1. Chennai Petroleum Corporation: This refinery company outperformed the Nifty 50 index by a whopping 88% in the past month, and by 22% in the past week. Moreover, last month, Superstar investor Dolly Khanna bought 10 lakh shares or 0.7% stake in this company worth Rs 26.3 crore. Even FIIs steadily increased their holdings in the company to 3.37% in Q4FY22 from 1.33% in Q2FY22. So, what exactly fueled the recent rally for this oil refining company?

Chennai Petroleum Corp saw a 4.3X jump in its Q4 net profits at Rs 994.4 crore driven by an 88% YoY rise in its revenues at Rs 16,427 crore. This company is a pure-play crude oil refining company and is not involved in marketing of downstream petroleum products. While its refining throughput rose by 10% YoY to 2.91 million metric tonne in Q4FY22, a 2.2X jump in gross refining margins (GRMs) played the real magic. Average GRMs rose to $14.18/bbl from $6.4/bbl in Q4FY21. Notably, Singapore GRMs were trading at $7.8/bbl levels in Q4FY22. In fact, it rose to $17/bbl levels in April backed by robust demand for refined petroleum products and supply constraints. According to Moody’s, global sanctions on Russia led to higher offtake of Asian fuels as European countries sought other alternatives. Additionally, supply fell owing to lower exports from China and due to significant refinery closures. According to the International Energy Agency, crude oil throughput in April 2022 fell by 1.4 metric barrels/day to 78 metric barrels/day, lowest since May 2021.

Interestingly, every dollar of GRM expansion can potentially add Rs 700-800 crore to the topline of an oil refining company. Hence, amid a tight supply situation, GRMs will stay buoyant and lead to oil refineries earning windfall gains at least in Q1FY23.

2. Lupin: This pharmaceutical company’s stock fell over 7% on Thursday after it announced its Q4FY22 results. Lupin posted a loss of Rs 518 crore in Q4FY22 against a profit of Rs 460 crore in the same quarter previous year. However, revenues increased 2.8% YoY to Rs 3,864.5 crore in Q4FY22.

As the company is not consistent in posting profits, it shows up in the screener that lists stocks that are seeing big swings between profit and loss in quarterly results.

The drug-maker posted losses in Q4FY22 as its EBITDA margin fell by 13.1 percentage points YoY to 7.3% mainly due to an increase in raw material costs and manufacturing expenses. Raw material costs rose 23.9% YoY to Rs 1,317.6 crore and manufacturing expenses increased by 18.2% to Rs 1,117.8 crore. Also, an impairment expense on its acquisition of Gavis IP of Rs 130 crore and a rise in deferred taxes contributed to losses in Q4FY22.

High raw material and manufacturing costs come at a time when the US markets are already under pricing pressure amid intense competition. This is putting further pressure on margins. Lupin was affected more by this as it derives a majority (over 37%) of its revenues from the US markets. The company’s revenue from US markets fell 5.3% YoY to Rs 14,162. However, its revenue from India increased 5% YoY to Rs 13,511. But this seems lower when compared to its peers. Cipla’s and Dr Reddy’s revenue from the Indian market grew 25% and 15% YoY respectively in Q4FY22. In fact, Cipla outperforms Lupin in YoY and QoQ profit growth, price to earnings ratio, and foreign institutional investors or FII holding.

3. Kotak Mahindra Bank: This bank’s stock outperformed the Nifty 500 index this week after it announced its Q4FY22 results. According to reports, Kotak Mahindra Bank recently made it to the top 10 most valuable companies, replacing Adani Green Energy at the tenth position. It is the fourth bank to enter the elite club after HDFC Bank, ICICI Bank, and State Bank of India. However, thanks to the bearish market, the stock fell more than 3% on the bourses on Thursday. The bank posted robust growth in net profit and maintained stable asset quality.

Net profit was up 64.5% YoY to Rs 2,767 crore with net interest income rising by 17.7% YoY to Rs 4,521 crore. Total advances for the bank also grew 21% YoY to Rs 2.7 lakh crore as businesses picked up pace after the third wave of Covid. Among the loan segments, the corporate loan demand is expected to increase. The management also plans to increase capex in this segment to meet rising demand. Also, the management thinks that an increase in repo rates by the Reserve Bank of India will not hamper credit growth.

Operating expenses increased 26.1% YoY to Rs 3,007.8 crore keeping the operating profit growth flat at 1.2% YoY to Rs 3,340 crore. The increase in expenses is because of the rise in spending on digital and promotional expenses. The management plans to  continue its growth plans even if costs run high in the near term.

4. Aditya Birla Capital: This Aditya Birla Group’s holding company’s stock tanked 5% on Monday because of reports of a whistleblower accusing the former CEO of the Aditya Birla Group Ajay Srinivasan of insider trading. This shook investors confidence as it is similar to allegations made for fund managers who were sacked at Axis Mutual Fund. The company, however, denied the allegations against Srinivasan of insider trading and frontrunning in stocks at Aditya Birla Sun Life AMC (mutual fund arm of Aditya Birla). The management asked Srinivasan to step down as the CEO, according to the BSE filing dated April 23, 2022, as the company says that it is looking to settle him into a new role. The management explicitly maintains its stance that this is in no way related to the allegations made against him, according to reports. Vishakha Muley will replace him as the CEO of Aditya Birla Capital starting from June 1, 2022.

According to reports, the Securities and Exchange Board of India (SEBI) is investigating both Aditya Birla Capital and Aditya Birla Sun Life AMC for the alleged wrongdoings.

5. Indraprastha Gas: This city gas distributor’s stock plunged 6% in trade on Thursday, despite its Q4FY22 net profit rising 14.9% YoY to Rs 430.9 crore to beat Trendlyne’s Forecaster estimates by 8.4%. The company also showed up on this screener which lists companies that saw their net profit rising QoQ and YoY in Q4FY22. However, it looks like the company’s robust performance led by rise in sales volume and price hikes were not enough to escape the bearish sentiment in the market.

In the last 6 months the price of CNG for automobiles has been hiked 40.6% to Rs 73.61 per kg in the Delhi-NCR region, with the latest price hike coming in on Monday. The Managing Director of Indraprastha Gas expects gas prices to remain high for the coming quarters due to geopolitical tensions and supply constraints.

Furthermore, the government’s amendment to its gas allocation policy to city gas distributors (CGD), which makes GAIL (Gas Authority of India) responsible for providing gas to CGDs and gas prices will be uniform for all CGDs. With the amendment in place, domestic gas supply to CGDs will increase every quarter instead of every six months. The management expects this amendment to improve domestic gas supply and decrease raw material costs for the company. It will also lead to a reduction in sourcing of gas from the international spot market. This amendment took effect from May 16, 2022.

The management expects the volumes of CNG to rise 20%, driven by robust demand for CNG vehicles in FY23. It also expects to keep its margins stable through price hikes in the coming quarters.

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