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

23 Jan 2025

Chart of the Week: Indian Rupee reaches record low against the US Dollar

The Indian Rupee (INR) has been under pressure over the last year, facing both global and domestic economic challenges. The rupee has been hit by the US Fed’s policy moves, rising crude oil prices and domestic inflation, depreciating sharply.

A selloff in Indian assets has led this month to the rupee’s biggest drop in two years. It fell 0.6% to a record low of 86.6 against the US dollar on January 13. Domestically, inflation has also put pressure on the rupee by reducing purchasing power.

With the new RBI Governor at the helm, reduced intervention by the Reserve Bank of India (RBI) has added to the pressure.

Reduced RBI intervention weakens INR

One of the primary reasons for the recent, sharp decline is the Reserve Bank of India’s (RBI) policy shift under its new governor. The RBI, under new governor Sanjay Malhotra, has opted to let the rupee move more freely, and has limited aggressive actions to stabilize the currency. This is a shift from the previous approach by ex–Governor Shaktikanta Das, who kept tight control over the rupee, only allowing gradual changes in its value.

Shaktikanta Das served as the RBI Governor from December 2018, managing crises like the pandemic, geopolitical tensions, and instability in the non-banking financial sector. The RBI, under his governance, worked to mitigate rupee volatility. To defend the rupee, the RBI intervened aggressively, utilizing over $60 billion of its foreign exchange reserves in November. The RBI also used dollar-rupee swaps to manage rupee liquidity without affecting the exchange rate.

However, experts including former RBI Deputy Governor Viral Acharya, have emphasized the importance of allowing some currency volatility to encourage private hedging, as the central bank cannot absorb all risks.

The IMF also highlighted that excessive interventions have limited rupee movement, and reclassified India’s exchange rate regime as a ‘stabilized arrangement’ from ‘floating.’ Exporters were also impacted by the central bank’s policy of not allowing the rupee to find its natural level versus the dollar.

Indian Rupee hits record lows, could fall further

The INR moved from being one of Asia’s best-performing currencies in 2023 and 2024, to a significant underperformer in the past quarter. Throughout 2024, the rupee depreciated by 2.8%, starting the year at Rs 83.2 and weakening to Rs 85.6 by December. It is down over 1% so far this year.

Over the last three years, the INR has gradually weakened against the dollar. In January 2022, the exchange rate stood at approximately Rs 74.5 per USD. By January 2025, the INR had depreciated by nearly 16.2% over this period. Several factors contributed to this decline, including the USD’s strength driven by global economic changes, India’s slowing economic growth, and a widening trade deficit. As a major crude oil importer, fluctuations in global oil prices have also hit India’s import costs and the rupee’s value.

Rupee’s depreciation comes with significant consequences

When the rupee depreciates, the cost of importing goods rises, leading to higher prices for imported products and raw materials. This increase in import costs can contribute to overall inflation, affecting consumers and businesses alike.

Rising inflation due to a weaker rupee can influence RBI’s monetary policy decisions. The RBI might raise interest rates to control inflation, which makes borrowing costlier and could slow down economic growth. On the other hand, if inflation seems under control, the RBI might decide not to change rates. With the rupee's recent drop in value, there’s speculation that planned interest rate cuts might be postponed.

A weaker rupee can make Indian exports more competitive by reducing their prices in international markets. This price advantage can boost demand for Indian goods abroad, potentially increasing export volumes. However, the benefits may be limited if key export sectors rely heavily on imported raw materials, as the cost of these imports would also rise with a depreciating rupee, offsetting the advantages gained from lower export prices.

The Baseline

22 Jan 2025

The rise of the rural consumer is changing FMCG | Screener: FMCG stocks outperforming their industry

By Swapnil Karkare

One evening, instead of absent-mindedly watching something with an audience rating of 4/10 on Netflix, I scrolled through a list of 2024’s top-grossing Indian movies. One thing stood out: three of the top five films were set in rural India. At the top of the list was Pushpa 2, based in a remote Andhra village. In third place was Stree 2, a horror-comedy that takes place in a small Madhya Pradesh town. Devara, the fifth in the list, is again based in an Andhra Pradesh village.

Popular culture is mirroring a shift in India’s consumption story. The latest Grameen Bharat Mahotsav 2025 in New Delhi, held earlier this month, couldn't have been better timed. Discussions focused on rural innovation and sustainable farming. Villages and small cities, often seen as passive participants, are playing a larger part in India's growth narrative, and brands are taking note.

In this week's Analyticks:

Rural revival: A recovery in rural India helps FMCG players, amid an urban slowdown
Screener: FMCG stocks outperforming their industry

A rural resurgence amid the urban gloom

The quarterly earnings season isn't looking great so far, especially for the consumer sector. In Mumbai and Bangalore's high-street shops, you see more salespeople than customers. FMCG companies admit that the reluctant Indian consumer is hurting their balance sheets.

Dabur expects its revenue to grow in the low single digits. Analysts estimate single-digit revenue growth for HUL, Britannia, and Nestle. Tata Consumer is expected to deliver healthy revenue growth, but faces margin pressures.

Mirae Asset Sharekhan projects a weaker overall consumer goods sector for Q3FY25 due to sluggish urban demand, compounded by inflation and fewer job opportunities. This has forced FMCG companies to focus on rural areas, which have been outgrowing cities for the last three quarters.

Rural consumers increase their spends

Most brands rely on small sachet sizes to penetrate the very price-elastic rural markets. But recently, HULobserved that rural consumers who previously purchased Re. 1 sachets of Clinic Plus shampoo for years, have upgraded to Dove’s Rs. 2 sachets. They are also buying Rs. 10 packs of noodles, chocolates, soaps, and detergents instead of the smaller five rupee ones, according to Kantar’s report. Brand and product preferences are changing, indicating lifestyle upgrades.

Recent income support schemes rolled out by several Indian states like the Ladki Bahin Yojana have also contributed to a decline in consumption inequality.

The change is beyond FMCG. Government data shows that spending patterns in rural areas are diversifying. There’s a growing interest in convenience and health products, with an increase in the share of processed food (from 9.6% to 9.8%), vegetables (from 5.4% to 6%), and fruits (from 3.7% to 3.9%) in consumption expenditure in 2023-24 compared to 2022-23.

The attitudes of rural consumers are also changing. Lakshmi Venu, director of TAFE, a farm equipment company, adds, "The knowledge asymmetry that used to exist between urban and rural is virtually gone. With cheap accessible data, today the rural customer has access to all the same information as the urban resident."

Rising income in non-metros drive luxury goods purchases

Like villages, consumers in tier II and III cities crave upgrades too. Pradeep Bakshi, Voltas’ Managing Director, notes that as per capita income increases in smaller towns, consumers are spending more on luxuries and durable goods.

Non-metro cities like Ludhiana, Jaipur, Lucknow and Coimbatore are witnessing increased spending power. Ethos, a luxury watch retailer, has launched boutiques in Kochi, Dehradun and Mangaluru. Tata Cliq Luxury reported a growing demand for brands like Louis Vuitton, Gucci, and Rolex in cities like Nagpur, Ajmer, and Aligarh. Non-metros now account for more than half of Tata Cliq Luxury's sales.

How are brands responding?

Brands are reaching non-metro consumers in unconventional ways. One example is the decision to launch Pushpa 2’s Hindi trailer in Patna instead of Mumbai.

FMCG companies are pushing their network into more villages. Daburhas reached 122,000 villages out of the over 6 lakh villages in India, and ITC has boosted its rural stockist network by 1.3 times in two years. Mahindra Logistics’ innovative ‘Direct to Kirana’ model has helped a leading multinational expand its market reach by 30% in non-metro cities. Even Durex is getting in on the action, cleverly targeting rural markets with premium products in smaller, pocket-friendly packs.

Smaller cities are making their online presence felt, outperforming metros in data consumption. Users in these cities are consuming 38–42 GB per capita per month, compared to Delhi and Mumbai’s 30–34 GB, and streaming platforms and the digital ecosystem are benefiting. Netflix and Amazon are investing in content delivery networks in cities such as Pune, Hyderabad, Ahmedabad, and Jaipur.

Local and blue-collar influencers such as Siraj Bachchan, a mimicry artist, Ankit Baiyanpuria, a Sonipat-based fitness creator, Rajesh Rawani, a truck driver, Santosh Jadhav from Sangli, and Pawan Bisnoi, an electrician-cum-mason from Fatehabad, are becoming prominent. They drive engagement at a fraction of the cost of traditional campaigns. Brands like Swiggy, Asian Paints, True Elements, and Jindal Stainless are collaborating with them, to connect with audiences in ways that big celebrities often can’t.

A structural improvement in rural consumption?

The government data shows that monthly spending (including social security benefits) in villages has surged 10% YoY, as against 8.5% YoY in cities, during the August 2023-July 2024 period. The gap between rural and urban spending has narrowed. In 2011-12, urban spending was 84% higher than rural. It’s down to 67% in 2023-24. This signals a more balanced economic landscape. Rural consumption growth has recently outpaced urban across most income categories.

It's time to dig deeper

Rima Bijapurkar, in her book "Liliput Land," challenges the traditional classification of consumers as just urban and rural. She points out that nearly 50% of India’s wealthiest households, reside in rural areas, and run agricultural businesses — busting the myth that wealth is concentrated in metros.

To truly understand the Indian consumer, Bijapurkar argues for more granular data: insights into income patterns, category-wise GST data, and comprehensive rural surveys. Without this, brands risk oversimplifying a complex and evolving market.

Of course, one cannot ignore the looming slowdown in the cities. As the government prepares the budget, all eyes are on how it balances the needs of urban and rural residents, and introduces much needed reforms in ease of doing business and in taxation, that have burdened urban India.

Screener: FMCG stocks outperforming their industries in price change and revenue YoY growthr

Packaged goods & personal products stocks have high quarter change and revenue growth

With the Indian markets undergoing a correction, we examine the performance of FMCG stocks over the past quarter. FMCG stocks are classified as defensive stocks, which provide relatively consistent returns and stable earnings regardless of the overall state of the stock market. This screener shows FMCG stocks outperforming their industries in the past quarter and quarterly revenue growth.

Major stocks appearing in the screener are CIAN Agro Industries & Infrastructure, Polo Queen Industrial & Fintech, Galaxy Cloud Kitchens, Radix Industries (India), Hipolin, Gillette India, Future Consumer, and Gokul Agro Resources.

CIAN Agro Industries & Infrastructure features in the screener with the highest YoY revenue growth of 452.5% to Rs 126.4 crore in Q2FY25, outperforming the edible oils industry’s average revenue growth by 439 percentage points. This helped the stock price surge by 126.2% over the past three months, outperforming the industry by 127.1 percentage points. The company’s revenue surged on the back of an increase in the agro and infrastructure divisions.

Gillette India is the only large-cap stock in the screener after outperforming the personal products industry price change by 20 percentage points after growing by 8.5% over the past quarter. The company’s revenue grew by 17.1% YoY to Rs 788.9 crore in Q2FY25, beating its industry average revenue growth by 14.8 percentage points. The company’s revenue increased, driven by an improvement in the grooming products segment.

You can find some popular screeners here.

Signing off this week,

The Trendlyne Team

View all polls show results

The Baseline

22 Jan 2025

Five stocks to buy from analysts this week - January 22, 2025

By Divyansh Pokharna

1. REC:

Axis Direct maintains a ‘Buy’ rating on this public sector NBFC with a target price of Rs 530, indicating a potential upside of 11.2%. REC's management plans to double its assets under management (AUM) to Rs 10 lakh crore by 2030, with renewable energy making up about 30% of its portfolio. The company also aims to capture 20% of the market share in the coal-based power plant business. Analysts Dnyanada Vaidya and Pranav Nawale project an AUM growth of ~18% CAGR over FY25-27.

REC has managed higher risks from state government-backed entities by relying on government guarantees for timely repayments. Its selective lending strategy and efforts to resolve stressed loans have helped improve asset quality. Vaidya and Nawale say, “We expect slippages to stay under control, leading to a gradual improvement in asset quality. With credit costs remaining in check, we anticipate healthy earnings growth of 14% CAGR over FY25-27.”

The company’s management expects to maintain net interest margins (NIMs) between 3.5-3.8%, with FY25 NIMs estimated at around 3.6%. The analysts believe that while there may be a slight decline in NIMs, low credit costs will offset this, enabling REC to achieve a stable return on assets (RoA) of 2.5-2.6% and return on equity (RoE) of 20-21% in the medium term.

2. Bharat Electronics:

Motilal Oswal reiterates its ‘Buy’ rating on this defence equipment manufacturer with a target price of Rs 360, indicating an upside potential of 29.1%. Bharat Electronics (BEL) has grown its overall defence market share to 12.8% in FY24 from ~12% in FY23, driven by government focus on defence indigenization. Analysts Teena Virmani, Prerit Jain, and Harsh Tewaney note that the BEL holds nearly 60% market share in the specialized defense electronics segment.

The analysts highlight BEL’s strong order book of Rs 74,600 crore as of Q2FY25. They also note that the company is expanding its presence through strategic business units and focusing on increasing exports and non-defense projects in its order book. In FY24, the company filed 146 intellectual property rights (IPRs), including 82 patents, in areas like AI, radars, and embedded systems. During the same period, 161 patents were granted, comprising approvals from some of the FY24 filings as well as applications submitted in previous years, bringing the total number of granted patents to 208.

Virmani, Jain, and Tewaney project order inflows of Rs 25,000 crore, Rs 32,100 crore, and Rs 38,500 crore for FY25, FY26, and FY27, respectively. They expect a revenue CAGR of 19% and a net profit CAGR of 20% over the FY25-27. However, the firm is in the PE Sell Zone, currently trading above its historical PE.

3. HCL Technologies:

Sharekhan maintains its ‘Buy’ rating on this IT consulting firm with a target price of Rs 2,180, indicating an upside of 21%. In Q3FY25, the company reported a revenue growth of 3.6% QoQ, reaching Rs 29,890 crore, driven by improvements in the software, engineering research and development (ER&D), and services segments. EBIT margin expanded by 90 bps to 19.5%, surpassing analyst estimates of 19.3%. Net profit increased by 8.4% to Rs 4,591 crore, beating Trendlyne’s Forecaster estimates marginally by 0.3%.

HCL Tech's total contract value (TCV) stood at $2,095 million in Q3FY25, marking a 6% QoQ decline. The company’s management noted that the average duration of signed deals has shortened, leading to moderated TCV. While smaller deals are converting faster, larger deals are taking more time. Analysts believe that HCL Tech is well positioned to deliver growth among Tier-1 IT companies in FY25 and beyond, thanks to its diversified offerings and partnerships with hyperscalers like SAP and ServiceNow.

The company’s share price dropped by 9.3% over the past month and 4.4% during the previous quarter. However, analysts expect the company to continue its growth in the IT services business, which makes up 89% of its total revenue. They forecast a revenue CAGR of 9% and a net profit CAGR of 12% over FY25-27.

4. HDFC Life Insurance Company:

KRChoksey maintains its ‘Buy’ rating on this life insurance company with a target price of Rs 820, indicating an upside potential of 31.4%. In Q3FY25, the company reported a 11.6% YoY growth in gross written premium (GWP) to Rs 17,275 crore, driven by higher contributions from individual and group businesses.

Analyst Dipak Saha mentions that the market share of the company rose by 70 bps to 10.8%. The number of policies sold increased by 15%, outpacing the private sector’s growth of 9%. He notes that the annuity business is expected to grow due to rising awareness of retirement planning and a growing customer base, along with increased demand for guaranteed income products for post-retirement financial security.

In Q3FY25, the value of new business (VNB) grew by 9.1%, driven by a solid increase in annualized premium equivalent (APE). The company aims for double-digit APE growth in FY25, supported by strong seasonal demand in the January-March quarter.

Saha expects the annuity and protection businesses to see steady growth, supported by increased demand in tier 2 and tier 3 cities. They expect 15.2% CAGR growth in net premiums, 15.9% in VNB, 23.1% in net profit and 13.8% over FY25-27.

5. Rainbow Childrens Medicare:

Prabhudas Lilladher initiates coverage with a ‘Buy’ rating on this healthcare facilities company with a target price of Rs 1,785. This indicates an upside potential of 23.7%. Analysts Param Desai and Sanketa Kohale believe that the company leveraged its first-mover advantage to establish itself as a leader in India’s pediatrics market, offering specialized healthcare services.

As of Q2FY25, Rainbow Childrens Medicare has 1,523 beds operational out of its total capacity of 1,935 beds. The company plans to add over 380 beds between H2FY25 and FY27 by expanding spokes in Bengaluru and establishing regional hubs in Coimbatore and Rajahmundry. Additionally, the board is exploring mergers and acquisitions in Northeast and West India.

Desai and Kohale project the company’s revenue to grow at a CAGR of 19% over FY25-27, driven by improvements in FY25, new bed additions, and scaling up of recently launched units.

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

(You can find all analyst picks here)

The Baseline

17 Jan 2025

Five Interesting Stocks Today - January 17, 2025

By Trendlyne Analysis

1. L&T Technology Services:

This IT consulting & software firm surged over 8% on Thursday following the announcement of its Q3 results. Eight large deals secured over the past quarter drove this increase. CEO Amit Chadha further fueled the rise by assuring investors that the company is on track to achieve its $2 billion revenue target in the medium term with an EBIT margin of 17-18%.

In Q3, the company reported sequential revenue growth of 1.8%, reaching Rs 2,687 crore, while net profit rose by 0.9% to Rs 322 crore. The profit remained flat QoQ, primarily due to wage hikes and one-time costs associated with the Intelliswift acquisition. Although revenue for the quarter aligned with Forecaster estimates, net profit fell short of estimates by 3.1%.

LTTS operates across three segments: mobility, sustainability, and technology, with each segment contributing roughly equal revenue. Over the past quarter, the firm won two large deals in mobility. It also secured two new deals in the sustainability segment. Additionally, it announced three deal wins in the technology segment.

Regarding future deals, CEO Amit Chadha said, “LTTS is seeing a good number of large deals in the pipeline across all three segments.” He also emphasised that FY26 will outpace FY25 in terms of deal wins. Chadha is confident in the firm's outlook of achieving 10% revenue growth in FY25, including the contribution of Intelliswift.

Post Q3 results, Sharekhan maintains a ‘Buy’ rating on LTTS. Analysts at Sharekhan expect the firm to witness a higher growth trajectory supported by the Intelliswift acquisition, which opens avenues to service three new sectors: retail, fintech, and healthcare. With a target price of Rs 6,500, the stock has a potential upside of over 20%.

2. Biocon:

This biotechnology company has risen by over 6% in the past week and touched a 52-week high of Rs 397.8 today. On January 12th, the company's Malaysian subsidiary received USFDA approval for its insulin units. Motilal Oswal notes that after this approval, all the company’s key biosimilar sites are USFDA-compliant, improving its prospects in the US market. The approval of the Malaysian site opens up commercial opportunities for its ‘B-Aspart’ (synthetic insulin) drug, whose US market size is estimated at $800 million (approximately Rs 6,640 crore).

The company had reported a net loss and a flat revenue in Q2FY25 due to delayed approvals for the US market and increased financial leverage. However, Trendlyne Forecaster estimates the company’s revenue to rise by 9.2% in Q3FY25. HSBC Securities expects an operational turnaround for Biocon driven by multiple catalysts, including its strong pipeline of biosimilars and a recovery in the generics sector, fueled by high-value launches such as generic GLP-1 products (used for weight loss and diabetes treatment). The company also appears on a screener of stocks with strong momentum.

Kedar Upadhye, Chief Financial Officer of the company, discussed the high debt situation in the biologics space, “Net debt in Biologics, which was around Rs 10,800 crore, has now decreased by about Rs 410 crore as of September 30th. Capex for the year is expected to be between Rs 750-830 crore, with half allocated to maintenance and the other half to expanding insulin capacity in Malaysia, driven by strong demand and pricing in global markets.”

Motilal Oswal has upgraded Biocon to a ‘Buy’ rating with a target price of Rs 430. The brokerage forecasts a 21% EBITDA CAGR over FY25-27. Given the focus on compliance and the potential business from upcoming products, it has raised the EV/EBITDA multiple for the biologics business to 22x on a 12-month forward basis. Additionally, it notes that timely approval of 'B-Aspart' could offer further upside to biologics sales over FY25-27. It expects Biocon’s potential sales from this product to reach at least $80-100 million (approximately Rs 664 crore to Rs 830 crore).

3. PCBL Chemical:

This petro-products maker has declined by 9.8% over the past week after announcing its Q3FY25 results on January 10. During the quarter, its net profit fell 37.1% YoY to Rs 93.1 crore due to higher material and finance costs, employee benefits and other expenses. Revenue was up 21.3% YoY at Rs 2,010 crore. The company’s net profit missed Forecaster estimates by 7.2%, while revenue missed estimates by 2.3%.

During the December quarter, revenue growth was driven by increased volumes (up 5% YoY at 143,500 MT) and the inclusion of the Aquapharm business. PCBL Chemical acquired Pune-based specialty water chemicals maker Aquapharm Chemicals in January 2024, marking its foray into the global specialty segments including water treatment chemicals and oil & gas chemicals.

PCBL’s carbon black segment (which contributes to over 81% of the total revenue) grew by 2% YoY during the quarter. Sales growth was slower compared to Q2FY25 (up 21.5% YoY) due to a drop in realizations amid crude oil price fluctuations. Commenting on this, Raj Gupta, CFO of the company said, “Volatility in crude prices has affected our realizations, as our main raw material is derived from crude. Additionally, a change in product mix during the quarter also impacted our performance”. Meanwhile, the power segment declined by 1.5% YoY during the quarter.

During Q3FY25, the company commissioned the second and final phase of its 20,000 MTPA (metric tons per annum) specialty chemical capacity at the Mundra Plant in Gujarat, increasing its total installed capacity to 790,000 MTPA.

Following PCBL’s results announcement, Nuvama lowered its rating to ‘Hold’ with a target price of Rs 397. The brokerage believes PCBL’s long-term growth prospects look promising with business diversification, but high debt levels and a potential turnaround in Aquapharm remain key factors to monitor.

4. Anand Rathi Wealth:

This capital markets company fell 3.5% on January 13 following the announcement of its Q3FY25 results. Anand Rathi Wealth's (ARW) revenue increased by 29.9% YoY to Rs 237 crore, but it missed Trendlyne Forecaster estimates by 2.6%. Net profit grew 33.3% YoY to Rs 77.3 crore for the quarter. The company also declared a 1-for-1 bonus share issue, offering one bonus share for every equity share held.

The firm’s assets under management (AUM) grew by 38.8% to Rs 76,402 crore. Equity mutual funds (MF) made up 55% of the total AUM, up from 52% in Q3FY24, while debt MF accounted for 5%, down from 9%. The company had initially set an AUM guidance of Rs 72,000 crore for the year, but having exceeded this target, management has revised the guidance to Rs 80,000 crore.

The company’s MF AUM stands at Rs 45,875 crore, which accounts for 1.37% of the total market, valued at around Rs 30 lakh crore. Deputy CEO, Feroz Aziz mentioned that the company aims to increase its market share to 4%. He outlined that achieving this target relies on two key factors: attracting funds faster than the industry average and ensuring the company’s portfolio outperforms the average equity MF. He highlighted that ARW’s portfolio, consisting of 14 schemes, has outperformed the Nifty by around 7.5-8% this financial year, which should help achieve the target.

The company added 1,785 new client families over the past year, increasing its total client base to 11,426. While ARW's stock price has declined by 7.3% in the last month, it outperformed its industry by 4%.

Post results, Motilal Oswal maintains its 'Neutral' rating on the stock. The brokerage projects a revenue and AUM CAGR of 26%, and 28% for PAT over FY25-27, supported by the company’s strong cash flow of Rs 890 crore, a return on equity (RoE) above 40%, and a healthy balance sheet. With a target price of Rs 4,200, the stock has a potential upside of 5.7%.

5. Angel One:

This brokerage company has fallen 6.5% over the past week. The stock faced selling pressure after the company reported its lowest quarterly profit increase (8.1% YoY) in Q3FY25 since its 2020 listing, due to stricter regulations in the derivatives market.

SEBI introduced new rules in October 2024 that limit retail investor participation in Futures & Options (F&O). These changes included raising the minimum contract size, cutting weekly expiries, requiring upfront premium payments, and stopping popular contracts. Angel One reported a 13% QoQ drop in F&O brokerage to Rs 662.7 crore, with the segment contributing 52.5% to the company’s total revenue in Q3FY25.

Angel One’s revenue increased by 19.1% YoY to Rs 1,263.8 crore. The company also announced a dividend of Rs 11 per equity share, totaling Rs 99.3 crore. This represents 35.3% of the consolidated net profit for Q3FY25.

Dinesh Thakkar, Managing Director of Angel One, stated, “Although a few regulations introduced this quarter caused a temporary industry-wide impact, our aggressive client acquisition strategy, along with the normalization of client activity, will fuel renewed growth momentum in the coming quarters.”

Motilal Oswal lowered its target price while maintaining a ‘Buy’ rating. The revised target price of Rs 3,200 suggests a potential upside of 28.2% from the current market price. The brokerage says that Angel One has managed to maintain its profitability by changing its pricing to cover the impact of fee transparency regulations.

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

The Baseline

16 Jan 2025

Chart of the Week: 87 out of 130 industries outperformed the Nifty 50 in 2024

By Aditi Priya

2024 was an eventful one for investors. The Nifty 50 and Sensex delivered gains of 8.8% and 8.2%, respectively, while broader markets outperformed. The Nifty Midcap 100 and Smallcap 100 indices rose by more than 20%.

However, the final quarter gave investors whiplash, with the Nifty 50 declining nearly 12% from its September peak. Disappointing quarter results and high foreign fund outflows in October and November drove markets down. Still, the year ended with positive returns, marking the ninth consecutive year of gains for the Indian equity market.

Of the 130 industries tracked on Trendlyne’s industry dashboard, 87 outperformed the Nifty 50 index in 2024. In this Chart of the Week, we highlight the top-performing industries and their major contributors over the past year.

Manufacturing and industrial sectors see steady growth in 2024

India's manufacturing and industrial sectors were the stars of 2024. Industries like heavy electrical equipment, consumer electronics, industrial machinery, and other electrical equipment rose over 70% in the past year.

The manufacturing PMI consistently stayed above the 50-mark, indicating sustained expansion in these industries. Increasing foreign investments, an expanding domestic market, and government initiatives like ‘Make in India’ and ‘Atmanirbhar Bharat’ drove this growth.

Among standout companies in these industries, Siemens (heavy electrical equipment) rose 39.8% over the past year. It also reported strong financial performance over the past 12 months. Its trailing twelve month (TTM) revenue and net profit increased by 38.5% and 13.7%. The surge in demand for electrification and data centers, driven by advancements in artificial intelligence (AI), led to high growth.

Dixon Technologies (consumer electronics) capitalized on the PLI scheme to expand its mobile phone manufacturing segment, boosting its revenue share in this category from 12% in FY20 to 62% in FY24.

Jyoti CNC, a metal cutting CNC machines manufacturer, launched its IPO in January 2024. The IPO received a strong response from investors, with an overall subscription of 40.5 times. Since its listing, the company has delivered returns of 260.9%. The rally is fueled by the company's strong financial performance, growing order book, and rising global demand for CNC machines, especially in aerospace. Jyoti CNC's total order book reached Rs 4,289.3 crore by the end of Q2FY25.

Similarly, Waaree Energies, a leading player in the other electrical equipment industry, launched its IPO in October 2024. As India's largest solar photovoltaic (PV) module manufacturer, the IPO saw high demand and was oversubscribed 76.3 times, including 11.3 times by retail investors. Since its debut, the company has delivered impressive returns of over 73.6%. As of September 30, 2024, its order book stood at 20 GW.

Financial services surged due to strong foreign inflows and increased retail participation

The banking and finance sector, including industries like exchanges, capital markets, and other financial services, saw notable performance improvements over the past year.

In 2024, strong foreign institutional inflows (in seven out of 12 months) and increased retail participation drove India's stock markets to record highs. New demat accounts rose 33% in 2024 compared to 2023, bringing the total to 18.5 crore.

Top performers from exchanges, capital markets, and other financial services industries include Bombay Stock Exchange (BSE), Multi Commodity Exchange, Motilal Oswal, KFIN Technologies and Central Depository Services (CDSL).

BSE shares surged 158.6% in 2024, fueled by its expansion of derivatives offerings and the anticipation of the National Stock Exchange’s (NSE) IPO. SEBI's regulatory changes favoring BSE's weekly Sensex options and strong financial performance also contributed to this growth. BSE’s TTM revenue and net profit grew by 17.1% and 119.3%, respectively.

CDSL maintained its dominant position with a 73% market share in demat accounts (September 2024). NSE's potential IPO boosted positive sentiment toward market infrastructure firms like CDSL, anticipating benefits from increased market activity.

Credit rating agency CRISIL's share price rallied by over 41% in 2024 after it acquired a 4% stake in Online PSB Loans (OPL) for Rs 33.3 crore, enhancing its presence in the digital credit infrastructure ecosystem. The company also reported strong financial results over the past year, with a 10.4% TTM net profit increase, and maintained consistent dividend payouts.

The services sector thrived due to rising demand and increased digital adoption

The services sector, including industries like hotels, internet software & services, and internet & catalogue retail industries, showed strong performance in 2024. The PMI for the services sector surged to a four-month high of 60.8 in December 2024, up from 58.4 in November, reflecting a strong rise in demand.

The hospitality industry benefited from a rebound in travel and tourism, while internet-based services experienced growth due to increased digital adoption and e-commerce activities. Top performers include Indian Hotel Company, Chalet Hotels, Zomato, Swiggy, Brainbees Solutions and PB Fintech.

Indian Hotels Company's (IHCL) share price surged 75.8% in 2024. The company unveiled its ‘Accelerate 2030’ strategy in November 2024, aiming to double its hotel count and revenue by FY30. This plan includes expanding its portfolio to over 700 hotels, up from 350 in FY24, and increasing consolidated revenue to Rs 15,000 crore.

Zomato's share price rose over 74% over the past year as the company reported a 249.4% increase in net profit TTM. In December 2024, Zomato joined India's BSE Sensex index, becoming the first new-age tech company to do so.

In 2024, Swiggy and Brainbees Solutions (FirstCry) launched their IPOs in the Indian market. Both IPOs received significant investor interest and were oversubscribed. Swiggy expanded its quick commerce services via Instamart, aiming for 10-minute grocery deliveries. The company increased warehouse size and cut delivery times, with quick commerce now making up 40% of its food delivery volume since 2020.

The Baseline

15 Jan 2025

A turnaround for Indian pharma in the US | Screener: High momentum pharma stocks

By Tejas MD

The fireworks were soggy for Indian markets in the new year. In the first 15 days of 2025, the Nifty 50 slipped into correction territory, down over 10% from its highs, while the Indian rupee tumbled to a record low, breaching 86 against the US dollar.

According to Bloomberg, the mood will be muted this earnings season as well, as Q3FY25 results could bring a flurry of downgrades.

Pictet Asset Management portfolio manager Prashant Kothari, who oversees about $1 billion in an Indian equity fund, says, “We have had very good economic expansion in India, but there may be clouds on the horizon.” He adds that opportunities in India "are not juicy."

But falling valuations may not be a bad thing, if you know where to look. Warren Buffett loved buying great stocks at discount valuations, and famously said, "Be fearful when others are greedy, and greedy when others are fearful."

One defensive sector that gets interesting in tough times is pharma. Since 2005, the Nifty 50 has delivered an annual negative return three times, but the Nifty Pharma index has outperformed the benchmark index all three times.

So which stocks are looking especially strong ahead of Q3FY25 results? Let’s dive in.

In this week’s Analyticks,

Indian pharma companies are adapting - and winning - in a changing US market
Screener: Pharma stocks with high momentum and durability scores, with rising operating profit margin in Q2

US market recovery gives Indian pharma a boost

Indian drug makers have seen booms and busts in the past 15 years, due to their heavy reliance on the US generics business.

The problem with generics? A generic drug contains the same chemical substance as one originally protected by patents. Its main appeal is its lower price.

So competition in the generic drug market is fierce. A single generic option usually causes a 40% fall in the drug's prices, and five to six generic players cause a 90% reduction. As a result, this segment has lower margins, and no product differentiation to bank on.

Trendlyne’s share price history data shows that Nifty Pharma outperformed the Nifty 50 from 2010 to 2016. This was due to a sharp uptick in US generics sales, which Indian players benefitted from by exporting low-cost generic drugs to the US.

Nifty Pharma outperforms the Nifty 50 in nine out of past 15 years

But the easy generics money soon ran out, and a slowdown took hold in 2016. US generics became less profitable due to stricter regulations by the US FDA. The regulator also encouraged more generics competition. Nifty Pharma posted negative returns from 2016 to 2019.

Post-Covid, Indian pharma companies pivoted towards specialty and complex generics segments in the US to beat the slowdown in generics sales. Industry leaders like Sun Pharma, Cipla, and Dr Reddy’s embraced this strategy.

This pivot led to Nifty Pharma's sharp rise of 34% in 2023, and 39% in 2024. Relatively smooth USFDA inspections have also contributed to this, allowing Indian drug makers to speed up product launches and enhance profitability in the competitive US market.

However, not all companies enjoyed similar success. Firms like Aurobindo Pharma and Alkem Labs attempted to diversify into specialty injectables and biosimilars but faced challenges. Weak demand and persistent supply chain issues have undermined their efforts, limiting revenue growth.

India vs US: Where is pharma's focus?

Post-COVID, Indian companies have switched away from the broad generics space in the US, which had high competition, to complex generics (Cipla, Dr Reddy’s), specialty products (Sun Pharma), and peptides.

Abhay Gandhi, Sun Pharma's CEO (North America Business), said in the Q2FY25 earnings call, “The US specialty business has grown YoY. The underlying prescription trends for the specialty business are strong.”

This diversification strategy has fueled two growth engines - India and the US. In addition, the number of adverse classification outcomes from US FDA inspections fell in 2024 after a sharp uptick in 2019.

USFDA’s red flags decrease in 2024

In 2024, 206 USFDA inspections were conducted, of which only 14 (6.6%) resulted in official action (OAI). The OAI percentage has fallen from 11% in 2019. An OAI from the USFDA greatly impacts the profitability and product launch timeline for drugmakers.

US generics remain an important vertical. Several bestseller drugs are expected to go off-patent in the US, increasing the potential for generic alternatives. This could help offset any lower-than-expected India sales. The Indian pharmaceutical market's growth moderated to 7% in 2024. This was primarily due to a lack of price hikes on the National List of Essential Medicines products and a regulatory ban on 156 fixed-dose combination drugs.

The US market, on the other hand, has picked up in the last few quarters after a period of underperformance. This was helped by strong sales of the complex generic cancer drug Revlimid (lenalidomide).

In the generics space, companies must launch new complex generics to find the next blockbuster, which remains a concern.

Pharma companies expected to post strong numbers in Q3

According to a Q3 result preview report by KR Choksey, pharma companies’ revenue is expected to grow 10.8% YoY, led by strong US business, and domestic growth.

The EBITDA margin is expected to expand 198 bps YoY, led by a favorable product mix and increased focus on complex products. Falling freight and raw material costs are also expected to help margins. The average price of raw materials has fallen around 25% YoY in Q3FY25 to $114/Kg.

A diverse set of companies, from API manufacturers to branded generics manufacturers, are in the list of players expected to post positive revenue and net profit growth in Q3.

Divi’s Labs expected to post high revenue and net profit growth

Mankind Pharma depends mainly on Indian market growth (over 90% of revenue share), and its Q3FY25 revenue and net profit are set to increase for the eighth quarter. Its outperformance in market growth with IPM is expected to continue in the chronic segment in Q3.

Companies like Sun Pharma and Dr Reddy’s get a notable portion of their revenues from the US. While specialty products should drive revenue growth for Sun Pharma, new product launches remain key for Dr Reddy’s.

Divi’s Labs and Lupin saw a sharp turnaround in the past two years. Divi’s Labs is benefitting from lower raw material prices and high demand in the custom synthesis segment.

When it comes to Trendlyne’s DVM scores, these pharma companies boast high durability scores.

Pharma companies have medium momentum scores despite a weak quarter

Despite a weak quarter, these pharma companies’ momentum scores remain in the ‘Medium’ category. Zydus Lifesciences has the highest DVM score. It has good durability, medium valuation, and momentum scores, making it a ‘Mid-range Performer.’

Screener: Pharma stocks with high momentum and durability with rising operating profit margin in Q2

Pharma stocks with high momentum scores and rising operating margins

As we enter the results season, we look at stocks from the pharmaceutical industry with good momentum and durability with rising operating profit margin growth in Q2FY25. This screener shows pharmaceutical stocks with high Trendlyne momentum and durability scores with rising operating profit margins in Q2FY25.

Major stocks that feature in the screener are Procter & Gamble Health, Lupin, Granules India, Ipca Laboratories, Mankind Pharma, Orchid Pharma, Innova Captab, and Caplin Point Laboratories.

Lupin features in the screener with a good Trendlyne momentum score of 57 and a growth of 5.4 percentage points YoY in operating profit margin in Q2FY25. This pharma stock has a high momentum score, helped by an 18.7% rise in stock price over the past six months. The company’s operating margins improved due to lower freight costs, combined with a better mix of high-margin products, helped by new product launches like Mirabegron in the US and Luforbec in the UK.

Ipca Laboratories also appears in the screener after its operating profit margin grew by 3 percentage points YoY to 18.8% in Q2FY25. Operating margin improved, led by reduced raw material costs and a 25-30% cost reduction in active pharmaceutical ingredient (API) processes at its subsidiary, Unichem Laboratories. It also has a good Trendlyne Momentum score of 59, driven by a 28.7% surge in its stock price over the past six months.

You can find some popular screeners here.

Signing off this week,

The Trendlyne Team

The Baseline

10 Jan 2025

Five Interesting Stocks Today - January 10, 2025

By Trendlyne Analysis

1. Titan Company:

This gems and jewellery major has risen by 1.5% over the past week, outperforming its industry by 4.1%. This comes after Titan reported a 24% YoY growth in revenue in its Q3FY25 business update.

The jewellery segment (which contributes over 87% of the total revenue) grew by 25% YoY, driven by strong festive demand. Plain gold jewellery sales jumped 24% YoY due to robust festive and wedding purchases over October-December despite higher gold prices, while gold coin sales surged 48% YoY.

Analysts believe that jewellery consumption remained strong due to rising gold prices, more auspicious days, and a shift from unorganised to organised trade after a 900 bps gold import duty cut to 6% (during the FY25 Union Budget). The company’s peer Kalyan Jewellers has also reported healthy revenue growth in Q3FY25, with a 39% YoY rise. According to Trendlyne’s Forecaster, Titan’s revenue is expected to grow by 16.1% YoY in Q3FY25.

Meanwhile, the company added 69 stores on a net basis during the quarter, taking its retail store count to 3,240. Titan has a market share of 8% in the Indian jewellery market and has been working on expanding its retail footprint. It also aims to triple volumes in emerging segments like wearables, women’s bags and ethnic wear by FY27. It opened an exclusive store for its bags and accessories brand, IRTH, in Chennai, as part of its expansion plans in South India. Commenting on this, Manish Gupta, CEO of the Fragrances and Fashion Accessories Division, said, “We aim to achieve Rs 1,000 crore in revenue by FY26-27 from our IRTH and Fastrack bags divisions”.

InCred Equities gives an ‘Add’ rating on Titan Co with a target price of Rs 3,600. The brokerage remains positive on the company but expects margin pressures from higher gold prices and diamond price volatility. It expects EBITDA margins to contract by 105 bps YoY to 10% in Q3FY25.

2. Manappuram Finance:

This gold loan company’s share price jumped over 6% before paring its gains amid profit booking by investors. This surge followed the company’s announcement that the RBI had lifted its ban on new loans and disbursements by its subsidiary, Asirvad Micro Finance. The RBI had slapped this ban on Asirvad over two months ago on October 22, after it found “material supervisory concerns and non-compliance issues”.

Manappuram’s stock fell by over 13% after the ban was imposed and made a 52-week low in the days that followed. The removal of this ban is a significant development for the company, as its micro-finance business contributes around 30% to its total revenue. The other 70% of the company’s revenue comes from gold loans.

The company's consolidated AUM (assets under management) jumped by 17.4% on a YoY basis in Q2. The gold loan segment has experienced remarkable growth over the past year, driven by higher-than-normal interest rates on unsecured loans. Bloomberg columnist Andy Mukherjee, writes that loans against gold jewellery have risen in India by 56.2% annually. In Q3, Forecaster expects revenue growth for Manappuram of 14.2%, with net profit growth of 8% on a YoY basis.

V P Nandakumar, MD and CEO, said, “The micro-finance sector is facing (collection-related) challenges in certain geographies.” Due to this, the company added around 5,000 new loan officers in Q2. He also said that he expects net interest margins to fall as operating expenses rise.

Motilal Oswal retains a 'Hold' rating on the stock with an upgraded target price of Rs 205. The brokerage anticipates a gradual recovery in Asirvad’s microfinance (MFI) and gold loan segments. However, it predicts that credit costs will remain high over the next two to three quarters due to industry-wide pressures. Currently, the stock is in the PE Buy Zone, trading at a relatively cheaper valuation than its historical PE.

3. Dabur India:

ThisFMCG producer declined 3.8% on January 6 following theannouncement of its Q3FY25 business update. Dabur India expects low single-digit (~1-5%) revenue growth due to weak demand in segments like Health Care, impacted by a delayed winter, and in Beverages, as consumersshift from non-carbonated to carbonated drinks. Higher-priced juices are seeing the biggest impact.

Management noted that rural demand for FMCG outpaced urban demand, contributing around 4-8% growth in the home & personal care (HPC) segment. Dabur expects its culinary brands to deliver double-digit growth, supported by brands like 'Homemade Cooking Pastes & Purees' and 'Badshah Spices.'

InQ2FY25, the company reported a revenue decline of 5.5% YoY to Rs 3,028.6 crore, with net profit falling 17.5% YoY to Rs 425 crore. This underperformance was due to heavy rainfall, floods, and high food inflation, which slowed down consumption. Dabur Indiareduced the inventory days of its general trade partners from 30 days to 21 days in Q2, to tackle challenges from alternative channels like modern trade, e-commerce, and quick commerce. The company aimed to reduce this by 19 days by the end of December ‘24. According toTrendlyne’s Forecaster estimates, the company’s revenue is expected to grow by 5.8% YoY in Q3FY25.

Mohit Malhotra, CEO of Dabur India,said, “We expect the Home Care portfolio to grow in double digits going forward in the future, taking up the portfolio from Rs 700 crore to around Rs 1,000 crore in 2 to 3 years.” To achieve this, Dabur is premiumizing and expanding its home care range, introducing Odonil (room air freshener) in gel pockets, diffusers, and premium air fresheners, and launching Odomos (mosquito repellent) in a liquid vaporizer format. The recentacquisition of hair oil brand Sesa marks Dabur’s entry into the premium Ayurvedic hair oil market, in line with its strategy to diversify and expand.

Still, analysts are pessimistic. Following the business update, Citimaintained its ‘sell’ rating on Dabur India and lowered its target price to Rs 510. The brokerage expects a 2.5% YoY revenue growth in Q3FY25, citing weak performance in healthcare and beverages, rising costs, and shifting consumer preferences as key challenges.

4. Zydus Lifesciences:

This pharma company's stock rose by 1.4% over the past week after it signed an agreement with CVS Caremark, a US healthcare solutions provider, on January 7. The agreement also adds the ZituvioTM range - Sitagliptin and combination tablets - to CVS' list of medicines for type 2 diabetes treatment.

On the same day, the US FDA accepted the New Drug Application (NDA) for CUTX-101, a potential treatment for Menkes disease, and assigned it priority review. The application was filed by Sentynl Therapeutics, the US subsidiary of Zydus. Menkes disease is a rare pediatric condition with no FDA-approved treatment, and often leads to death in infants. The CUTX-101 clinical trials showed promising results, with early-treated patients having an 80% lower death risk. The Menkes disease market, valued at approximately $8 million at the end of 2023, is expected to grow 5.9% annually through 2034.

Following the news, Nomura upgraded Zydus Life to ‘Buy’ from ‘Hold’ and raised its price target to Rs 1,140, indicating an upside of 13.5%. The brokerage also increased earnings estimates due to higher contributions from the Sitagliptin drug, used to regulate high blood sugar. They believe the drug’s market opportunity, estimated between $300-500 million, could provide Zydus with an annual revenue boost of $100-150 million. However, they anticipate a 5% decline in US revenues in FY26.

In Q2FY25, the company’s revenue increased 19.9% YoY to Rs 5,237 crore, driven by improvements in the US formulation (up 30%) and Indian formulation (up 9%). Its net profit rose 20.5% YoY to Rs 865.8 crore during the quarter. For Q3FY25, Trendlyne’s Forecaster estimates profit to surge 14.9% YoY, with a revenue growth of 17.8%.

Managing Director Sharvil Patel mentioned that Zydus is focusing on expanding its portfolio in the US by targeting high-value products that offer better returns and margins. This involves launching limited-competition products and exploring in-licensing opportunities for niche, high-value products. He added, “We anticipate topline growth in the high teens (15-17%) and maintain our FY25 margin guidance of 27%, with an expected improvement of 100-150 basis points over last year.”

5. Reliance Industries:

This refineries & petro-products company has declined by over 4% in the past month. The company has reportedly raised $3 billion (approximately Rs 24,900 crore) from a consortium of 11 banks, marking its largest borrowing deal in nearly two years. The five-year loan, finalized last month, was set at 120 bps above the three-month Secured Overnight Financing Rate (SOFR), with $450 million (around Rs 3,700 crore) denominated in Japanese yen. It is also reported that the company is gearing up for substantial loan repayments in 2025.

The company posted a nominal 0.3% YoY increase in revenue for Q2FY25. However, its net profit declined by 4.8% to Rs 16,563 crore due to a decline in EBIT of the Oil-to-Chemical(O2C) segment. The Trendlyne Forecaster estimates the company’s revenue to rise by 2.9% and the net profit to rise by 4.8% Q3FY25. Morgan Stanley expects the company's refining segment to grow on the back of increasing global demand. It appears in a screener of stocks where mutual funds have increased holdings in the past month.

Mukesh Ambani, chairman & MD of the company, said, “Jio and Retail are expected to double their revenues and EBITDA in the next 3-4 years. I see immense growth potential in our media business. I foresee our New Energy business becoming as big and profitable over the next 5-7 years, as our O2C business which we had built over the past 40 years.”

Global brokerage firm Jefferies points out that while Reliance lagged behind the Nifty 50 index by 15% in 2024, primarily due to concerns about its retail business's medium-term growth and weak earnings growth for the year, the company’s retail segment is expected to see mid-teen growth going forward. Additionally, improved profitability is anticipated in the Oil-to-Chemicals (O2C) segment by FY26. Jefferies also notes the potential initial public offering (IPO) of Reliance Jio, the company’s telecom arm in FY26.

Geojit has maintained Reliance Industries at a ‘Buy’ rating as it expects the recent tariff hikes and ongoing technology advancements to strengthen Jio's customer base, supporting its growth momentum. The brokerage also says that although the recent tariff hikes led to some SIM consolidation and a higher churn rate, the management expects the full impact of the hikes to be reflected in the earnings over the next 2-3 quarters. With a target price of Rs 1,516, the stock has a potential upside of over 22%.

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

The Baseline

09 Jan 2025

Five stocks to buy from analysts this week - January 09, 2025

By Ruchir Sankhla

1. Radico Khaitan:

Sharekhan retains its ‘Buy’ rating on this breweries and distilleries company with a target price of Rs 2,996. This indicates an upside potential of 25.4%. Radico Khaitan (RKL) has been focusing on premiumisation, and aims for 15-18% volume growth in the prestige & above (P&A) category for FY25. This segment has delivered 15 consecutive quarters of double-digit growth. The P&A portfolio’s contribution to Indian-made foreign liquor sales increased from 28% in FY19 to 46% in FY24 and is expected to reach 56% by FY27.

The company is implementing cost-optimisation measures such as backward integration with the Sitapur distillery and packaging shifts from glass to plastic bottles in the regular segment. These initiatives are expected to improve operating profit margins (OPM) by 125-150 bps annually, with a target to achieve late-teens OPM within three years.

The analysts mention that with no major capex planned for the next 6-7 years, RKL aims to repay most of its Rs 745 crore debt by FY27. They expect a CAGR of 16.6% in revenue and 29.6% in net profit over FY25-27.

2. Signatureglobal (India):

Motilal Oswal reiterates its ‘Buy’ rating on this NCR-based realty company with a target price of Rs 2,000. This indicates an upside potential of 52.8%. The company is expected to achieve a 35% CAGR in pre-sales from FY25-27, driven by its shift from affordable housing to the mid-luxury segment. Since 2014, the company has sold over 32,000 units (~25 million square feet) and achieved a 63% CAGR in pre-sales from FY21-24.

Analyst Abhishek Lodhiya notes that the company has a pipeline of 25.4 million square feet (msf), including projects in Gurugram's high-demand markets like South Peripheral Road and Dwarka Express Highway. The company is executing approximately 51msf of projects, with 25.3msf underway and 25.4msf in forthcoming projects that are set to be launched in the next 12-24 months.

Lodhiya believes that the company has a strong launch pipeline of premium projects, and expects it to deliver a 35% CAGR in bookings over FY25-27. He estimates the value of Signatureglobal’s current project pipeline at Rs 15,000 crore.

3. Metro Brands:

Emkay initiates a ‘Buy’ rating on this footwear manufacturer with a target price of Rs 1,500. This indicates an upside potential of 18.1%. Analysts Devanshu Bansal, Vishal Panjwani and Mohit Dodeja highlight Metro’s 20% CAGR growth in India’s sports and athleisure market from FY18-23. The company holds exclusive rights to FILA and Foot Locker.

The analysts note that the company caters to a wide audience with products priced from Rs 700 to Rs 12,000. Around 30% of employee compensation is linked to sales, which improves performance and drives consistent same-store growth of 3-4%. Analysts mentions that the company has ample expansion potential as premium brands like Tanishq operate in 290 cities, while Metro’s brands such as Metro, Mochi, and Crocs are present in only 171, 122, and 97 cities, respectively. They anticipate Metro can add 110-120 stores annually.

Bansal, Panjwani and Dodeja expect Metro Brands to continue adding 80-90 exclusive Metro/Mochi brand outlets annually to deliver a 18% revenue CAGR over FY25-27. They also expect net profit to grow at a CAGR of 22% over the same period.

4. Black Box:

Ventura maintains a ‘Buy’ rating on this IT software firm with a target price of Rs 826. This indicates a potential upside of 28.2%. The company offers digital infrastructure solutions in data centers and cybersecurity, as well as consulting services. Black Box expects its pipeline to grow to $3 billion from $2 billion and aims for a conversion rate of ~25%, up from the current 20%.

Analysts highlight that the company plans to expand its data center operations, primarily in North America and India, which contribute about 20% of its revenue. Black Box expects major clients like Meta, Amazon, and Microsoft to invest heavily in data centers, driving revenue growth. Analysts anticipate data center revenue to grow at a CAGR of 15%, rising from Rs 1,256 crore to Rs 1,994 crore by FY27.

Black Box has redefined its strategy by focusing on its top 300 customers and exiting less profitable long-tail clients, which do not contribute to margin growth. The company achieved an 8.9% EBITDA margin in Q2FY25 and 8.5% for H1FY25. Analysts note that Black Box has consistently outperformed in H2 compared to H1 in terms of operating profitability. They expect revenue to grow at a CAGR of 8% and net profit at a CAGR of 25.9%.

5. Canara Bank:

Hem Securities maintains its ‘Buy’ rating on this bank with a target price of Rs 118, suggesting a potential upside of 23.3%. The company’s management targets an 11% YoY increase in credit for FY25. Analyst Madhur Mandhana highlights that, of the total Rs 18,000 crore in unsecured personal loans, about Rs 12,000 crore was allocated to retirees and wage account holders, which poses no concerns. The remaining Rs 6,000 crore was used for education loans.

Mandhana believes that the 2020 merger of Canara Bank with Syndicate Bank enhanced its market position, giving it a market share of over 6% in advances and deposits as of FY24. The bank's net profit rose by 37.3% YoY to Rs 14,554 crore in FY24, with the net interest margin (NIM) increasing to 2.6%, up from 2.5% in FY23. It expects a gross NPA of 3.5% and a net NPA of 1.1% for FY25, compared to 4.2% and 1.3% in FY24. However, Mandhana expects these figures to stay below 3.5% and 1.1%, respectively.

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

(You can find all analyst picks here)

The Baseline

08 Jan 2025

Potential rockets? Defence stocks of 2025 | Screener: Defence stocks with high durability scores and growth forecasts

By Swapnil Karkare

Welcome to 2025 - which Defence Minister Rajnath Singh calls the "Year of Reforms" for India’s defence sector. Singh wants to modernise the sector, and increase local production.

The government has been arguing that our defence processes are frozen in time. But reforms face many blocks, including outdated command structures, internal resistance to change ("we have always done it this way"), and tight budgets.

Still there has been progress: India’s defence exports have jumped 30X in the last decade, with help from the private sector.

The growth is happening just in time. The world is becoming increasingly violent, with the Israel-Hamas conflict, the Ukraine-Russia war, and China-Taiwan all simmering. The US has elected a President that puzzlingly, wants to annex Canada and Greenland. India’s defence needs will grow in a more aggressive world, and will need heavy investments.

One can argue that people being the way they are, the market for bullets will never die. A defence investor may see this as an optimistic statement, and these stocks have become quite popular. The message from Motilal Oswal’s Defense Fund ad — "India is investing in defence, are you?" — captures the shift over the last ten years.

In this week's Analyticks:

Defence stocks boom, as private companies make their mark
Screener: Defence stocks with high durability scores and revenue growth forecasts for Q3

India moves towards the West, and away from Russia

The French Rafale deal controversy marked an early shift in India's defence strategy. India hugged Russia close for decades for its military needs - the country accounted for 76% of our arms imports between 2009 and 2013.

That has drastically reduced, and is below 50had % for the first time since the 1960s. While Russia is still the largest supplier with36% of our imports, Western countries - France (33%) and the US (13%) - are getting the larger share. This is part of a strategy to reduce our reliance from any single nation.

India is the world’s largest arms importer, accounting for 9.8% of global arms imports. However, the country is now focusing more on manufacturing defence products here and reducing dependency on foreign suppliers.

India's defence makeover: government push boosts production and exports

Our defence transformation took off with 2014’s ‘Make in India’ initiative. The government identified over 36,000 defence items that could be produced locally, ranging from complex systems, sensors, weapons, and ammunition. Since then, public sector companies have placed orders worth over Rs. 7,500 crore with domestic defence vendors

India's diplomats have also turned into brand ambassadors for Indian-made defence products. India’s defence exports touched Rs. 21,000 crore in FY24, growing by 40% CAGR over the last decade. Defence production has soared 8% CAGR, from around Rs. 74,000 crores in FY17 to Rs. 1.3 trillion in FY24. The government hopes to hit Rs. 3 trillion in production and Rs. 50,000 crore in exports by 2030.

Enter the entrepreneurs: open doors for the private sector

The public sector has long dominated India's defence production, but the private sector has made recent gains, with a 20% share in production and 60% in exports. The increase in private sector participation has led to interest from a wide range of investors, including retail, mutual funds, and foreign institutions.

In 2022, the NSE launched the Nifty India Defence Index, which has seen an impressive 4.5-fold rise since its inception, further fueling investor interest in the sector. As a result of this growing interest, fund houses like HDFC, Motilal Oswal, Aditya Birla Sun Life, and Groww have launched defence-specific schemes, with three of them debuting in 2024.

A Balasubramanian, CEO of Aditya Birla Sun Life, highlighted the large order books of top defence companies as attractive for investors. However, he noted that state-owned firms still dominate the sector, with the government holding majority stakes in many companies. Limited free float also makes these stocks vulnerable to price swings.

High valuations is another worry. The HDFC scheme, for example, had to stop accepting fresh investments due to worries about peak valuations. But over the last six months, the defence sector index corrected by 20%, driven by slower order inflows, supply chain disruptions, and other execution challenges.

Valuations are a high wall to climb for defence

The sector is promising, but stocks are at pretty high valuations. Surjitt Singh Arora of PGIM India AMC warns that “valuations have run ahead of fundamentals”. Shiv Chanani of Baroda BNP Paribas Mutual Fund agrees, pointing out that while order books provide revenue visibility, execution hurdles and rich pricing are worries.

Despite this, Binod Modi of Mirae Asset Sharekhan, is among the optimists, arguing that the sector’s growth potential justifies its current valuations. He also says that the sector will see premium valuations for the next 3-5 years. Brokerages like Antique and Elara Securities share this bullish outlook, and point to the recent correction as a good entry point for long-term investors.

Diamonds in the mix?: Looking for good fundamentals amid high valuations

Among the key players in the industry, Solar Industries, Astra Microwave, Hindustan Aeronautics (HAL) and Bharat Electronics (BEL) have grown steadily in revenue, net profit, order books and return ratios.

ICICI Securities expects Solar Industries to increase its share of defence revenue over the next five years, particularly with the global shortage of ammunition creating new opportunity. Astra Microwave’s healthy order book and robust pipeline have also kept its revenue and profitability healthy, especially with a focus on higher-margin domestic contracts.

ICICI Direct forecasts that HAL’s revenue growth will rise significantly from FY26, due to better execution. And Mirae Asset Sharekhan expects BEL to be the biggest beneficiary of recent proposals from the Defence Acquisition Council, including maritime surveillance, and other capability upgrades.

Challenges like high valuations or FII sell-offs could dampen the sentiment in the near term. But the long-term potential of the sector has made analysts upbeat.

Since FY23, the government has cleared Rs. 8.3 trillion worth of Acceptance of Necessities (AoNs) for defence projects — a 53% jump from the past decade. Government procurement begins after an AoN, and this signals a massive pipeline of upcoming projects for defence companies. According to Elara Securities analysts, there are substantial growth opportunities for the sector in the coming years, driven by the government’s focus on indigenisation and exports.

The government is also looking to increase the role of startups, SMEs, and corporates in various segments such as research and AI. Antique Research is particularly excited about the untapped potential in this space, noting that several defence companies with unique technologies and capabilities are still not publicly listed - including Tata Advanced Systems, Reliance Naval and Engineering, Mahindra Aerospace, Kalyani Strategic Systems, DRDO, Munitions India, and BrahMos Aerospace. A long established sector is seeing fresh excitement, with young players rising alongside promising, listed companies.

Screener: Defence stocks with the highest Durability scores and revenue growth estimates for Q3FY25

Defence stocks have high durability and revenue growth estimates in Q3

As we wait for the Q3 result season, we look at defence stocks with the highest Forecaster estimates for revenue YoY growth and a good Trendlyne durability score. Stocks with high durability scores are companies rated with good management, that have consistently demonstrated good growth and cash flow, stable revenues and profits, and low debt. This screener shows such defence stocks, which are expected to show high revenue growth in upcoming results

The most notable stocks in the screener are Bharat Dynamics, Data Patterns (India), ideaForge Technology, Bharat Dynamics, Hindustan Aeronautics, Mazagon Dock Shipbuilders, and Garden Reach Shipbuilders & Engineers.

Bharat Dynamics shows up in the screener with a Trendlyne Durability score of 70 and Forecaster estimates revenue growth of 102.8% YoY in Q3FY25. This debt-free defence stock’s high score can be partly attributed to its net profit increasing YoY in five out of the past eight quarters. Analysts at Phillip Capital and Elara Capital expect the company’s revenue to grow due to a strong order backlog and its inclusion in defence modernisation programs.

Bharat Electronics also features in the screener with the highest Trendlyne Durability score of 85 among defence stocks. Its good durability can be attributed to consistent revenue growth YoY for the past nine consecutive quarters and net profit increasing YoY for the past eight quarters. The company also has low interest expenses and a strong return on equity (RoE) of 16.8% in FY24. Its trailing twelve-month (TTM) PE stands at 45.4, higher than its three-year and five-year average PE. Trendlyne’s Forecaster estimates this company’s revenue to grow by 28.6% YoY in Q3FY25. Analysts at Sharekhan expect its revenue to grow due to increasing defence spending in India, the structural trend of indigenisation, and export opportunities.

You can find some popular screeners here.

Signing off this week,

The Trendlyne Team

The Baseline

07 Jan 2025

Zomato leads with high analyst upside, Aster DM shows strong momentum

By Aditi Priya

Finding the right investment opportunities can feel like a race against time for stock market investors. By the time a good stock is widely covered, much of its potential upside may already be gone. The challenge is identifying the right stocks at a good valuation, while sifting through a lot of data.

Screeners make it easier to find stocks that outperform on not one or two but multiple metrics. For example, Trendlyne’s durability and momentum scores look at metrics across management quality, financial health, and several dozen technicals to identify high-scoring stocks. These scores help investors shortlist quality stocks more easily.

In this week's Chart of the Week, we look at this screener of stocks with high durability and momentum scores, that fall within the PE buy zone with at least a 5% target price upside, according to the Forecaster. A stock in PE Buy zones indicates that it is undervalued compared to its historical averages.

These stocks are from various sectors, including software & services, banking & finance, pharmaceuticals & biotechnology, retailing and diversified consumer services.

Zomato leads in 12-month upside from analysts

The internet platform company, Zomato, boasts a 12-month upside forecast of 20.2%. It has an impressive durability score of 80 and a momentum score of over 50. The company has risen 93.7% over the past year. In Q2FY25, the company reported a 64% YoY revenue increase, driven by strong performance in key segments including hyperpure, quick commerce, and the food ordering and delivery business. Net profit rose 388.9%, driven by platform fees and higher ad revenue.

Geojit Paribas maintains its ‘BUY’ rating on the stock with a revised target price of Rs 284. Analysts noted, “We believe that growth in all key areas - orders, AOV, and new user acquisition should enhance profitability going forward.”

However, on Tuesday, Jefferies downgraded Zomato to a ‘HOLD’ rating, citing increasing competition in the quick commerce space.

Healthcare sector companies exhibit strong momentum

Cipla, a pharmaceutical company, has a 12-month upside potential of 8.8%, backed by solid durability and momentum scores of 85 and 51, respectively. In Q2FY25, Cipla's revenue increased by 5.7% YoY, driven by growth in South Africa, emerging markets, and Europe. Revenue from Indian operations saw a 4.7% YoY increase, fueled by strong sales in chronic therapy and consumer health.

PL Capital has upgraded Cipla to ‘BUY’ with a target price of Rs 1,730. Analysts at the brokerage stated, “We believe the recent classification of its Goa facility as VAI (Voluntary Action Indicated) by the US Food and Drug Administration has paved the way for the gAbraxane launch.” This clears regulatory hurdles, enabling Cipla to proceed with production and launch of gAbraxane, a generic version of the chemotherapy drug Abraxane, in the US market. Cipla’s $1 billion net cash position also provides room for strategic M&A opportunities.

Healthcare facilities player Aster DM has a 12-month upside potential of 7.8%. It has the highest momentum score of 69 among all the stocks in the screener, signalling strong buying interest. The company’s net profit increased to Rs 96.8 crore, a turnaround from a net loss of Rs 30.8 crore in Q2FY24. Steady growth in its core business segments and effective cost-optimization strategies drove this performance. On November 29, 2024, Aster DM board approved a merger with Quality Care, which made them the third largest healthcare chain in terms of revenue and bed capacity in India.

After the Q2FY25 result announcement, Alisha Moopen, Deputy Managing Director, stated, “We expect synergies to deliver a near-term EBITDA upside potential of 10-15%, driven by optimizing material and manpower costs and improving ARPOB (average revenue per occupied bed) through a better clinical mix. Over the next 3-4 years, we aim to further enhance margins to 24-25%.”

Banking and finance companies show strong growth potential and high momentum

ICICI Bank has a 12-month upside forecast of 15% and is categorized as a 'Strong performer, under radar', in Trendlyne’s DVM score classification. The bank holds a durability score of 60 and a momentum score of 50, consistently delivering strong financial results. In Q2FY25, it recorded a 27.3% YoY revenue growth and an 18.8% YoY increase in net profit.

Brokerages like Motilal Oswal and Sharekhan have maintained their ‘Buy’ ratings, citing the bank’s robust performance driven by healthy loan growth, strong asset quality, and industry-leading return ratios. Sharekhan highlights, “ICICI Bank remains our top pick in the private banks and is well positioned to deliver superior performance despite cyclical headwinds. NIMs (net interest margin) are expected to be stable in H2 vs. H1 FY25 until the rate cut cycle starts.”

City Union Bank (CUB) offers a 12-month upside potential forecast of 11.6%, with a durability score of 65 and a momentum score of 50. The bank posted positive results for Q2FY25, with net profit and revenue increasing by 1.6% YoY and 11.7% YoY, respectively, driven by improved asset and earnings quality.

Axis Securities says, “CUB appears to have re-started its growth journey, with demand-driven growth evident in its core segments. As revamped processes show results and the bank expands into the non-core retail segment, we expect further improvement. Steady NIMs, better operating expense ratios, and stable credit costs are likely to help CUB achieve RoA (return on asset) and RoE (return on equity) of 1.6% and 13-14%, respectively, over FY25-27.” The brokerage upgraded its rating from HOLD to BUY on the valuation front. They revised the target price to Rs 185, a 8.7% upside potential from the current market price of Rs 170.3.

Retail sector company Campus Activewear shows strong momentum

Campus Activewear, a footwear company, has a 12-month upside potential of 6.4%, with durability and momentum scores around 60. In Q2FY25, the company reported a 30% YoY revenue increase and net profit grew to Rs 14.3 crore from a loss of Rs 0.3 crore in Q2FY24, driven by 35% volume growth.

Motilal Oswal maintains a ‘BUY’ rating with a target price of Rs 360, based on 55x Dec’26 P/E. It stated, “Campus’ innovative designs, color combinations, and attractive price points make it a market leader in the Sports and Athleisure category. We expect the revival of the demand environment in 2H and stabilization in the D2C online channel to aid Campus’ growth recovery."

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