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

11 Nov 2021

Chart of the Week: Entertainment, Hotels, Real Estate recover strongly in Q2

Many industries that were impacted by the Covid-19 pandemic saw their fortunes change in Q2FY22. Realty surprised investors with one of highest rise in profits due to robust growth in sales bookings of constituent companies. Another beneficiary of the unlock theme has been the logistics.

Revival of business activity across industries boosted the companies' profits including BlueDart and TCI Express. Steel companies continued to outperform due to steep rise in HRC prices and buoyant steel demand. Hotels witnessed a strong recovery in sales due to easing of travel restrictions and revenge travel trend. See the full results dashboard.

The Baseline

05 Nov 2021

What Superstars bought in Q2FY22

Investors usually track the portfolios of large investors, or Superstars, to take cues on stocks that might do well in the future. So, the changes in their portfolios are keenly followed. We take a look at the stocks in which superstars bought or added to their portfolios in Q2FY22.

Superstar buys Rakesh Jhunjhunwala buys stake in NALCO and Canara Bank

Rakesh Jhunjhunwala, the ‘Big Bull’, bought 1.1% stake in Indiabulls Real Estate and 1.36% stake in National Aluminium Company. Shares of NALCO surged nearly 7% after he added this state-owned miner to his portfolio. This is his second bet on a commodity company after he added SAIL to his portfolio in Q1FY22.

He also bought a 1.6% stake in Canara Bank. The state-owned bank reported a three-fold rise in its net profits at Rs 1,333 crore as its net NPAs fell 3.21% YoY to Rs 20,862 crore in Q2FY22 results. This bank declared positive results in the previous quarters and the ace investor seems bullish on this stock.

Ashish Kacholia on buying spree in Q2

Ashish Kacholia bought a 2.8% stake at Faze Three. The shares of the company rose 44% within two sessions after Kacholia bought its shares.

Kacholia seems to have focused on small and mid cap companies in Q2FY22, as he bought a 1.55% stake in Somany Home Innovation. This company primarily focuses on consumer appliances. The two other stocks he added to his portfolio are Gateway Distriparks and Xpro India. He bought a stake of 1.54% and 2.52% in the two companies, respectively. Gateway Distriparks reported 41% jump in net profits to Rs 48 crore in their Q2FY22 results and Xpro India gave a high 19-fold year-to-date returns to its investors. Xpro India focuses mainly on polymer processing.

Porinju V Veliyath adds Kerala Ayurvedic to his portfolio

Porinju Veliyath made few bets in Q2FY22. He bought a 2.1% stake in McDowell Holdings, a 1.3% stake in Cupid, and a 1.12% stake in Swelect Energy systems. Swelect Energy system makes solar power systems.

Porinju also bought a 1.3% stake in Kerala Ayurveda. The company primarily engages in wellness, hospitals, products and services in India and the US. This business also has its own manufacturing and R&D centres.

Sunil Singhania’s Abakkus buys newly listed companies in Q2

Sunil Singhania’s Abakkus Fund added a 2.5% stake in the newly-listed Paras Defence and Space Technologies. The company’s stock hit the upper circuit limit after its debut on October 1.

Singhania added two new companies to Abakkus’ portfolio in Q2FY22. He added a 1.23% stake in PSP Projects and a 8.2% stake in Rajshree Polypack. PSP Projects is a construction company that is mainly engaged in designing, planning and post construction activities. Rajshree Polypack makes rigid plastic packaging products. The company aims to co-develop products and focus on material that have higher margins, and expand their customers in the US and UK.

Vijay Kedia buys two small cap companies in Q2FY22

Vijay Kedia bought a 15.25% stake in Affordable Robotic & Automation in Q2FY22, which designs automation systems for manufacturers across sectors. The company’s stock price has surged more than 50% year-to-date.

The investor also added two other small cap companies in his portfolio. These were a 10.7% stake in Innovators Facade Systems and he also raised his stake in Ramco Systems to 2.56% from 1.81%. Ramco System’s stock has dipped by 25% in 2021. It appears Kedia is bullish on this stock.

Dolly Khanna’s portfolio saw no major changes in Q2FY22

Ace investor Dolly Khanna increased her stake in Nitin Spinners to 1.64% from 1.24% in Q1FY22. This stock gave a 3X return in the last one year. She also bought a 1.1% stake in New Delhi Television in Q2FY22. There were no massive changes in her portfolio in Q2.

The Baseline

03 Nov 2021

Chart of the week: Commercial vehicle sales see steady recovery

A key indicator of a recovering economy is construction and infrastructure activity. Looking at the recovering sales of commercial vehicles (CV) - particularly the medium and heavy commercial vehicles (MHCV) - the outlook for construction activity appears positive.

In April 2021, when the second wave struck, CV sales tanked. The four major listed CV makers — Tata Motors, Eicher Motors' VECV, Ashok Leyland, and Mahindra & Mahindra (M&M)'s total MHCV wholesales dropped by close to 60% MoM.

Since then, CV sales have steadily recovered. By October 2021, the four CV makers' MHCV sales rose by 30-80% in six months. Some CV makers like Eicher Motors' VECV and Tata Motors' MHCV sales dipped in October compared to September. However, MHCV sales for M&M and Ashok Leyland have been on a steady incline since April.

The Baseline created a screener Stocks Outperforming the Index …

03 Nov 2021

Stocks Outperforming the Index Over the Week, Post Results

Stocks which outperformed the Nifty50 index post results

The Baseline

03 Nov 2021

Five Stocks Outperforming the Nifty50 Post Results

As results for the September quarter come in, we are seeing key stocks outperform the index post their earnings announcements. This screener looks at Nifty500 stocks that announced results at least one week ago, and have since beaten the Nifty50 index. While there are a good number of IT stocks present (no surprise there), several old school businesses also turn up in the list, including auto, cement, and consumer electronics. We pick five stocks out of the 80+ present in the screener.

1) Orient Electric: Consumer electronics companies are back on the investor radar post Covid, and appliances business Orient Electric is an interesting outperformer, substantially beating the index post its results (it beat the Nifty50 by over 14.8% in the past week). Revenues for the company grew 37% YoY, exceeding analyst estimates. And despite increases in commodity costs during the quarter, the company saw strong segment growth especially in the home and office space.

2) TVS Motor Company: After a bruising year with lockdowns sinking demand for the auto sector, this two wheeler business saw strong topline growth, and its capex plans remain intact. TVS has maintained its capex guidance of Rs 8 billion for FY22E, funded internally from accruals. The bullishness of the outlook is being driven by EV investments, new launches, and a focus on exports. But in the short term, dragons remain in the form of cost increases and supply chain shortages.

3) TCI Express: This logistics company has been another index outperformer, beating the Nifty50 by 11.2% over the past week. The company has been working on building a moat in its sorting centres and transportation network with IT investments, to halve processing time and speed up shipments. Its efforts in B2B offerings like pharma cold chains have also boosted its outlook with analysts. "Newer offerings expected to post EBITDA margins in 22-25% range in medium to long term," according to ICICISec.

4) L&T Technology Services: The IT companies under the L&T umbrella are all the rage. And LTTS is no exception, continuing to stoke investor interest by beating the index by 9.7% this week. The company saw its highest ever EBIT margins of 18.4% in the September quarter, despite the cost pressures in the industry. LTTS has raised its USD revenue growth guidance to 19- 20% from the previously stated 15-17%.

5) Ultratech Cement: This cement company is seeing bullishness from investors, outperforming the index by over 8% this week, and appears to be well-positioned to take advantage of demand recovery post the monsoon. The extended rains were a dampener (despite which Ultratech's volumes grew 8% YoY in Q2), but now the management believes that spending will see a strong resurgence, with the push for rural housing amid healthy government crop procurement.

See the full screener.

The Baseline

29 Oct 2021

Five Interesting Stocks Today

SpiceJet: This airline operator’s grip on domestic passenger air traffic is loosening, which could benefit its listed rival. In September 2021, domestic airlines carried over 70 lakh passengers, 90% of pre-second wave levels. However, SpiceJet’s September passenger traffic recovered to just 60% of pre-second wave levels. Meanwhile, IndiGo’s (operated by InterGlobe Aviation) recovery was 95% of pre-second wave levels. SpiceJet’s market share in the domestic passenger airline market dropped to 8.5% in September from 12.8% in March, the seventh consecutive month of market share decline.
Tatva Chintan Pharma Chem: This newly listed specialty chemical maker’s stock rallied after its Q2 results. Its Q2 revenue doubled YoY to Rs 123 crore with a nine-fold increase in net profits to Rs 32.4 crore. In one week, the stock’s price gained nearly 24%. On October 27 during the peak of the price rise, it was trading with volumes seven times the average volumes since listing on July 29. The stock is now trading at twice the IPO issue price of Rs 1,083 per share and 12.5% higher than its listing price of Rs 2,603 per share.
Oberoi Realty: This realty company’s stock is down by nearly 10% in two weeks as the realty market’s momentum moderates. Earlier in October, the company announced a YoY doubling of its Q2FY22 sales bookings to Rs 828.5 crore due to recovering housing demand. This pushed its stock to Rs 970 levels, which was 15% higher than the average brokerage target price of Rs 840. The real estate company will announce its Q2 results on October 29.
Century Plyboards: This plyboards maker’s stock is up by nearly 45% in two months, but the momentum looks to be running out. In one week the stock price is down by 3% ahead of its Q2 earnings reveal on November 2. Momentum indicators suggest the stock is overbought, as its relative strength index (RSI) is at 76 (an RSI over 70 is overbought) and money flow index (MFI) at 72 (an MFI of over 70 is overbought). The stock is trading well above all its exponential and simple moving averages with over delivery volumes of over 60% of total traded volume this week.
Nestle India: This FMCG company’s stock dipped after the announcement of its Q2 results. Net profits rose by 5.2% YoY to Rs 617 crore despite high cost of raw materials (oil and packaging materials) causing a dent in its operational performance. The company reported a 9.6% YoY growth in sales revenue. Brokerages — Edelweiss and Geojit BNP Paribas — maintained a ‘Buy’ rating on the stock expecting an increase in sales volumes. They also expect higher demand for the company’s products in the outdoor food and beverage industry due to a decrease in the intensity of the pandemic.

The Baseline

27 Oct 2021

Chart of the week - HDFC Bank and Kotak’s gross NPAs increase in Q2FY22

One of the ways to measure a bank’s financial health is to see its gross non performing assets (GNPA) ratios. A high GNPA ratio is a red alert for the bank’s asset quality. With the earnings season going on, some banks are seeing a steep decline in gross NPAs as the banking sector shows robust growth as things return to normal.

Except for Kotak Mahindra Bank private banks have reported a steep fall in gross NPAs. Yes Bank reported a sharp decline in provisions and an improvement in asset quality. For public sector banks, IDBI Bank is leading the charts with a 2,487 basis points (bps)YoY decrease in gross NPAs. Due to a sharp increase in net interest income by 34% to Rs 1,450 crore, Bank of Maharashtra’s net profits rose by 103% to 264 crore.

Most private sector banks have seen a double digit increase in net profits besides Kotak Mahindra Bank which reported a 7% fall in net profits in Q2FY22. The reason the private bank's profits fell is the increase in gross NPA by 64 bps YoY. But the bank is hopeful to bounce back from the red in the coming quarters.

The Baseline

23 Oct 2021

Five Interesting Stocks Today

Federal Bank: This bank’s stock is rising ahead of its Q2FY22 results. In one week, the stock is up by nearly 6%, outperforming the Nifty50 and the Nifty Bank. The bank's operational numbers improved in the quarter. Its loan disbursed increased by 9% YoY and total customer deposits by 8% with a healthy liquidity coverage ratio of 1.2 in Q2FY22. Investor Rakesh Jhunjhunwala also increased his stake in the bank to 3.7% from 2.8%.
Cadila Healthcare: Mutual funds aren’t thrilled about this pharma company despite its Covid-19 vaccine for children being rolled out soon. In each month of Q2FY22, mutual funds were net sellers of the company’s stock, selling 1.1 crore shares or 18% of their holding. Mutual funds lowered their stake in the company to 4.7% in Q2FY22 from 5.8% in Q1FY22. Their pessimism on the stock is reflected in the price, as the vaccine maker’s stock fell by nearly 14% in Q2.
Avenue Supermarts: Brokerages are not too upbeat despite this supermarket operator’s positive Q2 results. In Q2FY22, the company’s revenues grew by 45% YoY, with a two-fold increase in net profits. Despite this two brokerages — HDFC Securities and Axis Direct maintained their ‘Sell’ rating on the stock. Brokerages cautioned against the high valuations of the stock at 212 trailing 12-month price to earnings (PE) ratio, against a three year average PE of 132. After surging past the Rs 5,300 levels, the stock is down by 15% in one week.
Devyani International: This franchise operator of Yum! Brands (which includes KFC India and Pizza Hut) is outperforming peers and the benchmark index. In a volatile week, where the Nifty50 fell by 1%, the stock is up by 8%. The stock of its peers — Jubilant Foodworks (master franchisee of Domino’s Pizza), Westlife Development (master franchisee of McDonald’s in south and west India), and Burger King India have declined this past week. In FY21, the company made its third consecutive net loss of Rs 63 crore and expects to break even only in FY23.
Ashoka Buildcon: This infrastructure company’s stock price is on a tear but its valuations remain cheap. In one month, the stock is up by nearly 20%. This puts it among the top three highest gainers among infrastructure stocks within one month. It remains the most cheaply valued mid-cap infrastructure company with a trailing 12 month (TTM) price to earnings (PE) ratio of 8.3 times, compared to a three-year average PE of 14.9, putting it in the buy zone.

The Baseline

20 Oct 2021

Chart of the week: Mutual Funds decrease stake in chemical companies

Chemical companies may have a high growth outlook in FY22, but mutual funds aren't optimistic. In Q2FY22, mutual funds decreased their stake in several agrochemicals, specialty chemical, and commodity chemical companies.

Agrochemical company Laxmi Organic Industries listed in March 2021 at a 26% premium. Since then its stock has tripled. However, mutual funds trimmed two-thirds of their stake in the past six months, holding 1% of the company as of September. Mutual funds have also lowered their stake in phenolics maker Deepak Nitrite to 12.6% in September, from 14.3% in July. In that time, the stock is up by 40%.

Are mutual funds booking profits or missing out?

The Baseline

19 Oct 2021

Five Stocks Superstar Investors Sold in Q2

As the quarter's shareholding data comes in, we are seeing top superstar investors update their portfolios, as valuations change and some sectors - and stocks - fall out of favor. One of the key factors of a good portfolio is selling losers quickly rather than hanging on, hoping for a recovery. These are five stocks that lost favor with the biggest investors in the September quarter.

1. MCX: Investor Rakesh Jhunjhunwala has sold this commodity exchange stock, reducing his stake below 1%. MCX significantly underperformed the index over the last year by 41%. However it gained sharply in share price since the beginning of October after Jhunjhunwala's sell. You win some, you lose some.

2. Xchanging Solutions: Sunil Singhania's Abakkus Fund had increased the stake in this smallcap tech company between the March and the June quarters, but cut it in the September quarter. This was another underperformer relative to the index, with negative price to earnings growth over trailing twelve months.

3. Apollo Pipes: The reclusive investor Ashish Kacholia avoids the limelight, and has a great track record in his picks. His net worth has climbed steadily over the quarters he has been investing. A recent stock he sold is the pipes company Apollo Pipes, in which he previously held a 3.6% stake. Kacholia sold Apollo Pipes despite the construction sector being fairly bullish in its outlook over the next few quarters. The stock has been a stellar performer over the past year, with nearly 400% 1 year returns.

4. Kolte Patil Developers: Investor Mohnish Pabrai's Pabrai Fund has cut his holding in a long held real estate stock (held since 2017), from a 6%+ stake held in the March 2021 quarter. While the company's stock has seen some recovery in share price since early September, it has overall been an average performer in the real estate sector.

5. Som Distilleries and Breweries: This brewery stock has been down since its peaks in 2018, and the pandemic lockdowns continued to batter its performance. Investor Porinju Veliyath had reduced his fund's stake in the company to 1% in June 2021, and appears to have exited the stock in the September quarter.

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