1. ACC: This Holcim Group company’s stock zoomed 7.4% post-results  despite reporting a close to 30% YoY fall in its Q1 2022 net profit at Rs 396.3 crore. Revenues grew at a tepid 3% YoY, driven mainly by higher sales realisations. However, fuel and power costs rose by over 33% YoY, which ultimately hit its bottomline. The company managed to reduce its per tonne freight and forwarding expenses by 1% YoY in Q4 due to cost optimisation. Analysts at Axis Securities and Motilal Oswal are particularly positive on this cement company as they believe that its upcoming capex project (3.2 million tonnes) in Central India will boost the sales volume growth in FY23.

There was also a report of a possible exit by its parent company Holcim from India. Holcim Group has already exited the cement sector in Indonesia, Malaysia, Singapore and Brazil to reduce its carbon footprint. And if reports are to be believed, Holcim is in early-stage talks with JSW Group and Adani Group for a possible deal. Both ACC and Ambuja Cement could be re-rated if this deal goes through, especially since they are among the top five cement brands in India. ACC (alongwith Ambuja) could command higher valuations at the time of sale. Additionally, Holcim was very slow in expanding cement capacities in India, which led to a loss of market share for both these companies in the last 10 years. A change of guard could very well revive the fortunes of ACC and Ambuja Cement.

2. AU Small Finance Bank: This bank stock touched an all-time high of Rs 1,465.95 this week after it announced that it is considering a bonus issue. The stock outperformed Bank Nifty by 22% this month. The bank started to see a revival in growth from Q3FY22 as the economy opened up, as a majority of its lending business is linked to vehicles, business and housing. With demand recovering as the economy normalised, the bank has reorganised itself into 10 SBUs (strategic business units) to improve operational efficiency and scalability to capitalise on the recovery. The bank has a large retail dominated, secured and diversified loan book that is risk-free and ideally placed to take advantage of the economic upturn.

Its Q4FY22 total deposits rose 46% YoY to Rs 52,585 crore, and the cost of funds fell 80 bps YoY to 5.7%, due to consistent improvement in deposits. The loan AUM (assets under management) rose 27% YoY to Rs 47,843 crore as credit demand continued to rise due to improving sentiment on the ground. The bank saw sustained improvement in its asset quality as customers' cash flows improved during Q4FY22.

The bank is working on scaling up its digital banking services to expand into newer markets. It is expected to post robust numbers in Q4FY22, as brokerages like Motilal Oswal expect the net profit of the company to rise 87.6% YoY to Rs 316.9 crore, and Kotak Equities expects profit to grow by 200% YoY.

3. Angel One: This stock rose 17.5% on Thursday after it announced its Q4FY22 results. Angel One’s profit jumped 2.1X YoY in Q4FY22 to Rs 204.7 crore and revenues increased by 63.6% to Rs 685.3 crore. This sharp rise in net profit is due to the operating profit margin rising 6.5% YoY to 42.46%. The company is leveraging its scalable digital business model to keep costs lower. Though the number of clients jumped 2.4X YoY to 92 lakh in Q4FY22, the company reported its lowest average revenue per client (ARPC). ARPC fell 23.7% YoY to Rs 513. ARPC is on a downtrend from Q4FY21, representing intense competition in the brokerage businesses.

The company is benefitting from a sharp rise in demat accounts in India. Demat accounts grew 63.6% YoY in FY22 to 9 crore, with penetration in India increasing by 230 bps to 6.4%.  However, this high growth may not be sustainable as a major factor that affects demat account growth and penetration is the nature of the capital markets. In FY21 and FY22, Nifty 50 rose 71% and 19% respectively, helping the growth of demat accounts. This may change in FY23.

ICICI Securities maintained its ‘Buy’ rating on Angel One and increased the target price by 17.4% to Rs 2,230. The brokerage has a positive outlook on the company as its number of orders grew 83% YoY to 14.7 lakh in Q4FY22. ICICI Sec expects Angel One’s profit to grow at a 15% CAGR over FY22-24. 

4. Larsen & Toubro Infotech: This IT services company’s stock fell for two consecutive sessions since it declared its Q4FY22 earnings. Although the company’s revenues increased 4% QoQ to Rs 4,301 crore, this was below expectations of brokerages like Motilal Oswal, BOB Capital Markets (BOB Caps), ICICI Securities, among others. Revenue grew across all segments of the company with Consumer Packed Goods, Pharma, Retail segments growing the most at 6.2% QoQ to Rs 717.5 crore. However, BOB Caps believes that muted growth in banking and financial services (2.8% QoQ), and manufacturing (2.5% QoQ) led to the company missing its revenue estimates.

The Q4 results brought out mixed reactions from analysts. Motilal Oswal and ICICI Direct maintained their ‘Neutral’ stance on the stock as rising on-site attrition and salary hikes in Q1FY23 may affect EBIT margin by almost 290 bps. EBIT margins in Q4FY22 fell 64 bps QoQ to 17.3% because of lower working days in the quarter and a better revenue mix.

However, BOB Caps maintains its ‘Buy’ rating as it expects robust demand and large-deal pipeline to drive profit margin by 14-15% in FY23. According to its reports, the company bagged three big deals with Fortune 500 clients worth US$ 2 billion.

5. VRL Logistics: This transport company’s stock touched a new 52-week high on Thursday, gaining more than 8% after it announced an MoU (memorandum of understanding) with Ratna Cements. The company is planning to sell its wind power undertaking on a slump sale basis for Rs 48 crore to focus on the goods transport business. This comes after the company announced a capex plan of Rs 560 crore to buy 1,600 trucks to increase its carrying capacity to 25,000 tonnes.

The company’s balance sheet and cash flows are strong enough to manage its capex funding along with taking on an additional debt of around Rs 300 crore. While VRL’s current fleet capacity stands at 69,000 tonnes, once the capex plans are executed the net addition in capacity will be close to 20%. This will help the company increase its volumes by 15-20% in FY23.

Another reason for capex infusion is the new government vehicle scraping norms, which require the scrapping of the older fleet. With economic activities picking up VRL will need enough fleet to meet rising demand.

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