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The Baseline

23 Jun 2021

Five Interesting Stocks Today

Adani Ports & Special Economic Zone: This port operator part of the Adani Group and the Nifty50 has been on a decline due to reports stating the NSDL froze its foreign portfolio investors’ accounts. Its stock price dropped 26% in one week. Amid this fall, its promoter purchased shares. Between June 17-21, promoters acquired nearly 42.6 lakh shares worth Rs 288 crore via three insider trades. This is the largest acquisition by promoters since December 2020.
Au Small Finance Bank: This microfinance lender’s stock is up by 12% in one month, ahead of the Nifty50’s gain of 4% despite poor quarterly numbers. In Q4FY21, total income declined by over 60% sequentially, with the net NPA ratio increasing by 180 basis points. Its valuation is also nearing historic highs. The trailing 12-month (TTM) price-to-earnings ratio of 28 times is closing in on its average price-to-earnings ratio of 36 times. The stock is still trading in the buy-zone.
Jubilant Foodworks: Brokerages are not optimistic on this master franchise operator of Domino’s Pizza and Dunkin’ Donuts despite part of the country opening up. HDFC Securities maintained a ‘Reduce’ rating on the stock citing the expected sales recovery to be priced in. Motilal Oswal also maintained a ‘Neutral’ rating and lowered the FY22 earnings per share estimate by 12.5% given the second Covid-19 wave lowering dine-in sales. The average broker target price is at a downside of 11.1% against its current price.
KNR Constructions: This construction engineering company’s promoters and directors are selling shares. Last week, two directors and a promoter sold 50 lakh shares, representing 1.78% of the company, for Rs 111.5 crore via three insider trades. This is the first disposal of shares by directors and promoters in 2021. The stock is up by 18% in two months.
Infosys: This IT Services company’s stock is up by 11% in one month. This has pushed its price above all its moving averages. Its relative strength index (RSI) is at 79.2, and the money flow index (MFI) is at 74.8, both in the overbought zone. Among Nifty50 stocks, Infy is the most overbought per its RSI and MFI.

The Baseline

21 Jun 2021

Five new stock picks from analysts

Since Q4FY21 results, analysts have been taking a second look at their calls on stocks and picking new favorites. Here are the five latest buy calls from analysts.

Power Grid Corporation: HDFC Securities' Anuj Upadhyay picks Power Grid Corporation for a BUY call, revising the brokerage's target upward to Rs. 271. "PGCIL has recently participated and won projects with a strike rate of above 50%, which highlights the strong competitive edge it enjoys over its peers," he writes, "The Board has also announced one bonus share for every three shares held. Further, with robust operating cash flow of ~INR310bn p.a, lower capex guidance of below INR100bn for FY22E, and comfortable net D/E of below 2.0x, PGCIL is well poised to benefit from the upcoming investment opportunity in the transmission space."
Zensar Technologies: The analysts at Motilal Oswal and ICICI Securities both issue BUY calls on this tech company. Motilal Oswal's Mukul Garg and team write, "Zensar’s current valuation at 15x FY23E EPS is the lowest in our midcap coverage and is at a 44% discount to the median valuations of peers." Their forecast? "We expect revenue growth to rebound as the new CEO Ajay Bhutoria's refreshed strategy, and reinvestment of margin gains in sales starts to pay off." The upside according to analysts is in the range of 16-18%, with MOswal's target at Rs 350 and ICICISec's at Rs 345.
Time Technoplast: There is a similar level of upside - around 16% - in Time Technoplast, according to ICICI Securities' Sanjay Manyal and Hitesh Taunk, in their BUY call. "The management has guided for improvement in RoCE to 20% by FY25E (~9% in FY21) led by various debt reduction initiatives such as improvement in cash conversion cycle and sale of none core assets," they write. "While the guidance seems to be slightly aggressive, we believe new opportunities on the CNG cascade front, improvement in EBITDA margin and initiatives to lighten the balance sheet are fundamental rationale to remain positive on the stock."
Lumax Industries: This auto ancillary company got a BUY from Edelweiss, with an upside of 17%+ from its current price. Analyst Vishal Srivatsav writes, "Expectations of an improved demand scenario from H2FY21 is encouraging for the company. With growth momentum improving, we believe LUMAX’s product mix will also catch up gradually. This should help the company to outgrow its volumes." Noting the broader environment, he adds, "Although shortage of semiconductors is a growing concern for the automobile industry and may impact production to some extent in FY22, underlying demand scenario remains healthy."
Navin Fluorine: This specialty chemicals company is getting noticed for the first time from analysts at Axis Direct, who initiated coverage on NF with a BUY call with an upside of 17%. Analysts Suvarna Joshi and Darshita Shah write that Navin Fluorine "is now moving up the value chain, and entering high margin businesses such as Specialty Chemicals, Contract Research and Manufacturing (CRAMS), and multi year long-term High Performance Products (HPP) contracts with global players." They note that the company has "well-nurtured" long-term relationships with customers, and the global environment is favorable: "Industry tailwinds like increased usage of fluorine based molecules in pharma and agrochemicals business is expected to drive higher margins."

See all buy calls and analyst call screeners.

The Baseline

18 Jun 2021

Five Interesting Stocks Today

Advanced Enzyme Technologies: This enzyme maker’s promoter group entity Advanced Vital Enzymes sold around 3.06% stake in the company since the beginning of June 2021 through multiple insider trades. As a result, the promoter group’s stake is down to 52.33%. These set of insider trades come after the stock touched an all-time high of Rs 503.70 on May 19, 2021. The trades were executed after the company declared its Q4FY21 and FY21 results.
United Spirits: This alcoholic beverage maker is the most overbought stock among the Nifty 500 companies, according to technical indicators like RSI and MFI. Its stock price rose by over 15% in the past three weeks as alcohol sales are expected to benefit from unfolding lockdowns across the country. This comes after the company’s stock price fell nearly 8% in April 2021 after many states imposed lockdown measures.
Lupin: This pharmaceutical company’s stock saw seven brokerages upgrade their target price in the past month. Although the stock is trading lower than its average target price of Rs 1,148.08, none of the brokerages have changed their stance on the company. The pharma company has posted consolidated profits over Rs 400 crore for two consecutive quarters ending Q4FY21, after floundering in Q1FY21 and Q2FY21.
Alkyl Amines Chemicals: This speciality chemicals maker is one of the top performing stocks over the past five years, with returns of 2,540%. While this number seems mind-boggling, most of the upwards movement in the stock’s price came in the past 15 months. When the stock markets crashed last year of March 23, 2020, ahead of the national lockdown, this company’s stock was at Rs 470 levels. Over the next 15 months, as specialty chemicals companies found favour of the market, the company’s stock price rose nearly 8 times, and is now trading a little below Rs 3,600.
Greaves Cotton: This engineering company traded on Thursday with nearly 1.8 times its average weekly volumes of 1.06 crore shares, and touched a 52-week high of Rs 159.35. This stock is currently trading above all its simple daily moving averages.

The Baseline

16 Jun 2021

Chart of the week - CV sales plunge due to disrupted commercial activity

After a recovery in retail sales in Q4FY21, commercial vehicle (CV) sales plunged in early FY22. Several states enforced strict lockdown but allowed commercial activity to continue. Yet in April, retail CV sales fell by 24% MoM, and then again in May sales dropped by 65% MoM as lockdowns were tightened.

The top-5 CV makers - Tata Motors, Mahindra & Mahindra, Ashok Leyland, Eicher Motors' VECV. and Maruti Suzuki India saw a 65-72% decline in CV retail sales in May MoM. The worst affected was VECV. These companies' CV sales in May 2021 are less than 25% of March 2021 levels.

The Baseline

16 Jun 2021

Five Interesting Stocks Today

eClerx Services: This BPO company’s stock surged by nearly 50% in three days reaching a new lifetime high after its Q4FY21 results. Revenues jumped by 30% YoY to Rs 480 crore, and net profits doubled to Rs 99 crore. EBITDA margins were at 33%, and the management said margins would be maintained above 30% in the coming quarters.
Bata India: Brokers are positive on this footwear maker as the country begins to unlock. Edelweiss in a note, maintained its ‘Buy’ rating on its stock despite a near washout in the past two months due to the pandemic. The brokerage cited the company’s wide distribution reach and focus on cost controls. The company’s cost of production dropped by 7% QoQ in Q4FY21.
ICICI Prudential Life Insurance Company: This Nifty50 life insurer is being lifted up by the rising tide despite poor quarterly numbers. In the past month, its stock gained 5% against the benchmark index’s gain of 6%. In Q4FY21, it reported a 25% decline YoY in revenues to Rs 735 crore, and a 65% drop in net profits to Rs 62 crore.
Zensar Technologies: This software company’s institutional investors divested part of its stake bringing in a foreign institutional investor (FII) and two domestic institutional investors (DIIs). British private equity firm Apax Partners sold 11.4% of its stake for Rs 760 crore via a bulk deal on Monday, June 14. In corresponding bulk deals, Goldman Sachs purchased 25 lakh shares for Rs 76 crore, DSP Mutual Fund purchased 42.5 lakh shares for Rs 125 crore, and Nippon India Mutual Fund purchased 16.5 lakh shares for Rs 48.6 crore.
Westlife Development: The McDonald’s master franchisee operator in south and west India’s stock is down by 7.4% in one week despite parts of the country partially unlocking. Amid this fall, promoters are selling shares. In one week, the promoter group sold 13.1 lakh shares for Rs 64 crore via four market sales. Last month, its domestic institutional investor SBI Mutual Fund sold 3.3 lakh shares, lowering its stake in the company by 0.2%.

The Baseline

11 Jun 2021

Five Interesting Stocks Today

Firstsource Solutions: After a steady rise and gaining over 36% in just the past month, this software services company has hit a lifetime high in share price. Its RSI and MFI are both in the 80+ range, suggesting that the stock now is strongly overbought.
Godrej Agrovet: This agribusiness company saw its promoter Godrej Industries purchase 25,058 shares of the company in a market purchase at an average price of Rs. 559.9. The stock's momentum is currently mid-range, and its PE compared to its historical PE is in the neutral zone.
Federal Bank: This Kerala-headquartered bank has multiple analysts bullish on its prospects, receiving six target price upgrades in the last month alone. Analysts at ICICI Securities noted that while the bank has "relatively less" buffer in case of asset quality issues, "valuations for the stock are benign, which factor in near term concerns".
Redington India: This supply chain and distribution company has had a good month on the stock market, beating the Nifty50 by over 40% in share price over the past month. Investors have turned bullish on the stock following the company's strong Q4FY21 performance, which saw a recovery in its India vertical, which jumped 45% YoY.
TV18 Broadcast: After muted interest in the stock throughout 2020, MFs have started noticing this broadcasting company in 2021. Mutual funds have bought shares in April and May this year. The company hit a new 52-week high in the past few days, and has outperformed the Nifty50 index by around 9% over the past year.

The Baseline

10 Jun 2021

Chart of the Week: In a stressful FY21, SBI sees NPAs fall, Bandhan Bank's soar

FY21 was a stressful year for lenders. Yet some private and public banks improved their asset quality by lowering net non-performing assets (NPAs).

Among Nifty Bank companies, State Bank of India's (SBI) saw NPAs drop the most to 1.5% of advances in FY21 (from 2.2% in FY20), a 13-year low for India's largest public sector bank. Axis Bank, the fourth largest private bank, lowered net NPAs to 1.1% in FY21 (from 1.6% in FY20). However, Bandhan Bank and Au Small Finance Bank's net NPAs rose by 290 and 137 basis points respectively, as SME and agricultural loans remained under stress.

The Baseline

09 Jun 2021

Five Interesting Stocks Today

Birlasoft: This smallcap IT services company’s stock has been on a rising trend for the past week, rising by over 21% in the period and ending at its 52-week high of Rs 376.75 rupees. On Tuesday, the stock rose nearly 10% on news that it inked a deal with a company called Regulativ.ai to co-develop cyber security assessment tools for banking, financial services and insurance customers. With the share price on an upward trend since the beginning of the calendar year, the company's PE is currently in the sell zone.
Bharat Forge: This forging company posted strong Q4FY21 earnings including a profit at the consolidated level for the first time in five quarters. Analysts at HDFC Securities and ICICIDirect are upbeat about the prospects of this company’s defence and class-8 trucks business. Growth in the latter segment however hinges on a spurt in infrastructure spending in the US and the success of US President Biden's infrastructure bill.
Greaves Cotton: This engineering company’s stock traded with the highest volumes on Tuesday compared to the past week. This stock saw the highest change in volumes on Tuesday among the Nifty 500 companies at four times its weekly average as 1.02 crore shares exchanged hands.
Federal Bank: This private bank’s stock saw seven brokerages increase their target price over the past three weeks after the bank posted its best ever quarterly net profit. The stock has an average target price of Rs 94.20, which is an upside of 9.25% over its current market price.
PNB Housing: This mortgage lender’s stock price doubled after it announced that it will raise Rs 4,000 crore by selling shares to a group of investors, including an affiliate of private equity firm Carlyle. Carlyle’s stake buy triggered an open offer which will lead to its promoter Punjab National Bank’s (PNB) stake falling below 26%. But the shareholders’ meeting on June 22 to approve the deal might not be smooth sailing as minority investors and a proxy advisory firm have flagged valuation concerns and the fall in PNB's stake.

The Baseline

04 Jun 2021

Five Interesting Stocks Today

Aarti Drugs: This pharmaceutical company’s promoters recently sold shares via insider trades following a recent buyback. This week, promoters sold over 7,300 shares for Rs 52.3 lakh through two open market sales. These disposals were at a 27% discount to the company’s recent share buyback. In April 2021, the company’s promoters repurchased 6 lakh equity shares for Rs 60 crore via a buyback. Last week, 4.4 lakh shares of the buyback were disposed for Rs 44.2 crore.
PVR: This cinema operator’s stock is up by 21% in one month despite several states imposing lockdowns and halting cinema operations for the past two months. Its Q4, earnings didn’t provide much hope either. In the March 2021 quarter, when cinemas operated with higher capacities than previous quarters of FY21, revenues fell by 18% QoQ and net losses rose five-fold.
Shoppers Stop: Brokerages are optimistic about this apparel retailer even as the country battles the second Covid-19 wave. ICICI Direct, in a note, upgraded its rating on the company to ‘Buy’ from ‘Hold’ and Motilal Oswal maintained its ‘Neutral’ rating. Despite a 17% rally in one month, the average broker target price is at an upside of 11%.
ITC: This FMCG and cigarette maker reported strong Q4FY21 results, but this hasn’t helped its price. The FMCG revenues (of which 75% is staples, convenience foods, and health and hygiene products) grew by 16% YoY ahead of peers like Britannia Industries and Nestle India. Cigarette revenues were up by 7% YoY, ahead of the 5% growth estimated by brokerages. Its stock is down by 3% in the week and trades below its 50-day and 100-day simple moving average (SMA) but above the 200-day SMA.
Mahindra CIE Automotive: The CEO of this auto-components maker’s forgings division penned his resignation to the company’s board. His stint at the company lasted less than 20 months. The markets have shrugged off this resignation, as the stock is up by 33% since April reaching a new 52-week high this week.

The Baseline

03 Jun 2021

Chart of the week - Rising two-wheeler exports

With India facing a second Covid-19 wave from April 2021, two-wheeler makers turned to exports. In April and May, as several state governments imposed lockdowns, domestic two-wheeler wholesales slumped. But exports as a percentage of total sales in April and May jumped for Hero MotoCorp, TVS Motor Company, Bajaj Auto, and Eicher Motors' Royal Enfield.