January 2023 saw the benchmark indices Nifty 50 and Nifty Midcap 100 fall by 2.44% and 2.64% respectively. Both these indices are now trading significantly higher than January lows. With such gains, it was not surprising that mutual fund managers chose to add up on mid-cap stocks in sectors like auto, e-commerce and logistics, consumer durables and specialty chemicals. 

Samvardhana Motherson International Ltd – Gets boost from revival in auto sector 

Samvardhana Motherson International (SMIL), formerly known as Motherson Sumi, is an original equipment manufacturer of auto components. With a major presence in Europe and Asia Pacific, SMIL’s products include wiring harnesses, vision systems, modules, polymer products and other emerging auto components.

In Q3FY23, SMIL saw its best-ever revenues, rising for three consecutive quarters in a row. As car production is picking up after improvement in chip supply, SMIL is increasing its production and catering to more value-added products. With energy prices cooling off in Europe and freight charges coming down, SMIL is seeing an EBITDA expansion.

The growth in revenue will be further led by markets opening up in China. Electric vehicle (EV)-related components made up 6% of the revenue in Q3FY23, driving the value-added product mix. Nearly 30% of new orders are coming from EV manufacturers. SMIL is expected to be net cash positive on the balance sheet in FY25, outweighing the debt concerns of the firm.

Fund managers who bought shares of SMIL

Fund managers who added shares of SMIL to their portfolios include Anish Tawakley and Vaibhav Dusad for ICICI Prudential Bluechip Growth, Shridatta Bhandwaldar for Canara Robeco Flexi Cap Fund Growth, Sachin Relekar and Manish Gunwani for IDFC Flexi Cap Fund Growth. Additional shares were bought by Rupesh Patel and Ashutosh Bhargava for Nippon India Tax Saver Fund Growth, and Rohit Singhania and Kaushal Maroo for DSP Tax Saver Fund Regular Plan Growth.

Ashok Leyland – Demand uptick and higher price realization lead to sequentially high margins

Ashok Leyland is a Hinduja Group-owned entity based out of India. It manufactures a wide range of commercial vehicles and engines for industrial and marine applications. It is the second-largest commercial vehicle manufacturer in India and the fourth-largest manufacturer of buses in the world.

Its volume growth in Q3FY23 has been robust at 39.6% YoY and revenues grew by 63.1%. Higher price realization and an uptick in demand have led to sequentially higher margins of the company. Its volume growth was supported by a pick up in infrastructure and mining activity, demand from e-commerce, agriculture and allied activities.  

Ashok Leyland’s market share in M&HCV (Medium and Heavy Commercial Vehicles) increased to 32.6% in Q3FY23 from 25.3% in Q3FY22. Softening of raw material prices and better product mix is driving the margin expansion. Lowering industry discount rates and higher demand for buses will help in higher price realizations for the vehicles.

Fund managers who bought shares of Ashok Leyland

Fund managers who added additional shares of Ashok Leyland to their schemes include Aniruddha Naha and Puneet Pal for PGIM India Midcap Opportunities Fund Regular Growth, Shridatta Bhandwaldar for Canara Robeco Emerging Equities Growth, Ihab Dalwai and Sharmila D’mello for ICICI Prudential Large & Midcap Fund Growth, and Sankaran Naren and Anuj Tagra for ICICI Prudential Multi Asset Fund Growth. Fresh buys were done by Bhupesh Kalyani and Aniruddha Naha for PGIM India Small Cap Fund Regular Growth.

FSN E-Commerce Ventures Ltd (Nykaa) – Cutback in marketing and advertising costs helps EBITDA expansion 

FSN E-Commerce Ventures, more commonly known as Nykaa, is an e-commerce site involved in selling and distributing personal care, health care and fitness products.

Nykaa reported 33% growth in revenue for Q3FY23. Gross margins have been lower due to an inferior product mix. However, the cutback in marketing and advertising expense led to overall EBITDA expansion.

Fund managers who bought shares of Nykaa

Additional shares of Nykaa were bought by Gaurav Khandelwal and Gaurav Misra for Mirae Asset Large Cap Fund Regular Growth, and Sankaran Naren and Anuj Tagra for ICICI Prudential Multi-Asset Fund Growth. Fresh buys were done by Saurabh Pant and Mohit Jain for SBI Large & Midcap Fund Regular Payout Income Distributable cum Capital Withdrawal, Gaurav Misra for Mirae Asset Focused Fund Regular Growth, and Samir Rachh and Kinjal Desai for Nippon India Small Cap Fund - Growth.

Delhivery – Network optimization to increase bottom line

Delhivery provides supply chain, freight and logistics services to e-commerce segments across the board. It is India’s largest e-commerce logistics provider with 2,751 delivery centres across the country.

Delhivery reported negative revenue growth for Q3FY23 due to network optimization and lower demand. Improved capacity utilization backed by network optimization helped in EBITDA expansion. Management is repricing low-paying contracts of the clients. Delhivery has increased its market share and expects shipments to grow 15-20%.

Fund managers who bought shares of Delhivery Ltd

Fresh buys were done by Saurabh Pant and Mohit Jain for SBI Technology Opportunities Fund Regular Payout of Income Dist cum cap wdrl, and Saurabh Pant and Mohit Jain for SBI Large & Midcap Fund Regular Payout Inc Dist cum Cap Wdrl. Additional shares were bought by Roshi Jain and Priya Ranjan for HDFC Flexi Cap Fund Growth, Neelesh Surana for Mirae Asset Tax Saver Fund -Regular Plan-Growth, and Ankit Jain for Mirae Asset Midcap Fund Regular Growth.

South Indian Bank Ltd – Net profit declines in Q3, NIM expands 

South Indian Bank provides retail and corporate banking, para-banking activities like debit cards, and third-party financial product distribution, besides their treasury and foreign banking business. The bank has a network of 904 branches in India.

South Indian Bank reported a decline in its Q3FY23 net profit, impaired by a one-off provision towards security receipts. Net interest margin (NIM) expanded on the back of a high share of floating rate book and excess liquidity on the balance sheet.

Fund managers who bought shares of South Indian Bank Ltd

Additional shares were bought by Harsha Upadhyaya, Abhishek Bisen, Devender Singhal and Arjun Khanna for Kotak Multicap Fund Regular Growth.

Voltas Ltd – Margins under pressure due to steep competition

Voltas is engaged in the business of household and electromechanical projects as an EPC contractor in domestic and international geographies. It has various products like air conditioners, refrigerators, air coolers, washing machines, etc.

Voltas reported revenue growth of 11.8% in Q3FY23. EBITDA and adjusted PAT have declined 50.9% and 79.4% respectively YoY. Voltas faces steep competition in white goods from Indian and as global players. While Voltas has protected market leadership in air conditioners with a market share of 22.5%, high tonnage and better star-rated air conditioners did well during Q3FY23. Air coolers also reported healthy growth.

Fund managers who bought shares of Voltas Ltd.

Additional shares were bought by Rupesh Patel and Dhrumil Shah for Nippon India Growth Fund - Growth, Saurabh Pant and Mohit Jain for SBI Large & Midcap Fund Regular Payout Inc Dist cum Cap Wdrl, Neelesh Surana and Ankit Jain for Mirae Asset Emerging Bluechip Fund Growth, Ankit Jain for Mirae Asset Midcap Fund Regular Growth, and Ravi Gopalakrishnan and Ashish Aggarwal for Sundaram large and Mid Cap Fund Growth.

VRL Logistics Ltd – Sale of loss-making bus business to aid profitability

VRL Logistics, based out of Karnataka, is involved in the domestic transportation of goods. VRL also has bus operations for passenger transport, and power generation units.

VRL has taken a price increase of 5% on more than 60% of its goods business. It is looking at the sale of its loss-making bus business for roughly Rs 190 crore. VRL is undertaking rapid branch expansion in under-penetrated areas to aid >20% volume growth. Its management expects to be debt-free by the end of FY24, even with a capex outlay of Rs 560 crore.

Fund managers who bought shares of VRL Logistics Ltd

Additional shares of VRL Logistics were bought by Chirag Setalvad and Priya Ranjan for HDFC Small Cap Fund Growth, Shridatta Bhandwaldar and Ajay Khandelwal for Canara Robeco Small Cap Fund Regular Growth, Manish Lodha and Abhinav Khandelwal for Mahindra Manulife Small Cap Fund Regular Growth, Harshal Joshi and Daylynn Pinto for IDFC Multi Cap Fund Regular Growth, and Pranav Gokhale and Taher Badshah for Invesco India Smallcap Fund Regular Growth.

Neogen Chemical Ltd – Higher demand and increased capacity to drive future growth

Neogen Chemicals specialises in manufacturing bromine-based compounds, grignard reagents and inorganic lithium salts. Neogen has manufacturing facilities at Mahape, Navi Mumbai, Maharashtra, Karakhadi in Vadodara and Dahej SEZ. Neogen’s major markets are Europe, USA and Japan.

The company’s revenue grew 40% YoY in Q3FY23 and saw higher capacity utilization, aided by robust demand. Neogen is doing a planned capex of Rs 450 crore to increase electrolyte capacity and Specialty Lithium Salts. It is expected to become fully operational by FY25 end.

Fund managers who bought shares of Neogen Chemicals Ltd

Fresh buys were done by Hardick Bora and Sanjay Bembalkar for Union Flexi Cap Fund Growth. Additional shares were bought by Anupam Tiwari and Vinayak Jayanath for Axis Small Cap Fund Regular Growth, Shreyash Devalkar and Vinayak Jayanath for Axis Flexi Cap Fund Regular Growth, Ashish Naik and Vinayak Jayanath for Axis Special Situations Fund Regular Growth, and Ratish Varier and Sudhir Kedia for  Sundaram Multi Cap Fund Growth.

Kolte Patil Developers Limited – Growing presales market with a huge land bank for development

Kolte Patil Developers is in the business of constructing residential and commercial buildings, and IT Parks, along with renting of immovable properties and providing project management services for managing and developing real estate projects.

In Q3FY23, Kolte Patil Developers reported the highest-ever quarterly sales of 1.13 million square feet, generating a revenue of Rs 700 crore. The presales were backed by six new launches contributing 57% to the sales. Its management expects sales of around Rs 800 crore in Q4FY23.

Future growth triggers include a development pipeline of Rs 7,000 crore across Mumbai and Pune. Kolte Patil has signed an inventory sale agreement with Marubeni Corp for its Pimple Nilakh project for a consideration of Rs 200 crore. The deal is expected to close by April 2023. Kolte Patil has a land bank for development worth Rs 15,000 crore, giving clear visibility for the next 3-4 years.

Fund managers who bought shares of Kolte Patil Developers

Additional shares of Kolte Patil Developers were added by Aniruddha Naha and Puneet Pal to PGIM India Midcap Opportunities Fund Regular Growth.