• Cipla: This pharmaceutical company’s results were a mixed bag in Q3FY22. Although its net profits were down by 2.6% YoY to Rs 728.6 crore, but revenues grew 6% YoY to Rs 5,478.9 crore. Domestic revenues were up 12.9% YoY, while US revenues rose 8.8% YoY to Rs 1,124 crore. Growth in US markets was driven by an increase in demand for Cipla’s core products and those in its respiratory portfolio. Revenues from the South African private market also grew 16% YoY to US $60 million.

The company’s ingredients (API) segment’s revenues fell 25% YoY (US $20 million), which pulled its quarterly revenues down. EBITDA margins fell 135 bps YoY to 22.5%, which pulled down profits. Brokerages like HDFC Securities and ICICI Securities are still upbeat about this company’s prospects and upgraded their target price for the stock by nearly 23% to Rs 1,115 and Rs 1,100, respectively, as they see robust growth opportunities in Indian and US markets. The company’s plans to shift focus from loss-making segments like HIV drugs to more profit-making segments like respiratory and core products as these would be the key drivers for growth in FY23. The US market is likely to gain more momentum in terms of revenue growth once the approvals for drugs like gRevlimid, gAdvair, gAbraxane, and Albuterol’s portfolio of drugs come in from the US FDA and they start earning Cipla revenues.

• Lux Industries: This stock slumped on Tuesday and tanked 20% after the markets regulator SEBI held Executive Director Udit Todi guilty of insider trading.  Udit Todi is Managing Director Pradip Kumar Todi’s son. SEBI banned 14 entities for insider trading and ordered impounding of wrongful gains of Rs 2.94 crore. SEBI held that Udit Todi leaked sensitive information about the company’s financials to Avni Todi and Sanjeev Bubna, Udit Todi’s father-in-law. Then the related parties bought shares of the company from May 21, 2021, till right before the earnings were announced on May 25, 2021.

When the stock surged 40% in just three days after the results were announced, the related parties sold off a considerable number of shares and earned substantial profits out of it,  SEBI held in its order. The regulator SEBI has scrutinized the deals on receiving an alert of abnormal trading being carried out. Its preliminary examination gave out detailed information of the insider trading been carried out by Udit Todi, during the UPSI (Unpublished Price Sensitive Information) period and reveals the existence of close connections among the participatory entities. For now, SEBI has banned all the entities from trading into the securities market till the investigation is completed. The company denied this and so did Udit Todi. The company is in the process of seeking clarification for the same, as dictated by SEBI norms. 

• APL Apollo Tubes: The stock of this market leader in the structural steel tubes industry corrected nearly 24% from its 52-week high on December 16, 2021. The company’s Q3FY22 net profit fell 12.4% YoY to Rs 115.6 crore despite revenue rising 24.2% YoY to Rs 3,238.3 crore. Sales volumes in Q3 fell 17% YoY to 4.02 lakh tonne due to an extended monsoon season, weak construction activity and its distributors reducing stocks in anticipation of a fall in steel prices. Interestingly, realisations jumped over 50% YoY to Rs 77,569/tonne, which aided the top line growth.

However, this didn’t completely cushion the impact of higher input costs (up over 30% YoY) which in turn hit profits. Brokerages like HDFC Securities, ICICI Securities, and Motilal Oswal continue to be upbeat on the company’s prospects. This is primarily on account of the company’s medium-term plan to double its sales volumes to four million tonnes per annum by FY25 and maintain its EBITDA/tonne at Rs 5,000 levels. Notably, the management does not see a further correction in steel prices as a detriment to its profitability. Infact, it believes that lower HRC prices make it more competitive vis-à-vis traditional construction materials. With two back-to-back quarters of falling net profits and sales volumes, APL Apollo’s Q4FY22 performance could be an interesting inflection point to watch out for investors.

• Shoppers Stop: On January 21, this departmental store chain’s stock hit a 52-week high on the bourses after its bottomline returned to black for the first time in 11 quarters. The stock is up nearly 7.6% in the past week. Investors must be wondering whether this trend in profitability is sustainable or will Omicron ruin this party yet again. Consolidated net profit was Rs 77.3 crore in Q3FY22 as against a loss of Rs 25.1 crore a year ago. Revenues  rose 34% YoY to Rs 972.6 crore led by a robust festive period and marriage season during October-November 2021. Customer footfalls rose 65% YoY to 1.09 crore and average transaction by 13% YoY to Rs 4,345. If we further dissect the revenue growth segment-wise, beauty and private brands were the primary growth drivers in Q3. The sales from the beauty segment and private brands were up 40% and 31% YoY, respectively.

The focus of the new Managing Director Venu Nair is to steadily increase the share of high-margin private brands in the overall sales mix. Sales from the digital channels jumped 39% YoY to Rs 70 crore. While ICICI Securities is positive on the medium-term prospects of the company given its aim to double its sales by FY25, Motilal Oswal is cautious. This is because the brokerage feels the company’s past performance isn’t much to write home about. In the past five years, the company witnessed a sustained fall in the same-store sales growth (SSSG) and closure of non-performing stores. Only time will tell if the new management can sustain the current quarters’ performance over FY22-23 and achieve its target SSSG growth of 9-11% in the near term.

• Sharda Cropchem: This agrochemicals company’s stock is on fire after it announced its Q3FY22 results that saw its consolidated net profit more than double to Rs 102.2 crore on a 1.8X rise in revenues to nearly Rs 880 crore. The company announced its results on Saturday, and when trade opened after the weekend on Monday, the stock was up 17% and touched a 52-week high. Then on Thursday, breached this 52-week high and touched a lifetime high of Rs 577.85. This upmove made the company’s stock the most overbought among the Nifty 500 companies according to technical indicators like MFI and RSI.