1. KPIT Technologies: This IT Consulting & Software company fell nearly 7% in intraday trade on Wednesday after announcing its Q2FY23 results but recovered to close only 1.7% lower. The company’s net profit in Q2 declined 2.3% QoQ despite its revenue rising 8.6% QoQ. The fall in profitability is due to rising employee benefit costs and other expenses, which also led to a decline in its EBIT margin by 90 bps QoQ to 14.2%. The stock makes it to the screener for companies with revenues rising sequentially over the past eight quarters.

The recovery in the stock price despite its weak Q2 performance is due to the management raising its revenue guidance for FY23. It revised the organic revenue growth guidance to 23% from 18-21% and the constant currency (CC) revenue growth guidance to 31-32% for FY23. The management’s revenue guidance seems to be higher than the street’s expectations as Trendlyne’s Forecaster estimates the company’s revenue to grow by 20.7% in FY23.

The management expects organic growth across all its business segments, led by strategic clients. It is especially optimistic about the demand from vehicle manufacturers as they are heavily focusing on software-defined vehicles, which augurs well for the company. The software firm bagged new deals with a total contract value (TCV) of $142 million in Q2. The CEO and Managing Director, Kishor Patil cites a healthy order pipeline and expectation of winning more deals in the next 3-4 months for increasing the revenue guidance for FY23. Along with the anticipation of higher demand, the company also expects attrition rates to fall in the coming quarters.

2. Polycab India: This consumer durables stock touched its 52-week high on Wednesday after it reported an increase in net profit by 37% to Rs 270.5 crore in Q2FY23. Despite falling commodity prices and inflationary pressures, revenue was up 11% YoY on the back of strong volume growth in the cables and wires business. The company’s revenue and net profit beat Trendlyne’s Forecaster estimates by 10.1% and 9.7%, respectively. Its EBITDA margin grew sequentially to 12.8% during the quarter.

ICICI Securities remains optimistic about the company considering its competitive advantages and growth prospects in the consumer durables sector. It raised the target price to Rs 2,700 from Rs 2,250. However, it maintains its ‘Hold’ rating on the stock as it is cautious about the possible increase in input prices.

Polycab shows up on a screener with stocks that have high TTM EPS growth. This is in line with Trendlyne’s Forecaster estimates that expect the company’s EPS to grow by 25.1% in FY23. It also makes it to the screener with stocks that outperformed their sectors in the past month.

3. Ultratech Cement: This cement stock has underperformed its industry by 10.8% in the past 90 days, which is not a surprise given that Q2 is a seasonally weak quarter for the cement industry. However, the stock rose for six consecutive sessions until it declared its Q2FY23 results. Its net profit fell 42.5% YoY to Rs 756 crore dented by high energy costs causing the stock to fall by 1.7% on Thursday. It missed Trendlyne’s Forecaster estimate by 8.5%. But the company reported an increase in net sales by 15.8% YoY.

Although profitability fell, the management expects demand to improve post the festive season. They even gave a double-digit volume growth guidance for FY23-24. The company has capex plans worth Rs 6,000-7,000 crore to be rolled out for FY23 and FY24. Also, an additional capacity of 15.4 million tonne per annum is to be added in H2FY23 increasing total capacity to 131.3 million tonne per annum which will aid revenue growth in the second half of the year. ICICI Direct expects Ultratech’s capacity to grow by nearly 10% CAGR as against the industry capacity growth of 7.2% over the next three years.

Also, with the price hikes taken in September and further hikes expected post-Diwali, the company’s EBITDA earnings are likely to improve. IDBI Capital expects EBITDA to improve by 2-10% in FY23-24.

The only hindrance to growth lies with the high energy costs. Pet coke – a key raw material, saw a fall in its prices to $170 per tonne in Q1FY23. But prices have again increased to $205 per tonne. Imported coal prices are still high. And although crude prices cooled off a bit, the prices are likely to hover around $90 per barrel because of production cuts taken by OPEC. Ultratech Cement’s management expects fuel costs to fall in H2FY23 but remains cautious given the volatility and tightening crude oil supplies. Despite these risks, Forecaster’s consensus estimate shows 36 analysts recommending a ‘Buy’ on the stock.

4. Tata Elxsi: The stock of this engineering, research and development player fell nearly 13% since it declared its Q2FY23 results on October 14. This is despite the fact that the company saw strong sequential growth of nearly 5% and YoY growth of over 25% in its revenues. The ER&D player, however, disappointed investors on the earnings front. Its net profits fell nearly 6% on a QoQ basis owing to the sharp compression in margins.

Tata Elxsi saw its EBITDA margins contract by nearly three percentage points sequentially in Q2FY23. The company went on a fresh hiring spree and onboarded the highest-ever no. of employees in Q2. Tata Elxsi also had to make investments in building a new leadership team at the mid-and senior-management levels as it was facing a supply crunch there. These factors coupled with the expansion of facilities at centres like Bengaluru, Chennai and Pune caused a material fall in its EBITDA margins. This ultimately weighed negatively on the bottom line of the company. Tata Elxsi missed the consensus estimates of analysts on Q2 net profits by nearly 7%. Since its PE valuations are also pricey at 69X, the market came down heavily on the stock. The concerns on the cost and supply front are not the only factors worrying the investors.

While Tata Elxsi witnessed strong sequential growth in its transportation and healthcare segment, its media and communication segment was essentially flat. According to the management, media clients in the US and Europe deferred decisions to sign new deals to a later time. Key clients are now on a wait-and-watch mode and are being a little careful with their R&D spends. Notably, the media segment contributes over 35% share to the company’s revenues. Hence, the slowdown in this segment has spooked investors even though the outlook for transportation and healthcare segments continues to be robust.

5. PVR: This multiplex operator’s share price fell marginally on Monday after it announced its Q2FY23 results. PVR’s net losses narrowed to Rs 71.2 crore from Rs 153.1 crore in Q2FY22 with its revenue jumping 5.7X YoY. But this did not excite the investors as both revenue and net profit missed Trendlyne’s Forecaster estimates.

PVR’s lower-than-expected earnings could be attributed to the underperformance of Bollywood movies in Q2. The average gross collection of the top five Bollywood movies for PVR dropped by 37% to Rs 25.6 crore over the pre-pandemic base (Q2FY20). Regional movies’ contribution rose to 44% in Q2FY23 against 28% in Q2FY20. This outperformance of regional movies vs Bollywood movies could diversify the genre and regional risk for multiplex operators. However, footfalls overall were 39% lower than a comparable pre-COVID quarter. But the management is focused on improving admissions back to cinema halls and expects a full recovery in footfalls to pre-Covid levels by the end of FY23.

Despite a revenue miss in Q2, brokerages maintain a positive outlook on PVR on the back of a strong content slate in the near term. The company shows up in the screener that lists stocks with high analyst ratings with at least a 20% upside. Investors are also looking ahead to PVR’s merger with Inox Leisure, which is expected to be completed in three months. Inox’s revenue jumped nearly 8X in Q2FY23. According to Trendlyne’s comparison tool, Inox outperforms PVR on 27 out of 40 parameters including YoY revenue and net profit growth.

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