1. Campus Activewear: This footwear company touched an all-time high of Rs 617.95 on Wednesday, and gained 59.7% over the past 90 days. The uptick in the stock comes on the back of a robust business outlook. The management believes that the Indian sports & athleisure (S&A) footwear market is underpenetrated, and this provides it with an opportunity to expand.
   
   Within the retail industry, the footwear segment is expected to be one of the fastest-growing. According to reports, the S&A footwear market in India is expected to grow at a CAGR of 21%, beating the overall footwear industry’s CAGR of 17% in FY22-25. The optimism around the stock is due to the fact that it is the only listed company in the S&A footwear space in India. As of FY21, the company commanded a 17% market share in the branded S&A market in India.

The company also performed well in Q1FY23 - its net profit surged 10.9X YoY and revenue jumped 2.5X YoY on the back of sales volumes increasing 2.4X YoY. Trendlyne’s Forecaster estimates the company’s net profit to grow by 30.9% in FY23. The company also shows up on the screener which lists businesses with low debt.  

Campus Activewear’s key advantage is that its average selling price is significantly cheaper than its competitors. According to Motilal Oswal, given its wide product portfolio, competitive pricing, and wide-distribution network the company looks well poised to make massive market share gains.  

2. JSW Steel: This steel stock released its production numbers for Q2FY23, where its crude steel production increased 12% YoY to 5.6 million tonnes but decreased sequentially by 3%. The reduction in volumes QoQ is because of a 73% fall in the production of JSW Ispat Special Products, because of maintenance shutdowns. Also, market conditions are not conducive for the company’s USA unit, and it reported a 48% fall in volumes. The management also says that logistics issues and underutilization of capacity at some plant locations in India are other reasons for a fall in total production levels.

The company also reports a sharp decline in exports. This is because of the 15%-45% export duty imposed on various types of steel in May. Steel companies were expecting an early end to the export duties levied by the Centre, according to reports, but it looks like they will have to wait until the next Union budget for duty cuts. 

This is because while steel prices fell in May, June, and July, it started rising again in August, causing a hiccup in the duty cuts as the Centre wants more data to understand the metal’s demand-supply dynamics before making a final decision. Since the demand in the domestic market is low and inventory levels for steel companies are high, the removal of export duty may help steel companies tap into the global markets.

On the positive side, reports suggest that JSW steel has capex plans worth $1 billion to build a specialty steel manufacturing unit in India in partnership with Japan’s JFE Steel. This will largely help India reduce its import dependency on electric steel.

In terms of the sector outlook, the Nifty Metal index made it through the ‘golden cross’ on September 22. The golden cross indicates a stock’s  50-day moving average crossing above  the 200-day moving average. This means there is improving sentiment around that stock, or in this case, the Nifty metal index. Reports suggest the Nifty metal index has the potential of rising further by 11%. This could bode well for all metal stocks in the metal universe. JSW Steel shows up on a screener that lists stocks with consistent returns over the last five years.

3. One97 Communications (Paytm): This internet software company’s stock rose consecutively from September 30 to October 10, until the markets went on a downtrend. The rise comes with JP Morgan maintaining an ‘overweight’ stance on the stock. The brokerage expects the stock to regain its Rs 1,000 mark by March 2023 and expects Paytm’s losses to narrow down in Q2FY23. In terms of business, it expects its annual loan disbursements to reach Rs 29,000 crore with an improved penetration into the market by 4%. It also expects Paytm’s margins to improve and processing costs to rationalise in FY23. In its Q2FY23 business update Paytm did record an increase in its value of loan disbursements by 482% YoY to Rs 7,313 crore. Its monthly transacting users were also up 39% YoY. But asset quality trends on its disbursements are so far unclear. 

Goldman Sachs also has a positive recommendation for the stock. It expects the stock to go up by 112% in a bull case, which is pretty significant given that the stock is currently trading at 64% below its issue price. 

Another danger for the stock is the end of the lock-in period on November 18. Given the history of IPOs like Zomato where the stock plunged once its lock-in period ended, Paytm will have to deliver good results to keep up investor faith and may need to plan for an exit strategy like PB Fintech (Policybazaar) where it plans to line up buyers for its shares to avoid a Zomato-like situation, according to reports. Policybazaar’s lock-in period also ends in November. 

4. TVS Motors Company: The market capitalization of this two-wheeler maker surpassed that of market leader Hero MotoCorp on October 12. This is despite the fact that its net profits in FY22 were only one-third of Hero’s profit figure. The company’s stock also outperformed its industry by over seven percentage points in the past month. 

TVS Motors’ two-wheeler wholesales have grown at a compounded rate of nearly 10% in the past six quarters, much faster than that of Hero MotoCorp and Bajaj Auto. In fact, its two-wheeler wholesales for Q2FY23 rose in double-digits YoY while others saw a minor fall. Robust domestic sales drove the Q2 volumes for TVS, making up for the YoY fall in exports. Additionally, its focus on premium brands like Apache, Ntorq, and Ronin contributed to its healthy volumes. 

On the other hand, Hero’s volume growth suffered owing to its reliance on the entry-level segment which basically consists of motorbikes with 100 CC engines. Customers in this segment mainly belong to the rural and semi-urban regions and are highly price-sensitive. Demand from rural parts of India is still muted on account of inflationary pressures.

TVS Motors has plans to launch new electric two-wheeler models in the coming quarters. It also looks to ramp up the production capacity of its existing electric brand ‘iQube’ to 10,000 units per month very soon and then to 25,000 units per month. K N Radhakrishnan, CEO of TVS Motors, is quite confident of the demand trends in this festive season. According to consensus estimates of analysts, the company’s earnings may jump by over 35% in FY23 backed by strong sales. Investors should also watch out for the possible inclusion of TVS Motors in the MSCI Index from November 2022. 

5. Sobha: This realty company’s share price fell over 3.4% on Tuesday after it released its September business update. Sobha’s share price fell despite its total sales volume rising 13% YoY in September on the back of increased demand for residential and office spaces in Q2FY23. This was mainly due to a 20% sales volume rise in its Bengaluru market, which contributes over 75% of total volumes.

The fall in share price could be due to total sales volume declining by 0.9% QoQ. In addition, mortgage rates are rising in line with interest rates since May. The Reserve Bank of India has raised the repo rate by 190 bps since May to 5.9% and is expected to continue with its tight monetary policy. The company’s stock has fallen by around 30% in 2022, underperforming Nifty Realty by nearly 18%. With such a fall in share price, it comes up in the screener that shows companies with weak momentum scores. Notably, Sobha’s promoter pledging increased by 6.6% in Q1FY23 to 20.3%.

However, ICICI Securities has a positive outlook on the company due to strong H1FY23 performance despite rising mortgage rates and a strong launch pipeline. Post Sobha’s business update announcement, the brokerage retained its ‘Buy’ rating with a target price of Rs 808, indicating a 26.7% upside. However, the stock is currently in the sell zone as it has traded 86% of the days below its current price-to-earnings ratio. 

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