1. Bajaj Finance: This NBFC’s stock fell on the bourses despite robust Q4FY22 results. The company’s net profit surged 80% YoY to Rs 2,419.5 crore, in line with Trendlyne’s Forecaster estimates. Asset quality improved as gross NPAs fell 19 bps YoY to 1.6%. Total AUM (assets under management) has seen a rise of 29% YoY to Rs 1.97 lakh crore. These numbers however, did not enthuse investors or even brokerages.

HDFC Securities increased its target price marginally by 0.2% to Rs 6,430, on account of lower credit costs. However, it maintained its ‘Sell’ rating because of Bajaj Finance’s higher operating expenses. Operating expenses for the company rose 30.7% YoY to Rs 2,100.6 crore. The brokerage believes that operating expenses will be a cause of concern throughout FY23 affecting net interest margin (NIM). NIM fell 20 bps to 12.8% in Q4FY22.

Motilal Oswal expects NIMs growth trajectory to remain affected in face of increasing borrowing costs. NIMs weren’t affected much in Q4FY22 because of the excess liquidity Bajaj Finance carried. The brokerage also expects operating expenses to remain elevated due to investments in tech (Phase-2 of digital transformation) and investment in human capital. However, it expects the NBFC to deliver an RoA (return on assets) of 4.2-4.4% over FY23-24.

2. Cyient: This IT Services company’s stock rose 10% after it announced its Q4FY22 results. Cyient’s net profit rose 17% QoQ to Rs 154.2 crore, beating the Trendlyne’s Forecaster estimates by 20.7%. Revenues increased by 2% QoQ to Rs 1,320.6 crore and operating profit margin of the company rose marginally by 8 bps QoQ to 17.98%. The company derives over 83% of its revenues from the services segment. This segment grew marginally by 1.5% QoQ driven by aerospace, portfolio, and communications verticals. Revenue from the design-led manufacturing (DLM) segment fell 8.5% YoY to Rs 197.6 crore due to semiconductor supply-side challenges, which are expected to persist in FY23. 

Cyient’s revenue is heavily concentrated in aerospace, rail transportation, and communication segments. To diversify its revenues, the company signed an agreement to acquire a 100% stake in Citec for 94 million euros (around Rs 800 crore) in an all-cash deal on April 25. Citec is expected to help Cyient diversify its presence in energy, industrial and plant engineering (EIP), which currently accounts for 2% of its revenues. In addition to this, Cyient also announced that it will acquire Grit Consulting for about Rs 283 crore ($37 million) on Thursday. Grit Consulting is a Singapore-based consulting firm with expertise in asset-intensive industries like metal mining and energy.

ICICI Securities maintained its ‘Buy’ rating after the Citec acquisition was announced, it believes the acquisition will reduce the revenue cyclicality by diversifying the revenue mix. However, ICICISec expects Cyient to face difficulty cross-selling in new geographies as more than 75% of Citec’s revenue comes from Finland and Sweden.

3. Hindustan Unilever (HUL): This FMCG stock gained the most in the last few weeks, in spite of analysts cutting their target prices. HUL’s Q4FY22 results have been in line with Trendlyne’s Forecaster estimates. However, its Q4 results did not impress analysts. Net profit grew 5% YoY to Rs 2,307 crore, and revenue rose 10.2% YoY (Rs 13,846 crore) helped by hike in prices.

Brokerages like Axis Securities, Motilal Oswal, ICICI Securities, and HDFC Securities have slashed their target prices for HUL because of slowdown in rural demand, input cost inflation, and delay in demand recovery. With the ongoing geopolitical tensions in Europe, rising commodity prices have further added to the woes of consumer facing companies hitting their gross margins. HUL’s gross margins fell 300 bps YoY to 49.5% in Q4FY22. ICICI Direct expects inflation woes to drag profit and margins in FY23-24 hence cutting its earnings estimate for the company by 10%.

4. KPIT Technologies: This IT services company’s stock rose by 12.5% on Wednesday after it declared its Q4FY22 results. The company’s net profit rose 14.6% QoQ to Rs 80.5 crore and revenue rose 5.3% to Rs 664.8 crore, in line with Trendlyne’s Forecaster estimates. Revenue growth was led by autonomous and connected domains across commercial vehicles (8% QoQ) and passenger vehicles (2.4% QoQ). Even with supply-side constraints and fresher additions, EBITDA margin improved by 15 bps QoQ to 18.6%, led by offshoring. Offshoring consistently increased in FY22, rising by 10% YoY over FY21, and resulting in higher volume growth and improved margins. The management expects offshoring to continue to increase, which will offset the impact of wage inflation and supply-side constraints in FY23.

The software company won a $74 million deal with a European OEM (original equipment manufacturer), and the management expects 80% of the revenue to be delivered over the next 5 years. Total deals won during Q4FY22 stand at $125 million (excluding the $74 million deal with the European OEM). KPIT Technologies is solely engaged in automotive software integration and its domain expertise makes it a niche player in the market. This makes it well placed to benefit from the increased R&D (research and development) spend on CASE (connected, autonomous, shared, electric) vehicles by OEMs. The management expects revenue growth of 18-21% YoY CC (constant currency), and EBITDA margin in the range of 18-19% for FY23.

5. Varun Beverages: This PepsiCo bottling company’s stock rose 4% intra-day on Thursday after it announced its Q4FY22 results. Its net profit rose 98.2% YoY to Rs 271.1 crore and revenue grew 26.2% YoY to Rs 2,867.5 crore. The sharp rise in net profit was driven by improvement in margins, reduction in finance costs, and higher profitability from international markets. With the scorching heat wave in India, demand is expected to spike in the peak months of April-June. The management believes it is well-placed to cater to the surge in demand and expects to optimize its capacity utilization across all plants and enhance its reach across established and underpenetrated markets during the peak months. The company plans to expand into underpenetrated markets like Bihar, Odisha, Chhattisgarh, Jharkhand, and Madhya Pradesh, where per capita consumption is low. The company commissioned a manufacturing plant in Bihar this quarter to expand its manufacturing presence in the underpenetrated market where it sees a huge potential to gain market share. For medium to long-term, the management expects to deliver a healthy volume growth on the back of an improving demand environment.

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