1. Varun Beverages: This beverages company’s Q1CY23 net profit surged by 68.8% YoY to Rs 429.1 crore, while its revenue from operations rose 37.7% YoY. The growth has been driven by healthy demand across India, which enabled its sales volumes to increase 24% YoY, along with better realisations driven by price hikes and improved product mix. Its gross margin also expanded by 89 bps YoY to 52.4%. The management says that the rural demand has recovered and is growing faster than urban demand.  

Along with this healthy performance, this PepsiCo franchisee has seen one brokerage recommendation upgrade and 10 target price upgrades over the past three months. According to Trendlyne’s Forecaster, the consensus recommendation on the stock from 15 analysts is ‘Buy’.

The company’s board has announced a stock split in the ratio of 1:2 to enhance the liquidity of its equity shares and make the stock more attractive to small investors.  

The company plans to expand the distribution of its high-margin Sting energy drink, as its sales volumes have been rising in double digits. The management believes there is still significant room for expansion in the market for the product. It believes the next key growth drivers will be juices, sports drinks and value-added dairy products, for which two production facilities are being set up and are anticipated to be commissioned in CY24.

2. Cholamandalam Investment & Finance: This NBFC reached its all-time high of Rs 970 per share on Thursday as its net profit rose 24.5% YoY to Rs 855.2 crore in Q4FY23. Its revenue has also grown 43.6% YoY to Rs 3,741.1 crore on the back of improvements in vehicle finance, property and home loans. This has helped the company turn up in a screener of stocks with increasing revenue for the past eight quarters. 

The company’s asset quality also improved, with gross and net NPAs falling by 74 bps YoY and 65 bps YoY, respectively, thanks to improved efficiency in loan collection. The stock beat Trendlyne’s Forecaster estimates for net profit by 17.3%. 

Its vehicle finance segment, which contributes 64.2% of the revenue, grew 26% YoY over the quarter. This was supported by a well-diversified portfolio across India, which finances commercial, passenger, two-wheelers, tractors and construction equipment in both new and used vehicles. The lender is focusing on retail customers, especially in smaller towns and rural areas. 

According to Motilal Oswal, CIFC is well-positioned to capitalise on its diverse product portfolio and widespread distribution network to realise its growth potential. The broker has maintained a ‘Buy’ rating on the stock, with an upgraded target price of Rs 1,130, indicating a potential upside of 19%.  

3. MRF: This auto tyre company is trading near its 52-week high of Rs 96,000 after reporting upbeat Q4 results. It has risen over 6% in the past two sessions. MRF recorded a standalone net profit of Rs 410.7 crore, up 161.9% YoY, beating Trendlyne’s Forecaster estimates by 57.4%.  As a result, the company features in a screener of stocks with increasing profits every quarter for the past three quarters. Its revenue also grew by 10.1% YoY to Rs 5,725.4 crore. 

The company’s strong performance during the quarter was due to softening rubber prices and higher vehicle sales, which led to increased demand for tyres. Automobile manufacturers recorded higher sales in Q4,  due to increased demand for passenger and commercial vehicles. The demand comes as consumers are expecting price increases following tighter fuel emission norms, which took effect in April.

However, Motilal Oswal maintains its ‘Sell’ rating on MRF with a target price of Rs 75,400. This is due to the dilution of pricing power in the PCR (passenger car radial) and TBR (truck, bus and radial) tyre segments. According to Trendlyne’s Forecaster, the analyst price target on MRF is Rs 74,468, implying a 22% downside. 

4. Manappuram Finance: This NBFC stock fell 12% in trade on Wednesday after the Enforcement Directorate (ED) conducted raids at multiple locations, including its headquarters in Thrissur, Kerala, on charges of money laundering. The ED has reportedly frozen assets worth Rs 143 crore belonging to the MD & CEO, VP Nandakumar, after it discovered that the proceeds of the alleged money laundering were diverted into immovable assets under his and his family’s names.
   
   Reports also suggest that the company collected deposits worth Rs 150 crore in contradiction to the rules of the Reserve Bank of India, which state that NBFCs are not allowed to collect deposits for a period less than 12 months and more than 60 months. However, the company issued a clarification on Thursday saying that the deposit allegations are linked to Manappuram Agro Farms (MAGRO), a former proprietor. The company claims that it had repaid the money except for deposits amounting to Rs 9.25 lakh. 

Lately, the NBFC has been moving its AUM portfolio towards non-gold loans. Its gold loan portfolio dropped from 67% in Q1FY23 to 58% in Q3FY23. This is because banks, with their cheaper cost of funds, are aggressively expanding in the gold loan space, and Manappuram Finance is unable to compete with their lower rates. Its non-gold portfolio in AUM terms is 42% in Q3. Manappuram diversifying away from high-yielding gold loans may lead to margin contraction. 

The company’s track record in maintaining asset quality in the non-gold portfolio isn’t up to the mark. Its investor presentation shows that GNPAs in the non-gold portfolio for its subsidiary Asirvad Microfinance and housing finance stands at 6.7% and 5.4%, respectively, in Q3. The company's overall GNPA stands at 3%. 

Trendlyne’s Forecaster expects Manappuram’s revenue to fall by 15% in Q4FY23. The stock has fallen nearly 10% in the past month. However, the consensus recommendation on the stock from 12 analysts remains ‘Buy’. 

5. Bharat Heavy Electricals (BHEL): This heavy electrical equipment manufacturer has been rising for the past month and is trading near its 52-week high. The rise can be attributed to recent order wins and its efforts to diversify into other segments. As a result, the company shows up in a screener for stocks that have gained more than 20% in the past month. 

In April 2023, BHEL won a Rs 3,700 crore order for the supply of strategic equipment for the defence sector, and a railway tender for the supply and maintenance of 80 Vande Bharat train sets worth Rs 23,000 crore. As of Q3FY23, the company’s total orderbook amounted to Rs 1,03,700 crore, with 83% concentrated in the power segment and 13% in the industrial segment. The company also signed a pact with the Nuclear Power Corp of India to jointly pursue business opportunities in the area of nuclear power.

According to ICICI Securities, BHEL is making conscious efforts to diversify its industrial segment offerings in railway, defence and nuclear segments. Even though Q3 executions were muted, the brokerage expects the industrial segment’s execution to be at a higher pace. 

Despite a marginal increase in revenue during Q3FY23, BHEL’s profit grew by 56.5% YoY to Rs 42.3 crore. The electrical equipment manufacturer also features in a screener of stocks with rising profit and revenue for the past two quarters. According to Trendlyne’s Forecaster, the company is expected to post a net profit of Rs 531.9 crore in Q4FY23. 

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