1. Persistent Systems: This IT Consulting & Software company rose 7.5% in trade on Thursday after announcing its Q3FY23 results. Its net profit has improved 8.2% QoQ to Rs 238 crore on the back of falling attrition rates and margin expansion. This healthy performance helped the stock show up in a screener for companies with net profits increasing sequentially for the past four quarters. The stock has a high Trendlyne checklist score of 82.61%.

Its EBIT margin has improved 80 bps QoQ to 15.4% as its employee costs as a percentage of revenue fell by 160 bps QoQ. Also, its attrition rates falling sharply by 210 bps QoQ to 21.6% aided margin expansion. The company’s attrition rates have been consistently falling since touching 26.9% in Q3FY22, on a sequential basis. Its revenue growth of 5.9% QoQ was driven by robust deal wins and growth across all its business verticals. 

Surprisingly, growth in Europe has been robust  at 12.2% QoQ and contributed 9% to the total revenue. This is despite the region being in the midst of an energy crisis. According to reports, this is in line with other major IT companies which have reported robust growth in Europe. The company’s biggest market, North America, accounted for 77.1% of its revenue and grew by only 1.5% QoQ.    

Its total contract value (TCV) has risen 20% QoQ to $440.2 million, with new deals making up 54% of its TCV. According to reports, ICICI Securities believes the company will see growth in the coming quarters, as more than half of its TCV consists of new deals. 

2. Federal Bank: This banking stock has outperformed the Nifty Private Banks index by 3.46% in the past month and rose 5.8% in the past week. The stock reaction was in anticipation of its Q3FY23 results. The results didn’t disappoint - Federal Bank reported the highest-ever quarterly earnings for Q3FY23 and net interest income growth of 27.1% YoY and 11.0% QoQ. Its advances growth is 19% YoY and 4% QoQ. Its total deposits have crossed the Rs 2,00,000-crore milestone, reaching Rs 2,01,425 crore in Q3. This stock shows up in a screener for companies with good quarterly growth in recent results.

In its future outlook, Federal Bank management has guided FY23 with a Return on Asset (RoA) of 1.25-1.3% and a further 10 bps improvement going into FY24. Healthy RoA delivery will be driven by steady margins in the range of 335-340 bps, backed by high-teens credit growth.

According to Axis Direct, growth in new high-yielding products remains robust. Operating expenditures will reduce going forward and margins will improve despite the increase in the cost of funding. HDFC securities says Federal Bank has benefitted from a timing difference in asset/deposit repricing, offsetting higher employee operating expenditure (provision for wage revision) and higher provisions for security receipts. HDFC securities and Axis Direct maintain a ‘Buy’ rating on the stock post-Q3FY23 results. 

3. Metro Brands: This footwear stock rose 2.3% in trade on Tuesday in reaction to the strong results it posted. The company’s net profit has grown 11% YoY to Rs 112 crore in Q3FY23, better than analyst estimates. The stock reaction has been positive and gained nearly 5% in the past week.

The company added 48 stores in this quarter, which is one of the highest-ever store additions to date. The revenue growth comes on the back of retail expansion and a better product mix. Revenue has increased 23.8% YoY in Q3. However, the EBITDA margin has gone down to 34.3% in Q3, a dip of 44 bps YoY due to an increase in staff expenses. In December, the company acquired Cravatex and analysts expect the brand to contribute 5% to the revenue in FY23. The company also shows up in a screener of stocks with improving cash flow for the past two years.

An interesting thing about the footwear industry is that, although rubber prices have fallen, footwear stocks are not attracting investors. Generally, a fall in costs means better earnings for the companies, however, the footwear industry has not been able to garner investor interest. They prefer tyre stocks as their margins are proportional to natural rubber prices, unlike footwear companies. Some reports also suggest that consumers have shifted to cheaper alternatives as inflation affected their spending patterns and the industry is losing its charm.

However, analysts from ICICI Securities maintain a ‘Buy’ on the stock and expect revenue to grow 37% CAGR over FY22-24E.  But increasing competition from regional players and lag in-store addition could be a dampener for growth for Metro Brands if the momentum does not continue in Q4FY23.

4. ICICI Lombard General Insurance Co: This general insurance company fell 4% on Thursday after it reported its Q3FY23 earnings. Though the company’s revenue and net profit have risen YoY, both parameters missed Trendlyne’s Forecaster estimates by 10.4% and 12% respectively. In addition, ICICI Lombard’s gross direct premium income grew 16.9% in Q3, which is lower than the industry growth of 18.1%.

On the other hand, the insurer’s health segment has improved 47.9% YoY in Q3, higher than the industry growth of 34.9%. The health segment continues to be the fastest growing in the general insurance industry, says the Managing Director and CEO, Bhargav Dasgupta. For 9MFY23, the company outperformed its industry in the health insurance segment with 39% growth, he added. Consequently, the health insurance segment’s contribution to the total premium has increased to 26% from 22% YoY earlier.

Whereas the motor insurance segment, which contributes over 40% of the total premium,  grew 10.1% in 9MFY23, as against the 16% growth of the industry.

Post the earnings update, foreign brokerage Morgan Stanley has an ‘Overweight’ rating on the stock. The brokerage says that underwriting loss and investment income are lower than its estimates, but ICICI Lombard’s management has guided for continued investments in the retail health space and a gradual improvement in the return on equity (RoE) to high-teens. The company features in a screener of companies with RoE declining over the past two years.

5. Asian Paints: This furniture, furnishing and paints company has fallen 3.1% as its Q3FY23 net profit missed Forecaster estimates by 4.4%. The company’s revenue has risen marginally by 1.3% and its net profit increased by 5.6% YoY to Rs 1,074.2 crore. Analysts had expected its profit to grow higher based on deflation in the cost of raw materials, according to reports, but the company suffered from flat demand owing to the monsoon extending into the festive season. The company shows up in a screener of stocks which benefit from lower crude oil prices.

The company’s bath fittings and kitchen businesses also fell 10.9% and 7.1% YoY respectively, while the industrial business grew 23.9% YoY. Speaking about the results, Amit Syngle, Managing Director & Chief Executive Officer (CEO) of the company said, "The domestic decorative business registered flat volume and value sales delivery for the quarter, on a very high price increase base in the previous year. The extended monsoon in October also affected retailing in the peak festival season."

Asian Paints has a medium rank in Trendlyne’s checklist with a score of 47.8% and is in the sell zone as its current PE is trading at higher levels, when compared to its historical values. 

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