1. MindTree: This mid-tier IT services company’s stock fell nearly 4% on Thursday, despite an over 5% sequential revenue growth on a constant currency basis in Q1FY23. In fact, its revenue in rupee terms rose over 7.5% QoQ to Rs 3,121.1 crore. This is the eighth consecutive quarter of sequential revenue growth. Still, its stock took a beating.

What particularly stood out in Mindtree’s Q1FY23 results was the expansion in its EBIT margin by 30 bps QoQ to 19.2%. This is especially commendable in an environment where tier-I IT companies like TCS and HCL Technologies reported a contraction of 190 bps and 100 bps QoQ, respectively in the same quarter. Mindtree’s focus on mining its accounts, especially its top 100 customers aided both revenue growth and margin improvement for the company, according to its management. Basically, Mindtree laid emphasis on extracting more business from its existing clients at reasonable margin levels.

Revenues from North America grew over 8% QoQ (75% of revenue) in Q1FY23. But investors are fretting over a slowdown in the US and other western countries. This led the  Nifty IT index to fall by over 1.5% on Thursday as the US’ 40-year high consumer inflation of 9.1% in June exacerbated fears of a recession due to a likely aggressive rate hike by the US Federal Reserve. Additionally, the IMF cut the country’s GDP growth forecast to 2.3% from 2.9% recently. Investors fear an economic slowdown in the US and Europe will slow client spending on discretionary technology upgrades. Understandably, Mindtree’s management remained cautiously optimistic on the growth outlook for H2FY23.

2. Delta Corp: This casino company’s stock has been falling since Superstar Rakesh Jhunjhunwala started selling his stake in the company in early June. That month, Jhunjhunwala sold around 3% stake in the company. The stock tanked 10% and hit a 52-week low of Rs 162.1 on June 16. Junjhunwala and his associates currently hold 3.3% stake in the company, down from 6.17% at the beginning of June. What is bemusing investors is that Jhunjhunwala booked profits ahead of the company swinging back into a net profit of Rs 57.1 crore in Q1FY23 against a loss of Rs 28.9 crore in Q1FY22. Its revenues also jumped 2.3X YoY in Q1FY23.

After Jhunjhunwala’s partial exit from the stock, came the news of its subsidiary–Deltatech Gaming– filing a draft prospectus for an IPO. Deltatech Gaming is planning to raise Rs 550 crore through the IPO. The company plans to use the funds to promote organic growth, do business promotions and strengthen its technology. But there is another headwind that investors might have to contend with. The GST Council is pondering over whether to impose a 28% GST on casinos and online gaming. This will impact Delta Corp’s business. For now, the group of ministers mulling over this issue still stand by their 28% GST rate recommendation, but a decision has been deferred.

3. Aurobindo Pharma (Auro Pharma): This pharmaceutical company withdrew the proposed stake sale of its arm, Eugia Pharma Specialties on Monday, due to valuation differences, according to reports. If the deal had gone through, valued at $3.4-$4 billion, it could have been the largest deal in the injectables businesses in India. Blackstone and Baring PE Asia were the front runners in the proposed deal to buy a stake in Eugia Pharma.

The buyers wanted to split Auro Pharma and spin off the injectables business, Eugia Pharma, into a separately listed company, according to reports. Auro Pharma’s injectables segment, which includes Eugia Pharma, is a major revenue contributor and contributed 26.8% of the total revenue in Q4FY22. Auro Pharma is an export-focused company, deriving over 75% of its revenue from the US and Europe. Given the bleak outlook in the US businesses due to intense competition and weak Q4FY22 results, the company’s stock fell around 42% from its 52-week high and currently trades near its 52-week low.

In FY22, to counter the pricing pressure, the drug maker launched 10 injectable products in the US. According to its FY22 annual report, growing the injectable business continues to be among the top priorities for the company. The management expects the growth momentum in injectables to continue in FY23 despite price erosion on the back of new product launches.

4. PI Industries: This agrochemical company’s stock rose 10.7% over the past month till Thursday, outperforming the Nifty 50 index by 9.7% and the agrochemical industry by 5.9% over the same period. This rise over the past month is most likely due to brokerages like Prabhudas Lilladher and ICICI Direct expecting the company to outperform its industry in FY23 and also benefit from the monsoon season. According to Prabhudas Lilladher, agrochemical companies are expected to see lower growth and margins due to the later-than-expected monsoon and elevated raw material costs. Companies with high exposure to the domestic market are expected to be the worst hit. However, companies like PI Industries which are export-oriented will be able to offset high input costs, added Prabhudas Lilladher. Exports accounted for 75% of the company’s total revenue in Q4FY22. The positive outlook of brokerages on the company is reflected in this screener with Nifty 500 companies that are brokers’ top picks. According to Trendlyne’s Forecaster estimates the company’s net profit and revenue is expected to grow 20.1% YoY and 18.6% YoY in Q1FY23, respectively.

The management gave a revenue guidance of 18-20% for both its exports and domestic revenues in FY23. The company already has a strong export order book of $1.4 billion and expects to bag more orders in FY23. Favourable crop prices in the international market could lead to robust growth in exports in FY23, according to reports. The company’s export CSM (custom synthesis manufacturing) segment contributes 75% to total revenue, allowing the company to easily pass-on raw material prices. This would allow its margins to remain stable as the impact of the sharp rise in raw material prices will be reduced, the management added. The company also increased its capex to Rs 500 crore for FY23, compared to Rs 320 in FY22. This capex increase comes as it plans to increase its plant capacity by 1.5X this fiscal year. The company also plans to expand into the pharmaceutical sector and non-agro chemical segments, through acquisitions and new product launches in FY23.

5. Ceat: This auto tyre company’s stock is rising for four consecutive sessions gaining 9% in the past week. It was also one of the top gainer stocks on Thursday, rising nearly 5% in trade. The company recently launched its ultra-high-performance tyre for the luxury segment. This bodes well for the company as reports suggest luxury car sales are growing in double-digits in 2022. Reports suggest that 17,000 luxury cars were sold in India from January-June in 2022, which is an increase of over 55% from a year ago.

The stock is also rising in anticipation of better Q1FY23 results, which are expected to be released on Wednesday. A report from Nirmal Bang suggests that tyre companies are likely to see single-digit growth in revenue, mostly by 2-4% QoQ because of an increase in OEM (original equipment manufacturing) demand, higher volumes, and price hikes of 2-3% taken in Q1FY23. Also, Nirmal Bang expects that with the increase in two-wheeler demand, OEM sales will go up this quarter. However, margins will still be low in Q1FY23 given commodity cost pressures. As inflation is slightly low and commodity costs have eased, the positive effect on margins is likely to show up in Q2FY23. Trendlyne’s Forecaster estimates show that revenue is expected to grow 2% in Q1FY23 and the company is likely to report an average net profit of Rs 11.8 crore.

This stock also shows up in the screener where mutual funds decreased their holding in the past month. Although the total change in holdings is marginal (0.2% down), the sentiment from investors largely remains mixed. Trendlyne’s Forecaster shows eight analysts recommend a ‘Buy’ on the stock, while five recommend a ‘Sell’, and three recommend to ‘Hold’ the stock.

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