1. Cummins India: This industrial machinery company's stock rose 7% and hit its all-time high of Rs 1,618 on Thursday as its Q3FY23 net profit increased 65.9% YoY to Rs 413.8 crore. Both revenue and net profit beat Trendlyne’s forecaster estimates by 8% and 52% respectively. An increase in domestic and export sales has helped revenue grow 25.8% YoY. The company is in a screener of stocks with improving QoQ revenue for the past three quarters. 

Cummins India’s revenue from the engines segment, which contributes to 77.7% of its revenue, has grown by 25.9% YoY. The company stands to benefit from the government’s estimated outlay of Rs 2.4 lakh crore in FY24 in the railways segment. Ashwath Ram, Managing Director of the company, states, “The recent budget announced by the Government of India has a stronger outlay for the infrastructure sector, including railways, which is expected to create strong demand from various segments in the domestic market.” 

The company’s board of directors has also approved an interim dividend of Rs 12 per share on 27.7 crore shares. Record date for the payment of the dividend is set for February 21. 

2. InterGlobe Aviation (Indigo): This airline stock’s net profit has zoomed 10X YoY to Rs 1,422.6 crore in Q3FY23. The stock closed 2% above its opening price since its declaration of results last Thursday. The surge in profit is because of reducing fuel costs –  aircraft fuel expenses have fallen 7.6% QoQ as jet fuel prices fell globally in Q3FY23. Another cost advantage Indigo has is the dip in lease charges as a percentage of revenue. In Q3FY23, lease charges fell to 12.9% of revenues, compared to 19.2% in Q3FY22. This is because Indigo’s number of fuel-efficient aircraft has gone up. As of December 2022, Indigo has 238 new engine (Neo) aircraft – which are designed to accommodate more passengers with the same fuel costs – out of the total 302. 

Indigo’s domestic and international demand has been high in Q3. It aims to increase the international ASK (available seat per kilometre) mix to 40% over the next 3-5 years. A report from ICICI Securities suggests that the international ASK will increase more than 40% YoY in Q4FY23. The management, in its earnings call, said that Indigo is operating at 105% of its pre-Covid capacity. According to CEO Pieter Elbers, Q3 performance has been strong operationally and financially, as demand for air travel improved. Indigo expects capacity to increase by 15% in FY24. However, new airlines might eat into the current market share of 55%. 

As of February, 17 analysts recommend a ‘Buy’ on the stock. ICICI Securities and Prabhudas Lilladher have increased their target price for the stock by more than 15% after the airline’s robust performance in Q3FY23. In the past three months, the stock has gained 15% and shows up in a screener with a high momentum score.

3. Varun Beverages: This non-alcoholic beverage company rose over 5% on Tuesday after it posted strong Q4CY22 results. Varun Beverages’ (VBL’s) net profit has jumped 2.5x YoY to Rs 74.8 crore and beat its Forecaster estimates by over 25%. Its revenue increased by 27.7% YoY in Q4CY22 thanks to strong volume growth and higher realisations. With strong Q4CY22 results, the company features in a screener of companies with annual net profit improving for the past two years.

VBL’s profit has risen as net realisation per unit improved through strategic measures, including selective price hikes, rationalised discounts and incentives, and improved product mix. This was also backed by energy drink Sting, which has a higher realisation. Commenting on the performance of the company, Ravi Jaipuria, Chairman of Varun Beverages said that a strong recovery in demand post-pandemic and continued efforts towards expanding the distribution network across markets resulted in the growth of sales volume.

Axis Direct has maintained its ‘Buy’ rating on the stock post VBL’s Q4CY22 results announcement. The brokerage expects the company to perform well in terms of expansion in its distribution, growth in international geographies, and focus on expanding the high-margin energy drink, Sting, across outlets.

Meanwhile, ICICI Securities maintains its ‘Hold’ rating but increases the target price to Rs 1,225. Though the brokerage is positive on growth prospects, it says that it would be difficult for the company to grow at a fast pace on a high base in CY23.

4. Vinati Organics: This specialty chemicals stock released its Q3FY23 results on February 6. Vinati Organics’ revenue has grown by 38% YoY to Rs 508 crore but fell 10% QoQ owing to low volumes in the ATBS chemical, which constitutes ~40-50% of overall revenue. The capacity is expected to expand from 40,000 MT to 60,000 MT for ATBS and the new chemical portfolio.  The upcoming commissioning of ATBS, MEHQ, Guaiacol and Iso Amylene plants will aid revenue growth. Post expansion, the revenue is expected to grow by 23% to Rs 2,630 crore. EBITDA margin has seen an expansion of 1,072 bps YoY, backed by increased pricing power for its products.

Vinati Organics has not seen much growth post results. ICICI Direct and HDFC Securities have downgraded their target price owing to overvaluation. The stock shows up in our DVM score screener as an expensive performer.

ICICI Direct says the IBB chemical, which contributes to approximately 30% of the company’s revenues, is seeing a revival in demand and an increase in market share. Revenue numbers are below the estimated levels, whereas EBITDA and PAT margins have exceeded expectations. ICICI Direct has a ‘Hold’ rating on the stock.

According to HDFC Securities, the company’s shift in revenue mix towards lower margin products (IBB) will hamper EBITDA margin expansion going forward.  HDFC has a ‘Sell’ rating on the stock.

5. Blue Star: This consumer electronics manufacturer has grown over 12% since announcing its Q3FY23 results on January 31, which beat the street’s estimates. Its net profit grew 23% YoY to Rs 58.4 crore, beating Trendlyne’s Forecaster estimates by 3.3%. The management attributes this improvement in profitability to a healthy order inflow, robust demand and a better product mix. Due to this strong Q3 performance, the stock is trading above its short, medium and long-term moving averages. 

The company’s largest segment, electromechanical projects & commercial air conditioning systems, has grown 20.5% YoY and contributed 55.9% to the consolidated revenue. This growth was aided by healthy order inflow. BoB Capital Markets expects this segment’s order book to see greater traction in the near term, given the Centre’s push to increase the infrastructure capex. The brokerage also anticipates a rise in orders from the railway electrification business vertical.

The unitary products segment, which primarily produces room air conditioners and commercial refrigeration products, saw its EBIT margins expand by 100 bps YoY to 7.4%. Margins improved on the back of a better product mix and sustained demand for commercial refrigeration products. 

The company began commercial production at its new facility in Sri City, Andhra Pradesh in January 2023, just in time to ramp up for the summer season. The new facility will manufacture 3 lakh AC units and will reach 12 lakh units annually by 2027. The management is optimistic about the near-term demand growth given the onset of summer. It has also guided to increase its market share in the room air conditioners business to 15% in FY25 from 13.25% currently.  

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