion in the last two years helped it reach customers in new markets like Maharashtra, Odisha, West Bengal and Madhya Pradesh. Hatsun Agro Products invested about Rs 450 crore in the last financial year across new manufacturing facilities for capacity expansion in ice cream, milk, curd, milk products and cattle feed.

Fund managers who bought shares of Hatsun Agro Products

Shares of Hatsun were added by S. Bharath and Ratish Varier to Sundaram Mid Cap Growth, Sohini Andani and Mohit Jain to SBI Magnum Midcap Fund Regular Growth, R. Srinivasan and Mohit Jain to SBI Focused Equity Fund Growth and Saurabh Pant and Mohit Jain to SBI Large & Midcap Fund Regular Payout Inc Dist cum Cap Wdrlschemes respectively.

Britannia - Management rejig and and international foray key positive triggers

Britannia, a leading food-products company, sells various brands of biscuits, cakes, dairy products, breads etc. in India as well as globally.

The company recently teamed up with Nairobi-based Kenafric Industries to purchase Catalyst Capital-backed Britannia Foods Ltd. in Kenya in a $20 million transaction that also involved acquiring property and a plant, Mikul Shah, a director at Kenafric, said in an interview. Britannia Industries, unrelated to Britannia Foods, took a controlling stake in the partnership.

The company also saw a change in the top management team with Ranjit Kohli taking over from Varun Berry as the CEO, while Varun Berry was elevated to executive vice-chairman and managing director.

Fund managers who bought shares of Britannia

Buyers in Britannia included Sohini Andani and Mohit Jain for SBI Bluechip Fund Regular Growth, Sankaran Naren and Sharmilla D’mello for ICICI Prudential Focused Equity Fund Growth, Shridatta Bhandwaldar for Canara Robeco Flexi Cap Fund Growth and Neelesh Surana and Ankit Jain forMirae Asset Emerging Bluechip Fund Growthschemes respectively.

The Baseline

14 Oct 2022

Five Interesting Stocks Today

Campus Activewear: This footwear company touched an all-time high of Rs 617.95 on Wednesday, and gained 59.7% over the past 90 days. The uptick in the stock comes on the back of a robust business outlook. The management believes that the Indian sports & athleisure (S&A) footwear market is underpenetrated, and this provides it with an opportunity to expand.

Within the retail industry, the footwear segment is expected to be one of the fastest-growing. According to reports, the S&A footwear market in India is expected to grow at a CAGR of 21%, beating the overall footwear industry’s CAGR of 17% in FY22-25. The optimism around the stock is due to the fact that it is the only listed company in the S&A footwear space in India. As of FY21, the company commanded a 17% market share in the branded S&A market in India.

The company also performed well in Q1FY23 - its net profit surged 10.9X YoY and revenue jumped 2.5X YoY on the back of sales volumes increasing 2.4X YoY. Trendlyne’s Forecaster estimates the company’s net profit to grow by 30.9% in FY23. The company also shows up on the screener which lists businesses with low debt.

Campus Activewear’s key advantage is that its average selling price is significantly cheaper than its competitors. According to Motilal Oswal, given its wide product portfolio, competitive pricing, and wide-distribution network the company looks well poised to make massive market share gains.

JSW Steel:This steel stock released its production numbers for Q2FY23, where its crude steel production increased 12% YoY to 5.6 million tonnes but decreased sequentially by 3%. The reduction in volumes QoQ is because of a 73% fall in the production of JSW Ispat Special Products, because of maintenance shutdowns. Also, market conditions are not conducive for the company’s USA unit, and it reported a 48% fall in volumes. The management also says that logistics issues and underutilization of capacity at some plant locations in India are other reasons for a fall in total production levels.

The company also reports a sharp decline in exports. This is because of the 15%-45% export duty imposed on various types of steel in May. Steel companies were expecting an early end to the export duties levied by the Centre, according to reports, but it looks like they will have to wait until the next Union budget for duty cuts.

This is because while steel prices fell in May, June, and July, it started rising again in August, causing a hiccup in the duty cuts as the Centre wants more data to understand the metal’s demand-supply dynamics before making a final decision. Since the demand in the domestic market is low and inventory levels for steel companies are high, the removal of export duty may help steel companies tap into the global markets.

On the positive side, reports suggest that JSW steel has capex plans worth $1 billion to build a specialty steel manufacturing unit in India in partnership with Japan’s JFE Steel. This will largely help India reduce its import dependency on electric steel.

In terms of the sector outlook, the Nifty Metal index made it through the ‘golden cross’ on September 22. The golden cross indicates a stock’s 50-day moving average crossing above the 200-day moving average. This means there is improving sentiment around that stock, or in this case, the Nifty metal index. Reports suggest the Nifty metal index has the potential of rising further by 11%. This could bode well for all metal stocks in the metal universe. JSW Steel shows up on a screener that lists stocks with consistent returns over the last five years.

One97 Communications (Paytm): This internet software company’s stock rose consecutively from September 30 to October 10, until the markets went on a downtrend. The rise comes with JP Morgan maintaining an ‘overweight’ stance on the stock. The brokerage expects the stock to regain its Rs 1,000 mark by March 2023 and expects Paytm’s losses to narrow down in Q2FY23. In terms of business, it expects its annual loan disbursements to reach Rs 29,000 crore with an improved penetration into the market by 4%. It also expects Paytm’s margins to improve and processing costs to rationalise in FY23. In its Q2FY23 business update Paytm did record an increase in its value of loan disbursements by 482% YoY to Rs 7,313 crore. Its monthly transacting users were also up 39% YoY. But asset quality trends on its disbursements are so far unclear.

Goldman Sachs also has a positive recommendation for the stock. It expects the stock to go up by 112% in a bull case, which is pretty significant given that the stock is currently trading at 64% below its issue price.

Another danger for the stock is the end of the lock-in period on November 18. Given the history of IPOs like Zomato where the stock plunged once its lock-in period ended, Paytm will have to deliver good results to keep up investor faith and may need to plan for an exit strategy like PB Fintech (Policybazaar) where it plans to line up buyers for its shares to avoid a Zomato-like situation, according to reports. Policybazaar’s lock-in period also ends in November.

TVS Motors Company: The market capitalization of this two-wheeler maker surpassed that of market leader Hero MotoCorp on October 12. This is despite the fact that its net profits in FY22 were only one-third of Hero’s profit figure. The company’s stock also outperformed its industry by over seven percentage points in the past month.

TVS Motors’ two-wheeler wholesales have grown at a compounded rate of nearly 10% in the past six quarters, much faster than that of Hero MotoCorp and Bajaj Auto. In fact, its two-wheeler wholesales for Q2FY23 rose in double-digits YoY while others saw a minor fall. Robust domestic sales drove the Q2 volumes for TVS, making up for the YoY fall in exports. Additionally, its focus on premium brands like Apache, Ntorq, and Ronin contributed to its healthy volumes.

On the other hand, Hero’s volume growth suffered owing to its reliance on the entry-level segment which basically consists of motorbikes with 100 CC engines. Customers in this segment mainly belong to the rural and semi-urban regions and are highly price-sensitive. Demand from rural parts of India is still muted on account of inflationary pressures.

TVS Motors has plans to launch new electric two-wheeler models in the coming quarters. It also looks to ramp up the production capacity of its existing electric brand ‘iQube’ to 10,000 units per month very soon and then to 25,000 units per month. K N Radhakrishnan, CEO of TVS Motors, is quite confident of the demand trends in this festive season. According to consensus estimates of analysts, the company’s earnings may jump by over 35% in FY23 backed by strong sales. Investors should also watch out for the possible inclusion of TVS Motors in the MSCI Index from November 2022.

Sobha: This realty company’s share price fell over 3.4% on Tuesday after it released its September business update. Sobha’s share price fell despite its total sales volume rising 13% YoY in September on the back of increased demand for residential and office spaces in Q2FY23. This was mainly due to a 20% sales volume rise in its Bengaluru market, which contributes over 75% of total volumes.

The fall in share price could be due to total sales volume declining by 0.9% QoQ. In addition, mortgage rates are rising in line with interest rates since May. The Reserve Bank of India has raised the repo rate by 190 bps since May to 5.9% and is expected to continue with its tight monetary policy. The company’s stock has fallen by around 30% in 2022, underperforming Nifty Realty by nearly 18%. With such a fall in share price, it comes up in the screener that shows companies with weak momentum scores. Notably, Sobha’s promoter pledging increased by 6.6% in Q1FY23 to 20.3%.

However, ICICI Securities has a positive outlook on the company due to strong H1FY23 performance despite rising mortgage rates and a strong launch pipeline. Post Sobha’s business update announcement, the brokerage retained its ‘Buy’ rating with a target price of Rs 808, indicating a 26.7% upside. However, the stock is currently in the sell zone as it has traded 86% of the days below its current price-to-earnings ratio.

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

The Baseline

13 Oct 2022

Chart of the week: SME, Metal, Industrial stocks boost indices over the quarter

By Abdullah Shah

As anticipation of the result season grows, investors are buying into stocks which are showing potential for growth despite market volatility. We take a look at the indices which have grown the most in the past quarter and the stocks driving this growth.

The S&P SME BSE IPO rose 58.6% over the last 90 days, the most among all the indices. Shree Venkatesh Refineries, Maruti Interior Products and Ekkenis Software Services rose above 100% in the past 90 days, contributing to the surge in the index. The index has risen 9.3% in the past week, despite the market being volatile and the rupee falling to new lows.

The Nifty Metal index has also seen a broad recovery in the quarter after being in the doldrums in the past year, as it rose 18.5%. APL Apollo Tubes, Vedanta and Jindal Steel & Power grew more than 20%, helping the index to rise. After already beating Forecaster estimates for revenue growth in Q1FY23, analysts are estimating an average revenue growth of 18.7% in Q2FY23 for APL Apollo Tubes. The Nifty Metal index continued its gains in the past week and is up 0.5%.

S&P BSE Industrials index comes in third as it rose 17.2% in the past 90 days. Hindustan Aeronautics, Bharat Electronics and ABB India rose above 25% in the last 90 days, aiding this growth. Bharat Electronics’ forecaster estimates for revenue growth for Q2FY23 is at 24.4% after beating the forecaster estimates for revenue growth in Q1FY23. The Industrials index grew 0.7% in the past week.

The Baseline

12 Oct 2022

Five analysts make their picks ahead of Q2 results

By Abhiraj Panchal

Relaxo Footwears: Sharekhan maintains a ‘Buy’ call on this footwear brand with a revised target price of Rs 1,185. This indicates an upside of 18%. In H2FY22, the company took cumulative price hikes of 25-30% which affected the sales volume. To arrest the sales volume drop, the footwear manufacturer reduced prices by 12-15% in its key value-for-money brands such as Relaxo, Flite, and Bahamas.

Analysts at Sharekhan say, “The price corrections undertaken will take some time to come in the market and hence Q2FY23 sales volumes are expected to be muted due to weak consumer sentiment affected by inflationary pressures.” They expect a gradual recovery from Q3FY23. According to the analysts, Relaxo has a strong, debt-free balance sheet with good cash generation ability, and it is on track to achieve revenue and earnings CAGR of 14% and 22%, respectively over FY22-FY25.

Phoenix Mills: ICICI Securities maintains a ‘Buy’ call on this retail mall developer with a target price of Rs 1,638, indicating an upside of 13.7%. FY21 and FY22 operations were impacted by mall shutdowns across India owing to successive Covid waves. However, with the waning Covid impact, in Q1FY23 like-to-like consumption across the mall stood at Rs 1,980 crore or 111% of Q1FY20. Analyst Adhidev Chattopadhyay estimates that thanks to continued consumption strength, “we model for FY23 rental income of Rs 1,370 crore.”

Phoenix Mills has nine operational malls and six under-construction malls which are expected to be operational over FY23-26. The estimated capex of these ongoing projects is Rs 9,320 crore, of which pending capex stands at Rs 5,050 crore. Chattopadhyay adds, “We expect the company to generate annual operating cash flow of Rs 1,400-1,500 crore over FY23-25 which can comfortably fund the balance capex”.

He also remains positive on the mall developer due to its strong brand recall and its leadership position among malls across India.

Divi's Laboratories: Ashika Research recommends a ‘Buy’ rating on this pharmaceutical company with a target price of Rs 4,110, indicating an upside of 12.1%. The analysts at the brokerage believe the company is well-placed to benefit from the expected growth in active pharmaceutical ingredients (API) manufacturing. Supply chain issues in China and the China+1 strategy among buyers has provided Indian API manufacturers with a great opportunity to expand, they added. The brokerage believes the firm’s capacity expansion plans and its strong capabilities in manufacturing APIs, intermediates, and active ingredients will enable it to expand its client base and gain market share.

The analysts also see the company’s generics segment driving growth along with APIs as a key positive. “Divi’s is expected to clock double-digit growth in established generics products where it enjoys market share in excess of 60-70%”, they add. The brokerage expects margin pressure to persist in the near-term but remains positive on the firm’s future growth prospects. It expects the company’s revenue to grow at a CAGR of 7% over FY22-24.

Jubilant Foodworks: Bonanza initiates coverage of this restaurant chain company with a ‘Buy’ call and a target price of Rs 891, indicating an upside of 46.6%. “The quick service restaurant (QSR) master chef maintains its ground on the back of strong demand outlook and excellent execution capabilities,” says analyst Shreya Hanchate.

Hanchate believes that Jubilant Foodworks is the largest food service brand in the QSR industry and has the benefit of being the first mover. It is also a leading fast-food industry player in terms of the number of stores (1,625 in Q1FY23). The company aims to grow up to 3,000 stores in the medium term.

Hanchate says, “The resultant robust performance in Q1FY23, led by strong revenue growth, recovery in growth, and positive expectations from the new brands' portfolio makes Jubilant a hot pick.” On the back of sustained delivery demand, the analyst expects growth in EBITDA and profit margins of 26% and 11% respectively by FY24.

Bajaj Finance: KRChoksey maintains its ‘Buy’ rating on this non-banking finance company (NBFC) with a target price of Rs 8,317, implying an upside of 14.8%. Analyst Vikrant Kashyap believes India’s growing housing market will be an important lever of growth for the company. He notes that the NBFC expects its assets under management to grow at an annual rate of 25-28% in FY23. He also believes that future growth will be fuelled by aggressive customer acquisition. He adds, “The NBFC is confident of adding 9-10 million customers by the end of FY23. The firm has been focusing on customer acquisition, which is expected to be its key growth driver”.

Kashyap expects the company’s position as a market leader in customer finance to bode well for it, as it is well-positioned to capitalise on the demand shift towards premium products across discretionary categories. He is also positive about the company’s ability to increase its presence and improve its technological capabilities. The analyst expects Bajaj Finance’s net profit to grow at a CAGR of 41.8% over FY22-24.

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

(You can find all analyst picks here)

The Baseline

07 Oct 2022

Five Interesting Stocks Today

APL Apollo Tubes: The stock of this structural steel tube maker gained over 9% ever since it released its business update for Q2FY23 on October 1, 2022. It also touched a 52-week high on Thursday and has outperformed the Nifty 500 index by over eight percentage points in the past week.

APL Apollo Tubes reported its highest-ever sales volumes in Q2FY23 which were at 6.02 lakh tonnes. The volumes jumped over 40% YoY and sequentially in Q1FY23 led by the ‘Apollo Structural’ product category. Within this category, general structures grew the fastest in this quarter. As a result, share of the value-added segment in APL’s overall volumes fell to 54% in the quarter from 61% in Q1FY23. The management’s medium-term goal is contrary to the actual result. It aims to raise the share of value-added products in its sales volumes to 75% by FY25. Nevertheless, the volume numbers for Q2FY23 are impressive as the company had seen its volume fall by more than 20% QoQ in the previous quarter. This was on account of distributors reducing their stocks as a response to falling steel prices. Back then, the company was confident of clocking one million tonnes of sales in H1FY23. It has comfortably exceeded that target despite Q2FY23 being a seasonally weak quarter for construction given the monsoon season.

Given the rising applications of steel tubes for construction of airports, warehouses and high-rise buildings, the company aims to clock a volume CAGR of over 30% between FY22 and FY25. Its targeted sales volumes are at four million tonnes for FY25. Its upcoming facility of 1.5 MTPA in Raipur will enable APL Apollo to achieve this growth target. In fact, the company may generate additional volumes of 30 to 40 lakh tonnes from the Raipur plant in FY23. The outlook for APL Apollo is promising with the government’s thrust on infrastructure development.

Angel One: This brokerage company’s stock rose over 12% on Tuesday after it released its monthly business update. Angel One’s client base rose 77.4% YoY to 1.15 crore in September. In addition, a jump in average daily turnover (ADTO) of Futures and Options (FnO) and commodities segments helped the overall ADTO to increase by 116.4% YoY. With such a rise in share price after the business update, Angel One comes up in a screener that shows companies whose share price is trading above their short, medium, and long-term moving averages.

The sharp rise in the FnO ATDO could be due to the volatile nature of the markets. This bodes well for the company as it has a higher dependence on FnO income. Overall, the top five brokerages account for around 58% of the overall NSE active clients with Angel one’s market share at about 9%.

Though the company posted strong numbers, investors will have to note that trading enthusiasm slows down when markets are in a downturn. This remains a key risk for Angel One. This is reflected in its gross client acquisition, which fell both YoY and QoQ in September. Active users in the industry also fell both in July and August indicating a slowdown. However, the company’s share price is rising ahead of its Q2FY23 results, which is scheduled to be released on October 13.

VIP Industries: This luggage manufacturer rose more than 7% in intra-day trade on Monday and over the past month, it gained over 18.9% till Thursday. The uptrend in the stock’s price comes on the back of a robust business outlook. The rise in demand for travel this festive season is expected to augur well for the company given its dominant position in the organised luggage industry. The firm commands a market share of 45% in the industry, according to reports. Another key positive for the company has been its focus on increasing revenue from its own manufacturing. In-house manufacturing contributed 64% of revenue in Q1FY23, up from 35% in Q1FY20.

Along with improving its manufacturing capabilities, the firm has sharply reduced sourcing finished goods from China in Q1FY23 to 11% from 40% in FY20, according to ICICI Direct. This helps it reduce its exposure to forex fluctuations and disruptions in the supply chain. Over the past year, the company has risen over 40.4% till Thursday and made it to this screener with stocks that have had high returns consistently over the past 5 years.

The management has targeted annual revenue of Rs 2,000 crore in FY23, given a recovery in demand and a fall in some key raw material prices, according to reports. Trendlyne’s Forecaster estimates its revenue to grow 32.9% YoY to Rs 1,921.3 crore in FY23, coming in close to the company’s intended target. At the end of FY22, the company had 376 exclusive brand outlets, and by the end of FY23, it aims to increase its retail store network to 500. The firm hopes to achieve this target by expanding into smaller towns in India, and most of these outlets will be opened through a franchise model.

Avenue Supermarts (DMart): This retail chain company rose more than 3% on September 30 after brokerage Prabhudas Lilladher increased its target price for the stock by 16.7% to Rs 5,118. The stock also shows up on a screener where brokers upgraded recommendations and target prices in the past three months. Three brokers upgraded their recommendations while five brokers increased their target price for the stock.

Prabhudas Lilladher feels that the stores opened by DMart during the pandemic will deliver gains in FY23. It also believes that the company’s current strategy of ‘Everyday Low Prices’ will drive sales in this festive season, beating inflation woes. It also expects ‘Dmart Ready’ - a new venture by the company into door-to-door delivery service - to clock growth in FY23 as its sales almost doubled in FY22. One view of the new venture is that despite heavy competition in this segment, DMart has not structured its model on heavy discounts which generally burns cash flow, resulting in losses. The brokerage expects DMart’s top line to grow by 38% YoY and net profit to increase by 46% in Q2FY23.

The company recently gave out its quarterly business update. Its revenue is up 35.8% YoY to Rs 10,384.6 crore in Q2FY23. This number is almost double (Rs 5,218.1 crore) of revenue generated in Q2FY21. Although revenue growth is slightly down because of lower rural demand and rising inflation, some segments like apparel and general merchandise are seeing a surge. The company also plans to open more stores and expand geographically in FY23. Analysts expect that Avenue Supermarts’ EBITDA will break even by FY25 if it scales up at a faster pace.

Blue Dart Express: This logistics company touched its all-time high of Rs 9,640 on Tuesday and rose 9.2% in the past week till Thursday. The stock started its uptrend after the company announced an increase in shipment prices by 9.6% on September 28, effective from January 1, 2023. The management said the price hike will be taken to offset rising input costs, high inflation, and rising interest rates. The surge in share price comes on the back of expected volume growth and market share gains. This is due to its 54% market share in the organised air express market and the ability to deliver to 98% of pin codes in India. The company also shows up on a screener which lists stocks with rising cash flow from their operations in the last two years.

The company has been able to maintain its gross margins at 36% in FY22, despite elevated aviation turbine fuel (ATF) prices. Its ability to pass on prices and a 30% surge in volumes during FY22 aided in maintaining its margin, according to Motilal Oswal. Looking ahead, the management wants to expand its ground express segment and increase the segment’s contribution to total revenue from its current levels. This is because it expects the growth in this segment to be 2X the growth in the air express segment, mainly due to cost differential in services. The management also plans to scale up its services in e-commerce as well, as it sees this segment driving growth in the long term.

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

The Baseline

06 Oct 2022

Chart of the week: Hong Kong's Hang Seng index falls the most in the past six months

By Abdullah Shah

2022 has seen rising inflation and interest rates, as well as conflict in Europe. The weakening environment has spooked investors, resulting in a global sell-off across indices as people hunt for less risky options for their money.

The Hang Seng index of Hong Kong, China fell 18.4%, the most in the past six months among global indices. The index fell to its lowest level since October 2011. The major reason for this fall is traders selling equities for much safer government bonds, as Covid zero policies and weakening GDP growth discourage investment.

The USA’s S&P 500 fell 15.6% in the last six months. Ever since the Federal Reserve raised interest rates by 75 bps for the third consecutive time on September 21, the index has taken another plunge and dropped below the lows of June.

The United Kingdom’s FTSE 100 index fell 7.1% over the last six months. The US Fed’s interest rate hikes combined with the UK government’s unfunded tax cuts in its mini-budget have resulted in the British pound falling to its all-time low of $1.038 on September 26. The concerns around the tax cuts fuelling further inflation in the UK has caused investors to pull out of the equity market.

India’s Nifty 50 index has fared well compared to most other global indices. It has fallen just 2.4% in the past six months. A broad sell-off from foreign investors contributed to this drop. Another reason is the fall of the Indian rupee to its all time low of Rs 81.9 per dollar on September 28. Japan’s Nikkei index has recovered in recent weeks on the back of strong buying from retail investors.

As we head into the second half of FY23, central banks are likely to further increase interest rates to keep inflation in check.

The Baseline

04 Oct 2022

Five analyst stock picks from the banking and finance sector

By Suhas Reddy

This week, we look at five analyst picks from the banking and finance sector, which has been in the green over the past quarter.

IndusInd Bank: Sharekhan maintains its ‘Buy’ rating on this bank with a target price of Rs 1,400. This indicates an upside of 19.8%. Analysts at the brokerage believe that “the bank is well positioned to resume on the path of higher credit growth, as it has recovered from past asset quality challenges''. They note that concerns over the bank’s asset quality are fading as its collection efficiencies, liquidity position, and internal costs have been improving for a few quarters. The bank’s credit costs are also expected to fall, and they anticipate a decline of 150 bps annually over FY23-25.

Sharekhan believes IndusInd’s loan disbursement growth will be driven by its vehicle finance, micro-finance and MSME business segments in the coming quarters. Overall, the company’s growth is expected to be broad-based. The analysts are positive about the firm’s foray into new segments such as NRI banking, tractor finance, and affordable housing. They expect the bank’s net profit to grow at a CAGR of 29.5% over FY22-25.

Star Health and Allied Insurance: Motilal Oswal maintains a ‘Buy’ call on this insurance provider with a target price of Rs 830. This indicates an upside of 19%. Prayesh Jain and Nitin Aggarwal say, “Star Health outlined strong growth opportunities in the health insurance space in India. After the lifting of COVID-related restrictions, there is growing acceptance of the need for hospitalization, leading to larger customer walk-ins wanting to avail health insurance policies without being prospected.”

According to the analysts, the insurance company is planning to expand its presence in rural India by creating a dedicated vertical for addressing demand from these geographies. Jain and Aggarwal expect Star Health to deliver an 18% gross premium CAGR over FY22-25, led by strong growth in retail health insurance and expect claim ratios to improve due to the pandemic receding. They also remain optimistic about the company due to its healthy earnings growth and limited cyclicality risk.

Bandhan Bank: ICICI Securities maintains its ‘Buy’ rating on this bank but reduces its target price to Rs 408 from Rs 414. This implies an upside of 54.9%. Analysts Kunal Shah, Renish Bhuva, and Chintan Shah have cut their target price mainly due to the disruptions in collection efficiency and disbursements in Q1FY23. These disruptions were caused by the Assam floods and the revision in RBI regulations. However, they expect a recovery in the bank’s collection efficiency and disbursements in the coming months. They are constructive on mortgage lending growth as well.

The analysts say the bank is looking to open more than 500 branches in FY23, predominantly outside of its key markets Assam and West Bengal. Given these expansion plans, they expect the bank’s operating expenses to rise but the operating expenses to assets guidance of 2.6-2.7% to be maintained. They also see the firm’s increasing investment in technology as a key positive. They estimate the company’s net profit in FY24 to grow by 24.4% over FY23.

Au Small Finance Bank: Axis Direct retains its ‘Buy’ rating on this small finance bank with a target price of Rs 705, implying an upside of 17.7%. The analysts at the brokerage expect the bank’s strong disbursement growth momentum to continue over the medium term. They see this growth led by vehicle finance, home loans, credit cards, and business banking segments. The bank’s asset quality recovery since the disruptions caused by the pandemic is a key positive. They expect its asset quality to further improve as “the restructured book has been exhibiting strong collection trends and slippages from the pool well below the anticipated levels”.

The analysts also expect the company’s net interest margin to remain stable despite an increasing interest rate environment. However, operating expenses can increase in the medium term as the firm is investing in expansion and technology. Nonetheless, Axis is positive about the small finance bank’s growth prospects given its stable NIMs and low credit costs, and the analysts expect the company’s net profit to grow at a CAGR of 26.3% over FY22-25.

Union Bank of India: Motilal Oswal maintains a ‘Buy’ call on this public sector bank with a target price of Rs 50, indicating an upside of 14.8%. After attending the Union Bank’s thematic investor day on asset quality, Nitin Aggarwal, Yash Agarwal, and Vinayak Agarwal say, “The bank has segregated and shifted the loan portfolio to dedicated verticals, which focuses on marketing and general servicing.” The bank has opened 250 retail loan points, 125 MSME loan points, mid-corporate branches, and 13 large corporate branches to primarily focus on specific loan segments.

The analysts note, “The bank saw recoveries of Rs 3,800 crore and is on track to achieve total recoveries of Rs 15,000 crore in FY23.” For FY23, they expect GNPA and NNPA to be at 9% and 3% respectively, and expect the slippages to moderate to less than 2%, with a credit cost of less than 1.7%.

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

(You can find all analyst picks here)