- Vinati Organics: This chemical manufacturer company’s stock rose 3.2% intraday on Thursday after the company announced capex plans of Rs 580 crore. Out of this, Rs 300 crore is set aside to expand the manufacturing capacity of 2-acrylamindo 2-methylpropane sulfonic acid (ATBS) from 40,000 metric tonnes to 60,000 metric tonnes. This will be funded through internal accruals and is expected to be commissioned by December 2023. The remaining part of the Rs 580 crore capex (Rs 280 crore) is planned to be invested in Vinati Organics’ arm Veeral Organics for the manufacturing of products like Guaiacol and Iso Amylene. These products are used in polymerization inhibitors, flavors, fragrances, pharmaceuticals, and pesticides.
The ATBS segment contributed 40% of the total revenues in FY22 and Vinati Organics has a market share of 80% in this segment. With this expansion, it looks to further increase the market share in this space. In Q4FY22, the chemical manufacturer posted its highest-ever revenue of Rs 501 crore on the back of strong demand in the ATBS segment. Its five-year revenue CAGR till FY22 was 21% at the end of FY22. This helped the company enter this screener that lists companies with good financials, high returns, and high return on equity. In addition, mutual funds also increased their holdings in the past month.
- FSN E-Commerce Ventures (Nykaa): This e-commerce company held an investor and analyst day on Thursday where it outlined its future. Its stock rose 5.6% on Thursday with its average delivery volumes this week rising above its monthly average.
During the investor and analyst discussions, Nykaa emphasized its plan to diversify its product mix. Women’s products contributed 100% of its gross merchandise value (GMV) in FY20 whereas, in FY22, it constitutes 76% with men’s products GMV rising 17%. In addition, Nykaa is focusing on an omnichannel strategy and expanding its physical store footprint. The company’s physical store count now stands at 105 across 49 cities in FY22 against 34 across 21 cities in FY19. Physical stores’ GMV share also increased from 4.5% of GMV in FY19 to 6.6% in FY22. The management believes that there’s a big opportunity in this segment and plans to expand both footprint and store concentration within cities. The company is also increasing its warehouse capacity - in FY22, its warehouse capacity rose 40% YoY to 8.2 lakh square feet, enabling the average order to delivery time to reduce to 2.8 days against 3.5 days in FY21.
Despite a consistent YoY quarterly revenue growth in the past four quarters, a slowdown in key discretionary categories due to elevated inflation levels can impact Nykaa in the short term.
- Chambal Fertilisers & Chemicals: This fertiliser company’s promoter entities’ pledged shares are rising over the past 4-6 weeks. Zuari Industries (earlier Zuari Global), Simon India and Master Exchange & Finance pledged shares equal to 3.35% stake in the company after April 28. All of these pledges are for loans taken by these promoter entities for investments in other KK Birla Group companies. This comes after the company’s stock hit a lifetime high of Rs 516 on April 19 before the Indian markets entered the current downtrend.
On April 20, lenders released the pledge on around 0.08% of shares held in the company by Zuari Industries. But as the company’s stock lost nearly 46% of its value over the past 6-9 weeks, the four promoter group entities started pledging more shares to lenders as collateral for the loans they raised. This brings the proportion of promoters’ pledged shares out of the total shares of the company to 14.75%. Out of the promoters’ shareholding of 60.46%, the pledged proportion of their shareholding is now at 24.4%, up from 18.86% at the end of March 2022.
- InterGlobe Aviation: This airline’s market share in the domestic market rose in May by 261 bps to 57.9% YoY, and the number of passengers carried rose nearly 6X to 69.9 lakh passengers. This exponential rise is mainly due to a lower base in May last year when travel restrictions were in place. On an MoM basis, the airline saw a 9% rise in the number of passengers carried, but its market share fell by 42 bps. The airline’s passenger load factor rose by 230 bps MoM and by 29.8 percentage points YoY to 81% in May. The company saw demand for air travel rise despite an increase in ticket prices.
Although demand for air travel is growing, elevated aviation turbine fuel (ATF) costs will continue to hurt the company’s margins. The company’s margins will be under pressure in Q1FY23 as well, due to rising fuel costs and the depreciating rupee according to Prabhudas Lilladher. In Q4FY22, the company’s total debt rose 23.5% YoY to Rs 36,877.8 crore and shows up on this screener for companies that have high-interest payments compared to earnings on a yearly basis.
In FY23, the management expects that capacity deployment could grow by 55- 60%, largely led by an increase in operations. Over the long term, the management expects demand to grow on the back of a recovery in domestic and international travel, an increase in cargo volumes, and a reduction in commodity costs.
- Vedanta: This mining company’s stock fell 12% in intraday trade on Monday after the company put on sale its arm Sterlite Copper’s plant in Tamil Nadu. It invited expression of interest (EoI) for its Tuticorin-based smelter, which has been shut since mid-2018 following a Tamil Nadu government order. After facing several legal and political hurdles in trying to reopen the smelting plant the company has decided to sell. The smelter accounted for 40% of India’s copper output before it was shut over alleged violations of environmental norms.
Although the company’s stock has had a rough time in the market over the past month, the street still has a positive outlook on it. The stock shows up in a screener with companies that have a high analyst rating with at least a 20% upside. Going forward, Vedanta announced a capex of $2 billion for FY23, primarily focusing on the vertical integration of its aluminium business.
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